Known variously as Seattle Computer 86-DOS, IBM Personal Computer DOS, and Zenith Z-DOS, MS-DOS was developed by Seattle Computer Products for its 8086-based computer system. The MS-DOS history is intertwined with the general development of software for 8086-based computers.
In May 1979, Seattle Computer made the first prototype of its 8086 microprocessor card for the S-100 bus. There were brief discussions with Digital Research about using one of Seattle Computer's prototypes to aid in developing CP/M-86, which was to be ready "soon." Although Seattle Computer was considering using CP/M-86 when it became available (expected no later than the end of 1979), there were only two working prototypes of the 8086 processor card, and it was felt that both were needed in house. Therefore, there wasn't one free for Digital Research.
Microsoft had already started a strong 8086 software-development program. The firm was ready to try the 8086 version of Stand-Alone Disk BASIC, which is a version of its BASIC interpreter with a built-in operating system. During the last two weeks of May 1979, this BASIC was made completely functional using the hardware that Seattle Computer provided for Microsoft. Seattle Computer Products displayed the complete package (8086 running disk BASIC) in New York the first week of June at the 1979 National Computer Conference. (This was the first-ever public display of an 8086 BASIC and of an 8086 processor card for the S-100 bus.)
Seattle Computer shipped its first 8086 cards in November 1979, with Stand-Alone Disk BASIC as the only software to run on it. The months rolled by, and CP/M-86 was nowhere in sight. Finally, in April 1980, Seattle decided to create its own DOS. This decision resulted just as much from concern about CP/M's shortcomings as from the urgent need for a general-purpose operating system.
The first versions of the operating system, called QDOS 0.10, were shipped in August 1980. QDOS stood for Quick and Dirty Operating System because it was thrown together in such a hurry (two man-months), but it worked surprisingly well. It had all the basic utilities for assembly-language development except an editor. One week later, Seattle Computer had created an operating system with an editor, an absurdity known as EDLIN (editor of lines). A primitive line-oriented system, it was supposed to last less than six months. (Unfortunately, it has lasted much longer than that as part MS-DOS.)
In the last few days of 1980, a new version of the DOS was released, now known as 86-DOS version 0.3. Seattle Computer passed this new version on to Microsoft, which had bought non-exclusive rights to market 86-DOS and had one customer for it at the time. Also about this time, Digital Research released the first copies of CP/M-86. In April 1981, Seattle Computer Products released 86-DOS version 1.00, which was very similar to the versions of MS-DOS that are widely distributed today.
In July 1981, Microsoft bought all rights to the DOS from Seattle Computer, and the name MS-DOS was adopted. Shortly afterward, IBM announced the Personal Computer, using as its operating system what was essentially Seattle Computer's 86-DOS 1.14. Microsoft has been continuously improving the DOS, providing version 1.24 to IBM (as IBM's version 1.1) with MS-DOS version 1.25 as the general release to all MS-DOS customers in March 1982. Now version 2.0, released in February 1983, has just been announced with IBM's new XT computer.