The Computing Revolution Begins

On this day in economic and financial history...

The first copies of the January 1975 issue of Popular Electronics reached subscribers and newsstands on or around Dec. 19, 1974. That issue is now worth several hundred dollars in good condition, but the subject of the cover story -- an Altair 8800, which launched the personal-computing revolution -- proved to be worth trillions.

MITS, the company behind the Altair, had been developing increasingly complex electronics products since 1969, beginning with model rocket kits before advancing to electronic calculators and test equipment. By 1972, semiconductor pioneer Texas Instruments (NASDAQ: TXN  ) had developed its own electronic calculator, which pushed many smaller players out of a profitable market. MITS needed a new product to overcome its mounting debts, and founder Ed Roberts decided that a low-cost minicomputer would be his company's next meal ticket.

The Altair's timing was perfect. The Intel (NASDAQ: INTC  ) 8080 processor had been released earlier in 1974. It was the first processor with enough power and functionality to control a worthwhile minicomputer, and Roberts was able to get a deep discount by ordering in bulk. By this point, technologically inclined college students had had years of access to computer-programming courses, and the public had been exposed to two years of Pong, the first successful "computer game." Interest had been building, but no one had managed to release a useful computer hobby kit.

The bare-bones Altair kit cost only $439, and even a complete, assembled kit with all the add-ons cost less than $2,000 -- roughly equivalent to $8,500 today. By the end of the following February, MITS had more than 1,000 orders. By the end of August, it had filled more than 5,000 orders. The rough, primitive computer kit was a huge hit in the small world of computer hobbyists, most notably with three people who would go on to lead the PC revolution in the following decade: Bill Gates, Steve Jobs, and Steve Wozniak.

Bill Gates and Paul Allen received a copy of Popular Electronics, and Allen suggested that they could create a BASIC interpreter for the Altair, which would make it far more functional for the computer science kids who had been trained on the BASIC programming language. Their successful development earned them a distribution agreement with MITS, and Microsoft (NASDAQ: MSFT  ) was formed in Alberquerque, N.M., where MITS was based, in early 1975.

The Homebrew Computer Club was also founded in early 1975, largely to capitalize on the popularity of the new Altair. This hobbyist club allowed technically minded folks to trade parts and information, allowing access to greater knowledge and capabilities than any one hobbyist would likely possess. The club's (fictionalized) meetings are a highlight of Pirates of Silicon Valley, which shows the genesis of Apple (NASDAQ: AAPL  ) in Steve Jobs' garage as an outgrowth of Steve Wozniak's engineering for the club. Apple was officially founded only two years after MITS received its first orders, and it quickly became the hottest computer company in the world -- for a while.

By popularizing Intel's processors and Microsoft's software, the Altair can be considered directly responsible for the success of two members of the Dow Jones Industrial Average (DJINDICES: ^DJI  ) , as well as the modern transformations of Dow components IBM (NYSE: IBM  ) and Hewlett-Packard (NYSE: HPQ  ) into personal-computing companies (although IBM later shifted focus to become a more software-oriented enterprise). These four companies make up 15% of the Dow's total weight and are worth nearly $600 billion together. Add Apple to the mix and the value increases to more than $1 trillion -- all in some way stemming from the Altair 8800.

Ed Roberts, whose creation helped spark the computer revolution, didn't stick around in the industry for long. He sold MITS in 1977 -- the same year that Apple was founded -- and retired to Georgia, where he studied medicine and eventually became a small-town doctor.

Bailout nation
On Dec. 19, 2008, President Bush announced his intentions to bail out the auto industry. General Motors (NYSE: GM  ) and Chrysler were to receive $13.4 billion -- $9.4 billion for GM and $4 billion for Chrysler -- in federal loans in order to prevent a disorderly bankruptcy.

Bush said that "in the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action." President-elect Barack Obama agreed, saying the loan was "a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers."

GM and Chrysler subsequently needed far more money to stay afloat. GM, between its manufacturing arm and its now-separated finance arm, has taken $67 billion in federal funds, of which $38 billion remains outstanding. Chrysler and its finance subsidiary took more than $12 billion, of which $1 billion remains outstanding. The 2008 bailout, for Chrysler, came almost exactly 29 years after its first bailout cleared Congress in 1979.

My heart will go on
The most successful film ever created was released on Dec. 19, 1997. That day, millions of people were introduced to Jack and Rose, as played by Leonardo DiCaprio and Kate Winslet, in Titanic. Released domestically by Paramount, a subsidiary of Viacom (NASDAQ: VIA  ) , and internationally by 20th Century Fox, a subsidiary of News Corp. (NASDAQ: FOX  ) , the film made James Cameron an industry legend by grossing nearly $2 billion -- which it surpassed in 2012 on the back of a 3-D rerelease, issued to commemorate the 100th anniversary of the Titanic's sinking.

The only film ever to beat Titanic at the box office happens to be another James Cameron film. Avatar has grossed $2.8 billion worldwide since its 2009 release kicked off a new 3-D movie gold rush. That film, incidentally, was released on Dec. 18. These two James Cameron films have grossed more than the entire six-film Star Wars saga, which has had its original trilogy rereleased more than once.

Claim your investing edge
The companies inspired by the Altair continue to drive computing forward in the present day. But after decades of success, they've all come to a profoundly uncertain place. Can any -- or all -- of the world's computing giants continue to lead the way as our technology becomes more connected to our humanity? The Fool's best tech analysts love to dig deep past the hype to get at the information that really matters, and we've put together some detailed premium research reports on many of your favorite high-tech powerhouses. If you're wondering when the Apple rebound is coming, hoping Windows 8 can make Microsoft relevant in the post-PC era, or asking yourself how Intel will answer a mobile threat to its dominance, you'll find answers in our reports. Just click on your favorite stock to subscribe:


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