The contract gave the Japanese calculator company exclusive rights to the 4004. Hoff realized that the 4004 was a significant technical breakthrough and was concerned that Intel should not give it away to the Japanese calculator company as part of a relatively small contract. Fortunately for Intel the Japanese company did not realize the significance of what they had obtained and traded away their exclusive rights to the 4004 for a price reduction and some modifications in the calculator specifications.

Later Intel developed another microprocessor for the Computer Terminal Corporation (CTC). This one was called the 8008. In this case CTC could purchase the product from Intel but Intel retained the right to market the 8008 to other customers. Intel began to create support for this programmable chip, the 8008. An employee of Intel, Adam Osborne, was given the assignment of writing manuals for the programming language for the 8008. Osborne later became important in the development of the personal computer.

Gary Kildall, a professor at the Naval Postgraduate School in Monterey, worked at Intel to develop a language and programs for their microprocessors. Kildall also played another important role in the development of the personal computer. He wrote the first operating system for a microprocessor. It was called CP/M.

Without an operating system a personal computer is a very awkward device to use.

By the early 1970s there was a vast number of people who had had some experience with mainframe computers and would love to have a computer of their own. In Albuquerque, New Mexico there was a man named Ed Roberts who ran a business selling kits for assembling electronic devices. The company's name was MITS for Micro Instrumentation Telemetry Systems. The company was not doing too well and Ed Roberts was looking for some new products to increase sales. The calculator business was becoming saturated, especially when the chip manufacturers such as Texas Instruments began to market calculators themselves. After a disasterous attempt to sell kits for programmable calculators Ed Roberts was desperate for a new product. He decided to try to do what no one else had attempted, to create a kit for a home computer. He decided to base it upon a new chip Intel had developed, the 8080. Roberts negotiated contract with Intel that gave him a low price on the 8080 chips if he could buy in large volume. About that time a magazine Popular Electronics, edited by Les Solomon, was looking for workable designs for desktop computers. Roberts promised Solomon a working model if Solomon would promote it through Popular Electronics.

Ed Roberts decided to call his computer the Altair after the name of a planet in a StarTrek episode Les Solomon's daughter was watching. Roberts and the MITS people worked feverishly on building a prototype of the Altair to send to Popular Electronics but when the deadline for publication arrived the model was not quite ready. Nevertheless Popular Electronics published a picture of the empty case of the Altair on its front cover. The computer case with its lights and switches did look impressive. An article in the magazine revealed that the kits for the Altair were available for $397 from MITS in Albuquerque, New Mexico. To everyone surprise computer buffs from all over the country sent in their $397 to buy an Altair kit. In fact, MITS was flooded with money. It went from a state of near bankruptcy owing $365,000 to a situation in which it had hundreds of thousands of dollars in the bank. The Altair had a very limited capability. It had no keyboard, no video display and only 256 bytes of memory. Data input had to done by flipping toggle switches and the only output was the flashing lights in the computer. Nevertheless there was great enthusiasm for the Altair. Two programmers in Boston decided to develop software for the Altair. Their names were Bill Gates and Paul Allen. They called Ed Roberts and told him they had the programs to run BASIC on the Altair. Roberts said he would buy it if he could see it running on the Altair. Gates and Allen didn't actually have the programs written but they immediately set out to write them. It took about six weeks. It was an amazing accomplishment that they got it to work. It worked however on a more sophisticated lab version of the Altair at MITS rather than the version sold to the general public. The members of the general public that sent in their $397 were finding a long, long wait before they received their Altair kit. MITS was just prepared to handle the volume of business that came in. Buts showed the demand was there and the market started to work. Gary Kildall joined forces with a professor from U.C. Berkeley, John Torode, to produce a small computer based upon the 8080 chip. Torode built computers under the name Digital Systems and Kildall wrote the software under the name Intergalactic Digital Research. Altair's most effective early competitor was created by IMSAI Manufacturing of San Leandro, California. IMSAI was established by Bill Millard who had no particular interest in computers but knew a hot marketing opportunity when he saw it. Lee Felsenstein was an individual who played a number of important roles in the development of the personal computer. He had a quite interesting background. He grew up in the Los Angeles area and was a engineering student. One summer he got a job working as an engineer for an operation that required a security clearance. He loved being an engineer and had no plans for doing anything else. Then one day the security officer where he worked called him into his office. He said, "Lee, when you filled out the application for this job you said you did not know any members of the Communist Pary." Lee said, "That's right." The security officer said, "But Lee your parents are well known Communists!" Lee said, "I didn't know--I thought they were 'concerned liberals'--they belonged to organization called 'concerned liberals for this' and 'concerned liberals for that.'" The security officer told him that he could not give him a security clearance now but if he kept out political involvements he could reapply in a year or so and probably would get a security clearance then. Lee left the organization and after a while moved to Berkeley in 1963 where the countercultural revolution was in full swing. Lee went to work on a weekly newspaper called the Berkeley Barb as a technician. The Barb was a radical newspaper run by Max Scheer. The Barb did not make much money and the staff received no pay other than when Max took them home for his wife to feed them. Later Max started selling advertisement space in the Barb to massage parlors and started making a lot of money. But he still pay the staff any salary. The upset many on the staff in a two ways. First they were perplexed at their newspaper calling for social revolution but selling ads to massage parlors and second they were not getting any of that money. A group of the Barb staff, including Lee Felsenstein, left and started another newspaper the Berkeley Tribe. The Tribe was ideologically anarchist. Lee managed the Tribe for awhile and then entered UC Berkeley and finished his engineering degree. After graduation he joined a communal organization called Resource One and later an offshoot Community Memory which sought to bring computers to the people by installing remote terminals in places of business. About the time the Altair was announced a group of San Francisco Bay Area computer buffs organized the Homebrew Computer Club. After the club was operating for sometime Lee Felsenstein became the facilitor for the Club, an informal master of ceremonies to direct the meetings and discussions. As many as 750 attended the meetings and they became a major locus of information exchange on computers in the Bay Area. Stephen Wozniak attended these meetings. Adam Osborne sold his book An Introduction to Microcomputers at these meetings. Lee Felsenstein did occasional engineering design work including a computer which was named the Sol after the editor of Popular Electronics, Les Solomon. The Sol would sell for about $1000 but include a lot more capabilities than the Altair. Felsenstein and other were also creating enhancements, such as memory boards, for the Altair. What was needed for these microcomputers was a disk drive. Disk drives had long been used with mainframe computers but they were too expensive for the low cost home computers the industry was trying to develop. Shugart, the major disk drive manufacturer, did announce the availability of a 5-1/4 inch drive. Gary Kildall while developing the first microcomputer operating system, CP/M, acquired a Shugart disk drive.