IBM tried to compete with MSft with OS/2. It was decent but was hung up on having to play nice with the mainframe biz. MSFT also arm twisted the system builders into signing an agreement that said if they shipped any PC with windows they had to ship all PCs with windows. This meant all PCs came with windows for “free” but you had to pay extra for OS/2 or any other OS.
Yep.
Just a nit, but OS/2's original problem was that IBM insisted on it being able to run on 286's. Mainframes were not a special issue for OS/2, as even Windows had to play nicely with them, and always has, with decent 3270 and 5250 emulation software.
Subsequent problems for OS/2 relate to the fact that IBM had a bunch of dunces in charge at every step of the way.
Anyone curious about how bad a job IBM did with OS/2 should read Gordon Letwin's famous usenet posting on the topic:
http://groups.google.com/group/comp.os.ms-windows.misc/msg/d710490b745d5e5e?&hl=en