Good correction. This is the important point here. And there is a sub-point which is nearly as important:

The 8086 was out there and selling for years. AT&T ported UNIX™ to it, meaning it was the first ever microprocessor to run Unix.

But even so, DR didn't offer an 8086 OS, although it was the dominant OS vendor and people were calling for it. CP/M-86 was horribly horribly late -- it shipped after the IBM PC, it shipped about 3-4 years after the chip it was intended for.

The thing is, that's common now, but late-1970s OSes were tiny simple things.

Basically the story is that there was already an industry-standard OS. Intel shipped a newer, better, more powerful successor chip, which could run the same assembly-language code although it wasn't binary compatible. And the OS vendor sat on its hands, promising the OS was coming.

IBM comes along, wanting to buy it or license it, but DR won't deal with them. It won't agree to IBM's harsh terms. It thinks it can play hardball with Big Blue. It can't.

After waiting for a couple of years a kid at a small company selling 8086 processor boards just writes a clone of it, the hard way, directly in assembler (while CP/M was written in PL/M), using the existing filesystem of MS Disk BASIC, and puts it out there. MS snaps up a licence and sells it on to IBM. This deal is a success so MS buys the product.

IBM ships its machine, with the MS OS on it. DR complains, gets added to the deal, and a year or so later it finally ships an 8086 version of its OS, which costs more and flops.

The deal was very hard on Gary Kildall who was a brilliant man, but while MS exhibited shark-like behaviour, it was a cut-throat market, and DR needed to respond faster.