OS/2 Lite was a version of the OS/2 1.x operating system developed in cooperation by IBM and Microsoft Corporation. Intended to be usable in 286 systems that had only 1Mb of memory the system was considerably faster than version 1.2 especially when running Presentation Manager and intention was also that it would be sold at a reduced price making OS/2 Lite only slightly more dearer than the combination of DOS and Microsoft Windows. Intended for release in the spring or summer of 1990 the eventual release was blocked by Microsoft after Microsoft Windows 3.0 became a surprise sales hit and the company did not want to cannibalise Windows sales.
The disagreement over OS/2 Lite may have influenced IBM's decision to stop cooperating with Microsoft as much or even more than the OS/2 v3 debacle, the release was ready in the summer of 1990 and a number of large institutional clients had signed up to purchase the system for use on their IBM PC AT class machines, but they had resisted buying a full version of OS/2 1.x due to the costs that were associated with both the licensing of the OS itself and the required 4 MB memory expansion that would have been very costly at the time.
IBM had not only lined up customers to sell them solutions based on OS/2 Lite but also faced additional problems created when a number of OS/2 ISV's (WordPerfect et al.) stopped the creation and porting of software for OS/2 as they read the news of the discontinuation of the OS/2 Lite version as the end of the OS/2 API, to be replaced with the Windows API for OS/2 v3. This caused immense anger inside IBM since it made it apparent that Microsoft had no intention of replacing DOS with OS/2 as had been the long term goal of the project and had caused almost irreversible marketing damage to the OS/2 brand by telling ISV's behind IBM's back that the system was for all intents and purposes dead.
OS/2 Lite code was released as OS/2 v 1.3 in December of 1990, however that version was a full price release with all the same features as 1.2 and more as Microsoft blocked the release of a cheaper version and did not release a v1.3 version themselves directly, except for portions of code they used in their subsequent server releases.
- Patricia Keefe: OS/2 Lite:Less filling, but will it be released? - From Computerworld Magazine, 25th of June, 1990