40 years ago, Osborne Computer declared bankruptcy due to poor planning

Osborne Computer was on the rise, but the company’s lack of foresight led to its unexpected collapse and coined the term “Osborne effect”.

History is littered with stories of companies that failed due to lack of foresight, but many failures can be identified as that of the Osborne Computer Corporation. You’ve probably heard of the “Osborne Effect”, about how a company can quickly crash and burn by impressing customers with something that doesn’t exist. That statement was made nearly 40 years ago, after Osborne Computer filed for bankruptcy on September 13, 1983.

Osborne Computer was expanding

Osborne Computer Corporation was founded just a few years before its bankruptcy, back in 1980. Adam Osborne and Lee Felsenstein founded the company with the goal of creating an affordable computer, and they succeeded in doing so with the Osborne 1. The computer featured a 5-inch display, a Zilog Z80 microprocessor, and a 64KB of RAM, but it was also shipped with many programs – including WordStar and SuperCalc for word processing and spreadsheet creation – which made it very useful out of the box.

Calling it “portable” might be generous compared to today’s best (and worst) laptops, but it had a compact design and came with a handle, so the term was technically correct.

The Osborne 1 was a huge success, selling 11,000 units in the first eight months, with another 50,000 on backorder as the company struggled to meet production demands with a compelling bundle of hardware and software at a low price. At one point, Osborne was selling 10,000 units a month, and the company went from two employees to 3,000 in just one year. Although the company has cut some corners to meet demand, it seems to have been very successful.

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The Osborne Effect

With the success of the Osborne 1, the company began working on a successor that will apparently build on the original while offering improvements like a larger screen and better performance. However, the founder Adam Osborne made the big mistake of revealing the next generation machine – the Osborne Executive – along with prototypes like the Osborne Vixen ahead of their planning, in early 1983.

Although the company wanted the new product to be hidden from the public until it was closer to its launch, customers heard about the potential of the upcoming machine and canceled their existing Osborne 1 orders, leaving the company with a lot of stock even after a while. reduce the cost of the machine. In July 1983, the Osborne 1 was selling for $1,295, but the following month it dropped to $995, and even that didn’t do enough to bring back sales.

The company finally filed for bankruptcy in September of that year, giving rise to the so-called “Osborne Effect”. As it is clearly shown by the company, it is what happens when the announcement of the next generation of a product, which is not yet available, causes a significant decrease in interest in the current product, destroying its sales and bringing the company down. that’s it. This is why when you see something like an iPhone announcement, it happens only a few weeks before the new product is available.

We have seen other Osborne events in the world of technology, such as Sega starting to talk about its Dreamcast console two years after the launch of the Saturn, or Nokia’s Stephen Elop admitting that the Symbian platform should end in a controlled world. and ecosystems such as Android and iOS, indicating a change to Windows Phone that could happen a few months later. Yes, in all these cases, the problems went beyond the initial announcement, but they certainly played a major role.

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It wasn’t about being unprepared at all

Although the Osborne Effect played a major role in destroying the company’s sales, there were other factors that contributed to its poor financial performance which led to its demise. Osborne was facing great competition from rivals such as Kaypro, who offered the KayPro II and other similar notebooks but with a much larger 9-inch display and at a much lower price than the Osborne Executive, which only had a 7-inch screen.

In addition, Apple was already making waves with the Apple II, and IBM also introduced the PC, which offered faster performance and gained interest from programmers, meaning that more software was developed. All this led to Osborne’s reduction in sales, although the Osborne Effect played a major role. It’s interesting to think how quickly the company shot up and how it fell from grace because of its eagerness to introduce a new product. Although some of the worst technology failures in history did not lead to the demise of the company, Osborne did not have time to build up enough capital to survive the financial collapse.

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Source: thptvinhthang.edu.vn