Osborne Computer Corporation
The Osborne Computer Corporation (OCC) was founded by Adam Osborne in 1980 based on a product of not just personal computers but portable computers. Adam Osborne asked Lee Felsenstein to develop his portable computer with the result being the Osborne 1.
The Osborne 1 featured a 5-inch 52-column display, two floppy-disk drives, a Z80 microprocessor, 64k of RAM, and could fit under an airplane seat. It could survive being accidentally dropped and included a bundled software package that included the CP/M operating system, the BASIC programming language, the WordStar word processing package, and the SuperCalc spreadsheet program.
The package included $2000 worth of retail software alone, but the Osborne 1 personal computer with everything included shipped for a mere $1795 in 1981. It was the $1795 price tag that set market expections for bundled hardware and software packages for several years to come. The peak sales per month for Osborne 1 personal computers over the course of the product lifetime was 10,000 units, despite the initial business plan for the computer predicting a total of only 10,000 units sold over the entire product lifecycle. Osborne had difficulty meeting demand, and as production increased, quality control became more and more of an issue.
Despite early success, Osborne struggled under heavy competition. Kaypro Computer offered portables that, like the Osborne 1, ran CP/M and included a software bundle, but Kaypro offered larger 9-inch screens. Apple Computer's offerings had a large software library of their own and with aftermarket cards, could run CP/M as well. IBM's 16-bit IBM PC was faster, more advanced, and offered a rapidly growing software library, and Compaq offered a portable computer that was almost 100% compatible with IBM's offering. Osborne's efforts to raise $20 million in capital to rush an IBM-compatible computer to market were unsuccessful.
The final blow occurred in 1983, when Adam Osborne boasted about an upcoming product months before it could be released, killing demand for the company's existing products. It is unclear whether this boast was about the Osborne Executive, which was released in May 1983 for $2,495 and featured a 7-inch screen and did not sell as well as its predecessor, or, more likely, the Osborne Vixen, a smaller portable that promised to offer compatibility not only with earlier Osborne models but also with MS-DOS, allowing it to run software designed for IBM and Compaq computers. Dealers rapidly started cancelling orders for the Osborne 1.
Unsold inventory piled up and in spite of dramatic price cuts--the Osborne 1 was selling for $1295 in July 1983 and $995 by August--sales did not recover. Losses, already higher than expected, continued to mount, and OCC declared bankruptcy on September 13, 1983. This marketing blunder came to be known as "Osborneing" and the phrase circulated in Silicon Valley for the next decade.
On arriving at work on the final day of operation Osborne employees were greeted with security guards who instructed them to leave. No entitlements were paid, and the guards attempted to stop them from stealing company property. Some employees were still able to reap a small recompense as security guards failed to prevent them from walking away with units of the famous portable machines.
Nine days later on September 22, a group of 24 investors filed suit against OCC and several individuals, seeking $8.5 million in damages for masking the company's true financial situation and accusing several directors of the company of insider trading.
Osborne emerged from bankruptcy in the mid 1980s and finally released the Osborne Vixen, a compact portable running CP/M, in 1985. However, the company never regained its early prominence.
Osborne was also the name of the largest and most successful computer retailer in Australia. (The relationship, if any, between the American Osborne company and the Australian one is obscure) Osborne was very successful for many years, with a particularly strong presence in the corporate and government markets.
In about 1995, they appointed a new CEO who was determined to double their already substantial market share, largely by massive discounting without reducing the traditional good quality of an Osborne machine. The marketing push was financed by demanding that customers place a 100% deposit and then wait six weeks before picking up their new system, and by buying components on ever more generous credit terms from major suppliers like Micronics and Seagate. For about six months the new policy was remarkably effective: Osborne sales boomed and competitors were unable to match their prices. Osborne were selling well below cost, but their retail losses were made up for by currency fluctuations, in particular the steadily rising value of the Australian dollar against the greenback.
Inevitably, the currency movement swung back the other way eventually, and Osborne were placed on credit hold by several of their major suppliers: unable to secure more components until at least some of the previous shipments had been paid for, and unable to ship the promised new computers to the many customers who had long since paid in full for them, Osborne declared bankruptcy. The suppliers got a few cents in the dollar, and the customers who had paid AU$2999 in advance got nothing. About six months later, giant American computer company Gateway bought the remains of Osborne, and traded as OSBORNE-Gateway (then just "Gateway") for several years, but were unable to recover Osborne's former dominant position and despite making an honest effort to resolve the outstanding issues left by the Osborne collapse, were unsuccessful in the Australian market. Gateway withdrew from Australia in August 2001.