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Taking Osborne out of the Osborne Effect
It's a myth
It's a fair cop, and we're guilty. There never was an "Osborne Effect," and the fate of Osborne Computer wasn't sealed by pre-announcing hardware that didn't exist.
The phrase has been much in use this month, after Apple pre-announced its intention to move to Intel hardware that doesn't exist. But leave poor old Adam out of it, say readers familiar with the industry in the early 1980s.
Usenet veteran Charles Eicher was "the repair geek who could fix any Osborne," he tells us, "even the factory sent me some of the machines they couldn't fix." Charles offers a caveat about the figures, but condenses the tale told by Osborne himself in Hypergrowth, the 1985 memoir co-authored with John C Dvorak:
"They had transitioned to a new model, and it was finally shipping. Sales were going well, and money was flowing back into the company after months of postponed sales (the alleged Osborne Effect). But then a VP discovered the company had $150k of fully equipped motherboards from the previous model, but no parts to build them out, no CRTs, RAM or floppy disk drives, and in worst of all, no plastic cases and bezels. The injection molding company that made the complex Osborne cases had already destroyed the molds since the product was discontinued and no further orders were expected."
"The VP pitched Osborne to build out the old models, so they could get some money out of their stock of old parts, but Osborne didn't realize what sort of expenditures would be involved. Before Osborne pulled the plug, the VP spent $2 million to build out the $150k of old parts, the biggest expense was getting the injection molding company to build new molds and start up production on cases. Osborne described this as the classic example of 'throwing good money after bad.'"
"So that was what really killed Osborne. They had made the transition to the new model, sure sales had slowed for a while, but they were starting to show a profit. Then after the transition, a rogue VP made some really bad decisions that sucked all the money out of the company, and sank it into debt at a time when it couldn't afford ANY new debt. And then when Osborne realized what happened, the company died."
Dvorak confirms the story, and thinks that people are really getting their micro pioneers mixed up. Think North Star, he says -
"The pre-announcemnt myth used in the desktop computer business stems from the late 1970's. It came from within the microcomputer industry which was unprofessionally run and where everything was played by ear as entrepreneurs made up their own rules and axioms as they went along."
"The pre-announcement fiasco stems from around 1978 when North Star Computers, one of the two or three major hardware companies at the time, was selling a disk controller for the first 5 1/4-inch floppy drives. With a subsystem you got their OS and their BASIC, which by all accounts was superiror to Microsoft BASIC since it did BCD math which engineers needed.
"One day the company announced that it it had developed and would market a double density controller doubling the disk capacity from 80K to 160K, as I recall. There was no product to ship, it was a preannouncement. Furthermore, the company said it would sell the new controller for the exact same price.
"Sales of the old controller stopped dead and the company nearly went broke scrambling to produce the new controller. This is where the myth began."
"Note that the company did not go broke in the process. They ALMOST went broke. I know of no instance where anyone went broke with a pre-accouncement. It's possible, but I'm sure, as with Osborne, it just looked that way and there were real and more substantial underlying reasons.
"The North Star example of the risks of preannouncing continued as an anecdotal myth until about 1990 when the specifics of the situation were mostly forgotten and it - the pre-announcement bogeyman - became essentially an urban legend that is told to new marketing people to scare them."
And, he points out, pre-announcements never killed anyone: "just look at Microsoft (or IBM before them)."
Thanks to Charles and John. Now who will tell that highly emergent oracle, Wikipedia? Or Answers.com, or the Opentopia, or ... ®