Osborne Computer liquidated April 9, 1986

40 years ago today, on April 9, 1986, Osborne Computer Corporation, one of the early makers of CP/M computers and a pioneer in portable computing, liquidated after three years of financial hardship. Its demise is generally blamed on its founder, Adam Osborne, saying too much about an upcoming computer. But that oversimplifies a longer and more complex story.

Osborne Computer Corporation’s troubled past

Although Osborne secured funding and emerged from Chapter 11 bankruptcy in January 1985, it remained under jurisdiction of the bankruptcy court. In early 1986, it defaulted on one of its debt payments. When it couldn’t come up with $4 million in cash, its creditors liquidated the company in April 1986.

Osborne is one of many computer companies that didn’t survive the 1980s, but I think it’s one of the more interesting ones. I also think it’s a story most people oversimplify. In the process, they miss some important opportunities for lessons learned, too.

The incident that led to Osborne’s liquidation

In 1983, the Osborne 1 was a hot-selling machine that had sold nearly 150,000 units in the United States and 50,000 units in Europe in just two years. At the end of 1982, Time magazine reported the computer market  doubled in size every year since 1980. To paraphrase a popular song from 1986 by the band Timbuk 3, things were going great and only getting better. The future looked so bright, Osborne needed to wear shades.

But that was all in the rearview mirror by 1986. In 1983, Adam Osborne talked up a new computer they were working on, the Osborne Executive. Problem was, it wasn’t ready to go to market yet. The way most people tell the story, demand for the existing Osborne 1 computer evaporated. Dealers cancelled orders. And Osborne Computer Corporation quickly found itself out of business. Today people remember Osborne as a cautionary tale. It even has a name: The Osborne Effect.

Generally, the lesson people take away from this story is to not talk about products until they are ready to be released. The implication being that Osborne said too much.

What went wrong and led to Osborne’s liquidation

I think the problem is that people’s imaginations ran wild and they thought this great new computer was going to cost the same as the old one. Because that’s the version my parents’ colleagues were telling them, when you bought a computer in the 1980s, there was a new, better and cheaper computer right around the corner.

If it had been clear from the beginning that Osborne’s new computer was going to cost $1,000 more than the existing one, it’s possible some number of potential customers would have waited for the new, more powerful computer. But not all of them. The $1,000 price difference was a lot of money. For some of the market for these computers, the best way to be able to afford the newer, better, more expensive model was to buy the existing computer for the productivity gain, then sell it and upgrade to the new one.

I don’t think the problem was that Adam Osborne said too much. If he’d said a little bit more or a little bit less, I think he could have been just fine.

Osborne’s other problems that led to liquidation

Although Osborne was able to reorganize and continue under new leadership, it never recovered its momentum. It limped along until 1986 as a former industry darling selling CP/M computers, which was no longer a growth market.

Osborne’s ads promised IBM compatibility, but didn’t make it clear whether it was built in or an option. None of the usual sources today mention IBM compatibility, so it must have either been an option, or something Osborne never delivered. I found an ad in the June 6, 1983 issue of Infoworld mentioning IBM compatibility, but it ran in other publications as well.

Some people argue it was the rise of MS-DOS and portable computers running MS-DOS from companies like Compaq and Eagle Computer that ruined Osborne more so than the Osborne Effect. There’s something to that. Other CP/M makers like Vector Graphic and Kaypro fell on hard times in the mid 1980s as well.

And when you look at an Osborne portable computer next to other 1980s portables, you can see how quickly portable computers changed. Osborne didn’t keep up.

Osborne’s growing pains

Adam Osborne had a great idea in 1981 and knew just the person to build it. Both Osborne and his engineer, Lee Felsenstein, were longtime members of the legendary Homebrew Computer Club, which also counted Steve Wozniak and Steve Jobs among its members. Felsenstein had also designed the SOL-20 computer.

But Osborne Computer’s accounting practices were widely cited in the mid 1980s as being sloppy enough to sink the company. Like many startup founders, Osborne had a great idea but wasn’t able to find all the people he needed to fully carry out that idea, build the followup, and provide the necessary infrastructure to support both. It takes more than an idea and a couple of engineers to build a successful startup.

In a young industry, everything moves fast. The Osborne of 1983 wasn’t built to thrive in 1986. And the Osborne of 1986 didn’t look materially different from the Osborne of 1983.

Dave Farquhar

David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.