Last Updated on April 9, 2025 by Dave Farquhar
41 years ago today, on September 13, 1983, Osborne Computer Corporation, one of the early makers of CP/M computers and a pioneer in portable computing, filed for Chapter 11 bankruptcy. Although it was able to secure funding and emerge from bankruptcy in January 1985, Osborne never fully recovered and was out of business by early 1986.
Osborne Computer Corporation’s bankruptcy
When Osborne filed Chapter 11 on September 13, 1983, it had assets of $40 million versus $45 million in debt. It laid off all but 80 workers and discontinued production of its computers, while seeking all possible options, including taking on more funding or acquisition.
At the time, in its September 19, 1983 issue, Computerworld reported that other computer manufacturers were also in trouble and also seeking acquisition. It cited Fortune Systems Corp and Vector Graphic specifically.
Although Osborne emerged from 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 April 9, 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.
The Osborne Effect
The Osborne effect left a dark cloud over the computer industry in the early 1980s, even among people who didn’t know it by name.
I used computers at school, and developed a keen interest in them, so I asked my parents if we could get one. They didn’t say no, but they did say not yet. And the reason, they said, was because if you buy a computer, by the time you get it home, get it set up, and learn how to use it, there was something better on the market that was cheaper.
That is a slightly exaggerated retelling of the Osborne effect.
The incident that gave the Osborne Effect its name
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.
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 Osborne Executive broke the 64K memory limit the earlier model had. It also had a higher-resolution display.
Demand for the existing Osborne 1 computer evaporated. Dealers cancelled orders. Osborne cut the price to $1,295 and even $995. The cuts didn’t do enough to restore demand. Making matters worse, the Executive was late to market, so, according to the September 19, 1983 issue of Computerworld, Osborne had no income in April and May 1983.
Lingering questions and possible mitigating factors
And this leaves me asking questions. The new computer was going to be more capable than the old computer. But it was also going to be much more expensive. Its list price was going to be $2,495, versus the $1,495 list price for the old model. That price was an admission that there was still room in the market for both computers, especially because they were compatible with each other.
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.
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, that the new computer was better and cheaper.
If it had been clear from the beginning that the 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. Consider that $1,495 in 1983 is equivalent to $4,700 today. And $2,495 is equivalent to $7,900. Arguably, 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.
At least that’s how I would have pitched it as a sales engineer.
Osborne’s other problems
Although Osborne was able to reorganize and continue under new leadership, it never recovered its momentum. It limped along 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. I think both played a part. I also think the effect on the rest of the industry has been understated. If my parents heard about it in the middle of Missouri, other people must have also heard about it.
Osborne’s growing pains
But beyond all that, Osborne had growing pains. Adam Osborne had a great idea and found a great engineer to build it, but the company’s accounting practices were widely cited at the time 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 and build the followup. It takes more than an idea and a couple of engineers to build a successful startup.
What happened to Adam Osborne
Adam Osborne, the company founder, resigned as president when it went bankrupt in September 1983. Osborne went on to form a new company, Paperback Software, publishing inexpensive software targeted at professionals using MS-DOS computers. Lotus, publisher of a popular spreadsheet program and the second largest software publisher in the world at the time, successfully sued Paperback Software for copying the look and feel of its software. Frustrated with the computer and software industry, Osborne moved to India, living out the rest of his life in relative obscurity.
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.