On July 15, 1996, German PC manufacturer Escom declared bankruptcy. But Escom wasn’t necessarily just an ordinary PC manufacturer. Escom went bankrupt less than 2 years after acquiring the Commodore and Amiga brand names and starting to use their technology. Were Commodore and Amiga cursed? Or was there something else going on that led to Escom’s bankruptcy?
Big in Europe
Escom was the second largest PC manufacturer in Germany and 10th largest in Europe when it acquired Commodore on April 22, 1995. And they had designs on being much bigger than that. That was one reason they were interested in Commodore. The brand name had better name recognition outside of Germany, and the Amiga technology arguably still could have become a viable platform in the right hands.
$14 million is more money than most of us keep laying around, and it was more money in 1995 than it is now, but it was still a low risk flyer, relatively speaking. Microsoft sunk $150 million into Apple in 1997, and they didn’t even get voting shares, let alone controlling interest, for that.
Until the announcement, Escom was mostly unknown in North America. When I received the news, my immediate reaction was to ask, who is Escom? And that was the first question the American journalists covering it set out to answer.
Why Escom went bankrupt
In the UK, Escom had some name recognition. Escom had attempted to buy a larger share of the UK market in May 1995 by acquiring about 200 storefronts from the UK store chain Rumbelows to go with the 27 it already had.
And that was a bigger problem than the Commodore acquisition. Escom tried to grow too quickly, and they lost too much money in early 1996. Escom’s losses in its first quarter, according to the March 11, 1996 issue of Computerworld, were about 3 times what they expected, due to a combination of pricing pressure, slow sales due to a weak German economy, and costs associated with operating the UK stores it acquired from Rumbelows.
Making matters worse, Escom’s locations were smaller high street stores when the UK was following the same trend as the United States, with large superstores in the suburbs, according to the July 24, 1996 issue of The Independent.
Did Escom move too fast?
So it’s easy to say Escom made one too many acquisitions. But sometimes you only get an opportunity once. They weren’t going to get a second opportunity to buy the Commodore and Amiga names and intellectual property at bankruptcy. They may have also seen the opportunity to acquire 200 storefronts in the UK as something that wasn’t going to happen a second time any time soon. Then again, it’s clear even now from reading the few news reports from the era that are still available online that Rumbelows was losing money and was going to take time for Escom to turn around.
That’s assuming they could be turned around. To put things in U.S. terms, Rumbelows had the same problem as US chains like Tipton that were trying to compete with Best Buy. Under Escom’s ownership, nearly 1/3 of their stores were unprofitable.
Further exacerbating their problem, Escom overestimated how much they would grow during the 1995 Christmas season. They grew at 20 percent, but had stocked for 50 percent.
So in early 1996, multiple problems were catching up with Escom. Escom figured they needed a lifeline of $69 million to turn things around, and they couldn’t find anyone to loan them the money. I think we can safely say it wasn’t a curse associated with Commodore or Amiga who took Escom down. Rather, it was a combination of things.
Escom filed bankruptcy on July 15, 1996. At the time, in 1996, ZDNet called Escom’s quick demise “astonishing.”
Note: This blog post is also available in French, courtesy of Obligement.free.fr.
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.
Hi David,
Your article is really interesting and, like you, I’m sure Escom’s bankruptcy was not due to Amiga/Commodore but Escom grew to fast and exploded in flight, like a rocket full of gasoline!
PS : Can I translate your article in french, for the online french website Obligement.free.fr (with link to your original article and your name at the top of the translation, like I did for this article of John Passfield about Flight of the Amazon queen : http://obligement.free.fr/articles/coulisses_developpement_flightoftheamazonqueen.php
Thx!
I do remember them pretty much coming out of nowhere in the UK. Suddenly they were on every high street after buying Rumbelows, must have been a huge outlay and massive cost in rebranding and refitting the shops. I guess they underestimated this and the time it would take to start making a profit from them. Buying Commodore didn’t really do them much harm and might have just helped them raise their profile a bit more.
From what I have read ad remember it seemed like they were just buying it for the name and not the Amiga but they did start to make plans once they realised there was still demand. I honestly think with a bit of investment the platform could have continued and competed with Apple with a small percentage of the market.