Dead End: Osborne

The Publisher Who Sold Adequate

Adam Osborne was born in Bangkok on 6 March 1939 to British parents, took a chemical engineering doctorate in the United States, and found his subject writing manuals nobody else would write. He founded Osborne & Associates in 1972 to publish plain-language books about microprocessors at a time when the documentation available was written by chip engineers for chip engineers. An Introduction to Microcomputers sold 300,000 copies. By 1977 he had forty titles; McGraw-Hill bought the company in 1979 and ran it as Osborne/McGraw-Hill.

The publishing business taught him the argument he then applied to hardware. Buyers of a new technology are not connoisseurs. They want something that works well enough, now, at a price they can justify, and they will forgive a great deal to get it. Osborne said so loudly and often, which made him a useful quote for journalists and an irritant to engineers who wanted to build the best machine possible.

The Osborne 1

Osborne Computer Corporation was founded in January 1981 in Hayward, California. Lee Felsenstein, who had designed the Sol-20 and moderated the Homebrew Computer Club meetings, built the machine to Osborne’s specification, and the specification was mostly about constraints: it had to survive being carried, and it had to fit under an airline seat.

The result was shown at the West Coast Computer Faire and released on 3 April 1981 at $1,795. (Wikipedia’s article on the company puts the launch in July; the machine’s own entry gives the April date.) It weighed 24.5 pounds, closed into a case with a handle, and ran CP/M (see Gary Kildall and the OS IBM Didn’t Take) on a Z80 (see Federico Faggin and the Microprocessor) with 64 KB of memory and two single-sided floppy drives holding 90 KB each. The display was a five-inch CRT showing 52 characters by 24 lines, which was small even by the standards of 1981 and is the specification everyone remembers.

The screen was not the product. The software was. Every Osborne 1 shipped with WordStar, SuperCalc, CBASIC and MBASIC, a bundle with a retail value above $1,500, on a machine costing $1,795. A reviewer of the period put it as getting a software package with a computer thrown in almost free. Buying the same programs separately for another CP/M machine cost close to the price of the Osborne.

It sold 11,000 units in the first eight months and reached a peak of 10,000 a month. The company went from two people to about 3,000 and booked $73 million of revenue in its first twelve months, which was the fastest growth anyone in the industry had seen (see The Personal Computing Explosion).

The Announcement

In early 1983 Osborne announced the Osborne Executive ahead of its availability: a seven-inch amber screen, 124 KB of memory, and a higher price at $2,495. It reached buyers that April. He talked about a further machine, the Vixen, that was further away still.

Orders for the Osborne 1 fell. Dealers, according to accounts published at the time, cancelled in numbers. The company filed for Chapter 11 bankruptcy protection on 13 September 1983 and laid off most of its staff.

Dead End: What Actually Happened

Three things were going wrong at the same time, and none of them was the announcement.

Kaypro. The Kaypro II of 1982 ran the same CP/M on the same Z80 with its own bundle of software, in an aluminium case, at about $1,595. It had a nine-inch green screen and drives holding 191 KB against the Osborne’s 90 KB. Against the Osborne 1’s five inches and the Executive’s seven, the screen was the specification buyers could see across a shop floor, and Kaypro was taking Osborne’s customers before the Executive existed.

The IBM PC. IBM’s machine arrived in August 1981, four months after the Osborne 1, and by 1983 the business market wanted MS-DOS compatibility rather than CP/M. Any product line tied to CP/M was on a schedule it did not control. Worse for Osborne specifically, Compaq shipped an IBM-compatible portable in 1983 and sold 53,000 of them for $111 million in its first year. Osborne had invented the category and then watched a competitor take it with the thing Osborne could not offer, which was software compatibility with the machine on the buyer’s desk at work.

The company’s own books. Osborne Computer’s accounting was cited at the time as poor enough to sink it on its own, and the clearest example is a manufacturing decision. Left with about $150,000 of obsolete motherboards, a vice president persuaded the company to build them into finished machines rather than write them off. Doing so meant retooling a production line, and the exercise ended up costing around $2 million, more than anyone had expected and more than the company could then afford.

The company emerged from Chapter 11 in 1984 and shipped the Osborne Vixen, a compact CP/M portable, late that year. It never got back to the volumes of 1982, and it was finished by the middle of the decade.

The reason the Osborne effect stuck as an explanation is that it is a single, teachable, blameable mistake with a memorable name, and the alternative explanation is several ordinary business failures happening at once. It is also the version that flatters everyone repeating it, since avoiding one press release is easier than building a manufacturing organisation. The phrase remains in the vocabulary and gets applied to cases where it fits better than it did to Osborne: Nokia’s February 2011 announcement that it was abandoning Symbian for Windows Phone months before any Windows Phone shipped is the usual modern example (see Nokia and Dead End: Symbian).

After

Adam Osborne wrote the story down almost immediately. Hypergrowth: The Rise and Fall of Osborne Computer Corporation, written with John C. Dvorak, appeared in 1984. He founded Paperback Software International the same year to sell cheap clones of expensive programs, which put him in court against Lotus over the look and feel of 1-2-3; the court ruled against Paperback in June 1990, one of the decisions that made interface copyright a live question (see Copyright and IP in the Digital Age). A last venture, Noetics Software, followed in 1992. Osborne fell ill with a brain disorder, returned to India, and died at Kodaikanal on 18 March 2003.

Lee Felsenstein kept building things and kept talking about why he built them, which is the part of the Homebrew tradition he never left.

The machine itself is the argument that survived. A computer you can carry, sold with the software you need already on it, at a price that does not require a capital-expenditure approval, is now the entire industry. Osborne was right about what buyers wanted and had two years to be wrong about everything else.

📚 Sources

• Osborne Computer Corporation — Wikipedia — the January 1981 founding in Hayward with Felsenstein, the Osborne 1’s sales of 11,000 units in eight months and peak of 10,000 a month, growth from two employees to 3,000 and $73 million of revenue in twelve months, the Executive and Vixen, the 13 September 1983 bankruptcy filing, emergence from bankruptcy in 1984, the Vixen in late 1984, and the dispute over the causes
• Osborne 1 — Wikipedia — the release on 3 April 1981 at $1,795, 24.5 pounds, the five-inch 52×24 display, Z80 with 64 KB and two 90 KB drives, and the bundled WordStar, SuperCalc, CBASIC and MBASIC worth over $1,500 at retail
• Osborne effect — Wikipedia — the origin of the term, the contemporary account of dealers cancelling, and the employee interviews and competitive evidence that undercut it as the sole cause, and the vice president who turned roughly $150,000 of leftover motherboards into a $2 million expense
• Adam Osborne — Wikipedia — born Bangkok 6 March 1939 and died Kodaikanal 18 March 2003, Osborne & Associates from 1972, the 300,000 copies of An Introduction to Microcomputers, the 1979 McGraw-Hill sale, Hypergrowth with Dvorak in 1984, Paperback Software and the June 1990 Lotus ruling, and Noetics Software in 1992
• Kaypro II — Wikipedia — the 1982 launch at about $1,595, the 2.5 MHz Z80 with 64 KB, the nine-inch green screen, the 191 KB drives, the aluminium case at 29 pounds, and the direct comparison with the Osborne 1’s five-inch screen and smaller drives
• Osborne Executive — Wikipedia — the premature announcement, the April 1983 release at $2,495, the seven-inch amber display and 124 KB of memory
• Kalat, David: “Nervous System: The Osborne Effect” — BRG — the Executive at $2,495, the Kaypro and MS-DOS pressure, the retooling decision, and the conclusion that the announcement was “not entirely” the cause (note: the site answers scripts with HTTP 403 but loads in a browser)
• “Osborne Computer’s bankruptcy and the Osborne Effect” — The Silicon Underground — the price gap between the Osborne 1 and the Executive, the company’s accounting, and the Compaq and Eagle IBM-compatible competition
• The Henry Ford: “The Rise and Fall of the Osborne Computer Corporation” — museum account of the machine and the company’s arc