Computer Titan Crashed by ‘Osborne Effect’

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Most technology buffs remember 1981 as the year IBM introduced its first personal computer, a machine destined to dominate the PC space for years to come. But in that same year, another PC hit the market that arguably made an even bigger initial splash than Big Blue’s. Adam Osborne, an iconoclastic publisher and technology pundit turned entrepreneur, founded Osborne Computer Corporation, and in April 1981 introduced the Osborne 1, the world’s first portable computer. Sure, it weighed 24 pounds and had a 5-inch display smaller than some smartphone screens, but at $1,795—$1,000 less than IBM’s desktop computer—it became an immediate hit.

So did Osborne, who was dubbed a visionary. “I tell people that in those days, there were three major people in the industry: Bill Gates, Steve Jobs and Adam Osborne, and not necessarily in that order,” the late industry pioneer David Bunnell once said. Harry McCracken, technology editor of Fast Company magazine, who wrote a lengthy profile of Adam Osborne in 2011, called his idea “transformative.”

The Osborne 1, despite a plethora of technical flaws—it ran the ill-fated CP/M operating system rather than MS-DOS—drove jaw-dropping sales. The company sold $10 million worth of computers in August 1982 alone and hit $100 million in revenues for the fiscal year 1983, which ended in February. So successful was the Osborne 1 that more than a dozen competitors, including Compaq Computer and Kaypro, immediately jumped into the portable PC market space.

A tall, erudite figure who was born in Thailand to British parents, Osborne spent much of his childhood in southern India, later moved to England, and migrated to the United States, where he earned a doctorate in chemical engineering. As Osborne Computer soared, he got swept up in his own success. He compared himself to Henry Ford and boasted that his start-up was the “fastest growing company in the history of the Silicon Valley.” He began expanding his organization at breakneck speed, hiring 1,500 workers in 12 months, and pouring cash into facilities and production. This profligate spending ate through the firm’s cash like a hungry beast. And then, perhaps fueled by his own hubris, he provoked what many believe was his fatal flaw.

In early 1983, with competitors starting to make inroads in the market, Osborne started actively promoting an Osborne follow-up computer, the Osborne Executive. His plan was to invite journalists to see it and promise not to publish anything until the machine’s release date—only the news still leaked out. Dealers, anticipating this new machine, canceled orders for the Osborne 1 and sales plummeted. Even as Osborne cut the price of his signature computer, the slide didn’t abate. Already cash-strapped, the young company ran out of money and declared bankruptcy in September 1983. The stunning rise and fall of Osborne Computer in just two years was the talk of the industry. Pundits and analysts pointed to Osborne’s premature promotion of his newest product, which they dubbed “The Osborne Effect,” as the CEO’s suicidal blunder.

Fast Company’s McCracken believes that Osborne got a raw deal in the retelling of the company’s story. Osborne didn’t purposely undermine his own healthy company by preannouncing a new product, McCracken says. The news leaked and the dam burst. In fact, he added, Osborne Computer was already in financial trouble. But, “sadly, the Osborne Effect is what first comes to people’s minds when they think about Adam Osborne,” McCracken says.

Today, of course, companies have learned their lesson, studiously avoiding a preannouncement of products that might undermine their existing lines. A company like Apple is fanatical about suppressing information until a product is ready to ship. Leaks, not pre-announcements, remain an industry bugaboo. For Adam Osborne, the charismatic visionary, his remarkable career slid into oblivion. He returned to southern India in 1992, stricken with a brain disorder, and moved in with his sister. He died at age 64 in 2003.

Authors

  • Glenn Rifkin

    Managing Editor, Korn Ferry Briefings