The myth of the Osborne effect

Michael Gartenberg | June 21, 2005, 04:03 PM

Well. It's true that the story as told is not accurate but I'm not sure that this was the cause either. In reality, Osborne announced the Executive in March and shipped in April of that year. There was a period of about six weeks between the new models but that's not what sunk them, nor was it the story as detailed below. The reality was that the machines could not live up to what as being offered at the time from competitors such as Kaypro. It was simply a case of the new stuff not being good enough. Folks waited to see what they would introduce and when they did, it just didn't meet the competitive standard. And that's the lesson to be learned.

By now, you’ve surely heard about the “Osborne Effect,” which occurs when a computer manufacturer pre-announces a product long before it’s introduced, and goes bust as customers stop buying current models in anticipation of the new ones. The term is based on Osborne Computing, which went under in the early 1980s, and has been used repeatedly in recent weeks by punditsdiscussing the possibility that Apple could share Osborne’s fate as potential customers delay purchases until Intel-based Macshit store shelves. Problem is, there is no Osborne effect. As Osborne expert Charles Eicher points out in The Register, “they had transitioned to a new model, and it was finally shipping. Sales were going well, and money was flowing back into the company after months of postponed sales.” Then, a senior exec discovered that the company had a pile of motherboards from the earlier model (worth about $150K), and figured it would make good sense to build those into full-fledged computers, which ended up costing the company $2 million. Osborne went under, and is now a textbook case in how not to run a business — though, as it turns out, the textbooks (and, of course, the unnamed exec) had things a little wrong.