Osborne Effect - The Osborne Myth

The Osborne Myth

Interviews with former employees cast doubt on the idea that Osborne's downfall was caused solely by announcement ahead of availability. After renewed discussion of the Osborne Effect in 2005, columnist Robert X. Cringely interviewed ex-Osborne employee Mike McCarthy and clarified the story behind the "Osborne effect". Purportedly, the new Executive model from Osborne Computer was priced at US$2,195 and came with a 7-inch (178 mm) screen, while competitor Kaypro produced a computer with a 9-inch (229 mm) screen for US$400 less. The Kaypro computer had already begun to cut into sales of the Osborne 1 (a computer with a 5-inch (127 mm) screen for US$1,995), but inventories of the Osborne 1 cleared out, and customers switched almost entirely to the Kaypro. However, this only proves that there were other factors involved in the organization's downfall—it does not prove that the Osborne effect was a myth. Additionally, CEOs that have made grave errors of this nature cannot be expected to admit fault in interviews.

On 20 June 2005, The Register quoted Osborne's memoirs and interviewed Osborne repairman Charles Eicher to tell a tale of corporate decisions that led to the company's demise. Apparently, while sales dipped after the initial announcement, they eventually began to pick up, and cash started flowing into the company. Then, a vice president discovered some fully equipped motherboards for the older models, worth US$150,000. Rather than discard the motherboards, the vice president sold Osborne leadership on the idea of building them into complete units and selling them. Before long US$2 million, far more money than anybody anticipated, and more than the company could afford that time, was spent to turn the motherboards into completed units: For CRTs, RAM, floppy disk drives, and to restore production and fabricate the molded cases. In his autobiography, Osborne described this as a case of "throwing good money after bad." It was then that the company folded due to debt.