How a hot new computer firm tries to keep ahead
Hayward, Calif. — Like many business journalists, Adam Osborne thought he could do a better job than some of the company managers he reported on. It appears he was right.
Mr. Osborne made a name for himself writing a column criticizing computer industry managers. One of his chief beefs was that personal-computer makers concentrated on making their products unique. He thought they should focus on driving down prices so more people could buy computers.
So the industry gadfly stopped writing and launched a company to make a low-price, portable computer with built-in instructions for a variety of popular tasks. Since opening its doors in mid-1981, the Osborne Computer Corporation has turned into one of the fastest growing companies in the United States.
Mr. Osborne gave another former writer, Georgette Psaris, the task of holding on to the company's market position. ''As long as we can continually lead in price/performance comparisons and maintain portability, we can stay on top,'' claims Ms. Psaris, the company's marketing vice-president, who had been working for a subsidiary of McGraw-Hill.
Analysts and retailers admit the Osborne company concept of a complete, low-cost computer aimed at business people has great appeal. ''The Osborne is attractive because everything is priced together in one easy package,'' says Gregory L. Kelsey, a computer industry analyst with Hambrecht & Quist, a San Francisco-based brokerage firm. ''With the software included it is easy to sell.''
In fact, Osborne this year expects to sell some 125,000 computers, all of a size that will fit under an airline seat. If that forecast holds, it will have sales of $150 million in its first full year, while sporting a hefty 30 percent pretax profit margin.
Because of the Osborne computer's relatively low $1,795 price, which includes software, the machine has been able to eat into the market for low-cost individual business computers. For example, at Macy's department store in San Francisco, which recently opened a ''computer solutions'' sales counter, Osborne has been outselling an industry leader, Apple Computer Inc., department manager Markhams Douglas says. One advantage for Osborne is that it comes equipped with word processing and budgeting programs, while the Apple requires additional software costing $650 or so just to do word processing, he notes.
Osborne has been able to keep its costs low by using only those components that suppliers could offer at reasonable prices, keeping inventory at very low levels, and subcontracting most production steps.
Launching of the new company and new product has not been without problems. ''They started out with a bang but had their share of reliability problems,'' says Richard Inatome, president of Computer Mart, a Detroit-based chain of computer stores. The company says it spent $140,000 to solve the problems.
Even with reliability woes out of the way, sales will be tougher to come by in the future. For one thing, the number of individuals presold by the machine's low price ''will be exhuasted by the end of the year for sure,'' Ms. Psaris says.
As a result, Osborne is improving its sales literature and preparing videotape presentations for use in stores. At the same time, Osborne will shift emphasis away from retail distribution and toward greater use of office equipment dealers. At the moment about 90 percent of Osborne's distribution network is made up of retail stores. ''By the end of the year 60 percent will be retail,'' Ms. Psaris says. For example, the firm recently signed on a marketing company to handle sales to potential Fortune 1,000 customers.
Osborne's strategic plan to cope with increased competition includes a move to sign deals with distributors before competitors can do so. This will make it tougher for new producers, since dealers can afford to handle only a limited number of products. ''When 'me toos' come in we will already have sewn up the distribution,'' Ms. Psaris says. Osborne has also prepared a new product to cope with increased competition.
The firm's early success is sure to attract competition. Dataquest, a Cupertino, Calif., market research firm, estimates that the market for personal computers will be $7.2 billion by 1986. ''A lot of Osborne customers are people seeking computer literacy,'' says John Klonick, a senior analyst at Dataquest. ''That is a large and rapidly growing market, although it is difficult to know what its precise size is.''
Perhaps the greatest threat facing Osborne is the possibility of a large company's getting into the market. ''I am worried about a Japanese firm willing to take a long-term loss,'' Ms. Psaris says. ''As long as no one comes in and says we will take a loss to win share, I am not worried.''