Once High-Flying Computer Maker Emerges From Bankruptcy : Osborne Is Back With a New Look

Times Staff Writer

The name is the same, but the Osborne Computer Corp. due to come out from behind the shield of the bankruptcy laws today bears little resemblance to the high-flying firm whose spectacular crash 16 months ago signaled a shakeout in the small-computer industry.

Gone are founder Adam Osborne, President Robert Jaunich and just about everybody else. The new Osborne Computer has 35 employees, compared to 1,000 in 1982. It hasn't any factories and has moved from Hayward, Calif., to offices in Fremont that are one-fifth the size. And it has put together a business plan whose modesty befits its bankrupt status.

Osborne Computer, now owned and run by four executives from the old company's second tier of management, proposes to be a only a marketer of machines designed and produced by other people.

"We've learned from the excesses of the original company," says Ronald J. Brown, 51, the new president and chairman, who formerly headed Osborne's overseas operation.

"I like what they're doing," says Esther Dyson, editor of Release 1.0, an industry newsletter. "They have no grandiose ambitions, they just want to make some money. It's just a marketing company trading on a name."

She meant the Osborne name, which is perceived to be a positive asset despite the company's well-publicized collapse. In fact, Brown says he hopes to turn the debacle into an advantage.

"The company took a beating, but the product never did," he says. "And you get the underdog thing going for you, like Chrysler. We've got some avid Lee Iacocca fans around here."

As any computer buff knows, Osborne Computer was founded in Silicon Valley in 1981 by colorful entrepreneur and software publisher Adam Osborne. His new firm brought out the Osborne 1 portable computer and became one of the splashier success stories.

The company quickly won a cult-like following, especially in California and Europe, with its inexpensive ($1,795) but well-equipped machine. Osborne amassed $104 million in revenue in the 12 months ended May, 1983, and sold about 120,000 of the original computers and almost 20,000 copies of a successor model, the Executive 1.

Osborne himself, ex-President Jaunich and others are still arguing over what subsequently went wrong; stiff competition and poor management are mentioned.

In any event, U.S. sales collapsed and the firm found itself with debts of $42 million against realizable assets of perhaps $15 million when it sought bankruptcy court protection in September, 1983.

None of 160 potential buyers would touch the company after looking at the books, Brown says, and at year-end, liquidation appeared the only answer. But Brown and his overseas group talked creditors into letting them take over the privately held company.

Brown recalls that the surviving entity kept assembling and selling computers and collecting receivables last year while it sold odds and ends, such as furniture for 1,000 former employees.

The firm thus managed to repay all but $3.5 million of the $15.5 million promised to creditors under the reorganization plan. That works out to about 37 cents on the dollar, though creditors will also get 20% ownership of whatever has survived three years from now.

Two months ago, the company introduced two new externally produced portable computers: the Osborne 3, an IBM-compatible lap-top machine starting at $2,195, and the $1,298 Osborne 4, or Vixen, which had been under development to replace the Osborne 1.

Now, Osborne Computer is conducting a loyalty test. Not only is it counting on many of its 140,000 previous customers to buy the new machines, but its executives are also leaning on them to buy stock in the company.

Brown is traveling up and down California this month for meetings with Osborne owners in hopes of selling them $1 shares in Osborne Computer. It is an unusual and unregulated offering of 3 million shares of stock, open only to Californians and foreign nationals living outside the United States.

The stock sale was part of the company's reorganization plan approved by the bankruptcy court in June, but it is exempt from federal and state regulations.

In effect, the company says, the stock offering is an effort to raise venture capital in lieu of more conventional sources of funds.

Brown says he had raised about $100,000 at the end of his first week on the road and hopes to reach $3 million by mid-February, enough to fund operations through year-end. Conducting meetings at hotels, he says, "We've actually collected some checks on the spot. They aren't exactly revival meetings, but they're close.

"It's too early to know how it's going to go," Brown said earlier this week before boarding a plane for a series of fund-raising meetings in Los Angeles, Long Beach and San Diego.

As for the new computers, the company hopes to sell 15,000 to 20,000 this year--about 40% to Californians and the rest overseas. Brown notes optimistically that Osborne users are such buffs that each owns, on average, 1.3 computers. Brown further declares: "The Osborne 1 user is ready for a new machine."

"What I call that is guerrilla marketing," says analyst Ralph Gilman of Infocorp, a Cupertino, Calif., market research firm. "What they do have going for them is user groups. All those users are very loyal. A lot of them feel like Osborne is their kind of computer company because everyone else was trying to sell them computers for $5,000.

"But getting anyone to invest in computers these days is tough," Gilman adds.

The company is dour about its prospects in the absence of the $3 million, which is intended as operating funds. Though Brown says it has inventories of more than $3 million in Executive 1 computers it can sell, the prospectus for the stock offering confesses how close to the edge the new venture is operating: "Working capital is virtually non-existent."

Nonetheless, the company plans on being "modestly profitable" in 1985, and editor Dyson gives it a good chance of succeeding. One of its most valuable assets is a tax-loss carry-forward of at least $16 million, making the firm tax free for the foreseeable future.

From his new quarters in Berkeley, where he has started a firm called Paperback Software International, Adam Osborne declined comment on his successors' prospects except to say: "I wish them well."

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