Joint Venture Will Offer Full Line of PCs : Osborne, 2 Allies Create New Computer Firm

Less than a year after rising from the ashes of bankruptcy, Osborne Computer Corp. is a key partner in forming the country’s newest computer company--an as yet unnamed joint venture with two small computer makers that industry analysts say could represent a survival strategy for other small or troubled technology firms.

Osborne’s alliance with Colby Computer and Sona Computers Inc.--which is expected to result in an outright merger, possibly early next year--brings together for the first time a line of computer products compatible with virtually every personal computer made, including both Apple’s Macintosh and IBM’s PC.

Ronald J. Brown, president of Osborne, said the venture combines the strengths of each small company to make one “major player” in the personal computer market.

“I don’t see how small companies are going to be players if they don’t get together,” he said in an interview. “In the next year, the smaller companies are either going to be acquired or they’ll go away.”

One industry analyst, Dave Fradin of Dataquest in San Jose, called the joint-venture agreement “a leading indicator of what we’ll probably be seeing throughout the industry” in the next few years.

Dataquest projects that one in five of the 450 manufacturers of personal computers will disappear--”mostly through mergers and acquisitions”--in the next two years.

“People ask how small computer companies can survive an industry shakeout; this is our answer,” Jay Lussan, Sona’s chief executive, said.

But another computer industry analyst, who called the joint venture a “very creative, very slick” strategy, expressed skepticism that so many partners can work together successfully.

“It’s an interesting approach, but it’s fraught with uncertainty,” Richard Matlack, president of Infocorp in Cupertino, Calif., said. “Clearly their objective is to combine to create a critical mass in order to survive, but the question is how do you make three companies work together?”

Under terms of the agreement, Osborne--headquartered in Fremont, Calif., since emerging from Chapter 11 protection last January--contributes its brand name for all products and its international distribution network.

Colby, a 2-year-old Mountain View, Calif.-based computer company specializing in secure systems designed for military and private industry, contributes its newly designed product line--including a lap-top computer with hard disk and an electroluminescent screen, an IBM-compatible portable computer and the MacColby, an Apple Macintosh-compatible personal computer.

Sona, a 3-year-old engineering company with a low-cost IBM-compatible computer designed to meet military specifications, contributes its not yet marketed desk-top model plus “considerable management expertise in finance and manufacturing,” according to a joint statement issued by the three companies.

Lawrence R. (Duff) Hicks, chairman of Sona and the owner of Milpitas, Calif.-based Unitronic, a manufacturing subcontractor, will be chairman and chief executive of the new company.

The joint venture is the second involving Osborne to be announced in recent weeks. In October, Osborne signed a separate joint-venture agreement with San Diego-based Tigermark Corp., a manufacturer and marketer of IBM and Apple microcomputer peripherals. Ultimately, all four companies could be merged under the newest joint-venture plan, a spokesman for Osborne said Tuesday.

The decision to form a joint venture immediately while pursuing a merger over the next few months was made, according to Prem Abraham, managing director of the Palo Alto investment banking firm of Gladstone-Abraham, to “eliminate time pressures.”

“It would take three to six months to work out a merger, but, since time is of the essence, this interim approach was desirable,” Abraham said. “This way the separate companies can continued to operate under the joint venture without being distracted by the technicalities of merging.”

Abraham conceded that “computer is a bad word among venture capitalists,” but he said the new computer company will probably be financed instead through corporate investment.

Inventor Charles E. Colby, president and founder of Colby Computer, said the new venture “could be billed as the last start-up computer company in the country.”

“In effect, we’ve created a new computer company but with all the parts already in place,” Colby said, citing the marketing, manufacturing and product base that each individual company contributes to the new organization.

“This kind of marriage should work quite well for all of them,” predicted Dataquest’s Fradin.

“Companies that have been in trouble in the past or that will be in the future will probably follow a similar course.”

Analyst Matlack was less optimistic, calling joint ventures difficult to manage because “everyone’s in charge and no one’s in charge.” However, he said that merger might be their only hope for success.

“They’re all trying to break out, to become significant players in the market, but I don’t think any one of them could make it alone. Collectively, they might.”