Osborne effect

Last updated

The Osborne effect is a social phenomenon of customers canceling or deferring orders for the current soon-to-be-obsolete product as an unexpected drawback of a company's announcing a future product prematurely.


The term was coined after the Osborne Computer Corporation, a company that took more than a year to make its next product available, and eventually went bankrupt in 1983. [1] [2]


An Osborne 1 from 1982. Portable1982.jpg
An Osborne 1 from 1982.
An Osborne Executive. Evolution (34 365).jpg
An Osborne Executive.
An Osborne Vixen prototype. Osborne 'Vixen" Prototype.jpg
An Osborne Vixen prototype.

The Osborne Effect states that prematurely discussing future, unavailable products damages sales of existing products. The name comes from the planned replacement of the Osborne 1, an early personal computer first sold by the Osborne Computer Corporation in 1981. In 1983, founder Adam Osborne pre-announced several next-generation computer models (the Osborne Executive and Osborne Vixen), which were only prototypes, highlighting the fact that they would outperform the existing model as the prototypes dramatically cut down assembly time. [3] A widely held belief was that sales of the Osborne 1 fell sharply as customers anticipated those more advanced systems, leading to a sales decline from which Osborne Computer was unable to recover. This belief appeared in the media almost immediately after the company's September 1983 bankruptcy: [4]

To give the jazzy $2,495 Osborne Executive a running start, Adam began orchestrating publicity early in 1983. We, along with many other magazines, were shown the machine in locked hotel rooms. We were required not to have anything in print about it until the planned release date in mid-April. As far as we know, nothing did appear in print, but dealers heard about the plans and cancelled orders for the Osborne 1 in droves. In early April, Osborne told dealers he would be showing them the machine on a one-week tour the week of 17 April, and emphasized that the new machine was not a competitor for the Osborne 1. But dealers didn't react the way Osborne expected; said Osborne, "All of them just cancelled their orders for the Osborne 1."

Osborne reacted by drastically cutting prices on the Osborne 1 in an effort to stimulate cash flow. But nothing seemed to work, and for several months sales were practically non-existent. [4]

Pre-announcement is done for several reasons: to reassure current customers that there is improvement or lower cost coming, to increase the interest of the media and investors in the company's future prospects, and to intimidate or confuse competitors. When done correctly, the sales or cash flow impact to the company is minimal, with the revenue drop for the current product being offset by orders or completed sales of the new product as it becomes available. However, when the Osborne effect occurs, the quantity of unsold goods increases and the company must react by discounting and/or lowering production of the current product, both of which depress cash flow.

The Osborne myth

Interviews with former employees cast doubt on the idea that Osborne's downfall was caused solely by announcement ahead of availability. [5] [6]

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, while the new Executive model from Osborne Computer was priced at US$2,195 and came with a 7-inch (178 mm) screen, competitor Kaypro was selling a computer with a 9-inch (229 mm) screen for $400 less, and the Kaypro machine had already begun to cut into sales of the Osborne 1, a computer with a 5-inch (127 mm) screen for $1,995.

Consequently, after inventory of the Osborne 1 had been cleared out, customers switched to Kaypro, causing monthly sales of the Executive to fall to less than 10% of its predecessor.

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. [6] Apparently, while sales of the new model were relatively slow, they were starting to show a profit when a vice president discovered that there was an inventory of fully equipped motherboards for the older models worth $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.

Soon, $2 million was spent to turn the motherboards into completed units, and for CRTs, RAM, floppy disk drives, to restore production and fabricate the molded cases. This was far more money than anybody anticipated, and also more than the company could afford at that time. In his autobiography, Osborne described this as a case of "throwing good money after bad". [6] It was at this time that the company folded.

Other examples

In 1978, North Star Computers announced a new version of its floppy disk controller with double the capacity which was to be sold at the same price as their existing range. Sales of the existing products plummeted. The company almost went bankrupt, folding in 1984. [7]

Other consumer electronic products have been continually plagued by the Osborne effect as well. In the early 1990s, TV set sales were depressed by talk of the imminent release of HDTV, which did not actually become widespread for another 10 years.

When Sega began publicly discussing their next-generation system (eventually released as the Dreamcast), barely two years after launching the Saturn, it became a self-defeating prophecy. This move, combined with Sega's recent history of short-lived consoles, particularly the Sega Mega-CD and 32X which were considered ill-conceived "stopgaps" that turned off gamers and developers alike, led to a chain reaction that quickly caused the Saturn's future to collapse. Immediately following the announcement, sales of the console and software substantially tapered off in the second half of 1997, while many planned games were canceled, causing the console's life expectancy to shorten substantially. While this let Sega focus on bringing out its successor, premature demise of the Saturn caused customers and developers to be skeptical and hold out, which led to the Dreamcast's demise as well, and Sega's exit from the console industry. [8]

Another example of the Osborne effect took place as a result of Nokia CEO Stephen Elop's implementation of the plan to shift away from Symbian to Windows Phone for its mobile software platform. On top of this, criticism of existing products was compared to the Ratner effect. Although it was known for some time that Nokia's Symbian phones were no longer competitive against iOS and Android, they still generated significant profit thanks to Nokia's brand recognition until Elop's announcement "effectively transformed the Symbian cash-cow into a dead duck". At the same time, Nokia's first Windows Phone devices would not be ready for a year, and once they were released their sales were not enough to replace the volume and profit of Symbian devices. [9] Furthermore, the announcement that Windows Phone 7 devices would not be able to upgrade to Windows Phone 8 hurt sales of Nokia's Windows Phone 7 phones, plus it was a risky move for Microsoft which "can ill afford to alienate people when there are scores of highly capable and affordable Android phones up for grabs, or years-old Apple iPhones which aren't being prematurely shut out of the iOS playground." [10] [11] Poor performance led Nokia to sell its mobile phone division to Microsoft in 2013. [12]

MakerBot also appears to have fallen victim to the Osborne effect, as talking openly about a future product significantly reduced the sales of their current product. [13]

See also

Related Research Articles

Nokia Finnish technology and telecommunications company

Nokia Corporation is a Finnish multinational telecommunications, information technology, and consumer electronics company, founded in 1865. Nokia's headquarters are in Espoo, Finland, in the greater Helsinki metropolitan area. In 2018, Nokia employed approximately 103,000 people across over 100 countries, did business in more than 130 countries, and reported annual revenues of around €23 billion. Nokia is a public limited company listed on the Helsinki Stock Exchange and New York Stock Exchange. It is the world's 415th-largest company measured by 2016 revenues according to the Fortune Global 500, having peaked at 85th place in 2009. It is a component of the Euro Stoxx 50 stock market index.

Smartphone Multi-purpose mobile device

A smartphone is a mobile device that combines cellular and mobile computing functions into one unit. They are distinguished from feature phones by their stronger hardware capabilities and extensive mobile operating systems, which facilitate wider software, internet, and multimedia functionality, alongside core phone functions such as voice calls and text messaging. Smartphones typically contain a number of metal–oxide–semiconductor (MOS) integrated circuit (IC) chips, include various sensors that can be leveraged by their software, and support wireless communications protocols.

Microsoft Software Updater

Microsoft Software Updater is a Windows and OS X based application launched in 2006, that enables customers to update and recover their mobile device firmware of a S40 or S60 or Lumia device from any Internet enabled access point. To avoid data loss users are prompted with on-screen advice on how to safely update their device.

Ovi (Nokia) Former Internet services by Nokia

Ovi by Nokia was the brand for Nokia's Internet services. The Ovi services could be used from a mobile device, computer or via the web. Nokia focused on five key service areas: Games, Maps, Media, Messaging and Music. Nokia's aim with Ovi was to include third party developers, such as operators and third-party services like Yahoo's Flickr photo site. With the announcement of Ovi Maps Player API, Nokia started to evolve their services into a platform, enabling third parties to make use of Nokia's Ovi services.

A mobile operating system is an operating system for mobile phones, tablets, smartwatches, 2-in-1 PCs, smart speaker, or other mobile devices. While computers such as typical laptops are 'mobile', the operating systems used on them are generally not considered mobile ones, as they were originally designed for desktop computers that historically did not have or need specific mobile features. This distinction is becoming blurred in some newer operating systems that are hybrids made for both uses.

Nokia 7650 Smartphone model

The Nokia 7650 is a 2.5G consumer-oriented smartphone belonging to the fashion and experimental (7xxx) series. It was introduced in Barcelona on 19 November 2001, and was described by CEO Jorma Ollila as the company's most important launch of that year.

Windows Phone Family of mobile operating systems by Microsoft

Windows Phone (WP) is a discontinued family of mobile operating systems developed by Microsoft for smartphones as the replacement successor to Windows Mobile and Zune. Windows Phone featured a new user interface derived from Metro design language. Unlike Windows Mobile, it was primarily aimed at the consumer market rather than the enterprise market.

Symbian Discontinued mobile operating system

Symbian is a discontinued mobile operating system (OS) and computing platform designed for smartphones. Symbian was originally developed as a proprietary software OS for PDAs in 1998 by the Symbian Ltd. consortium. Symbian OS is a descendant of Psion's EPOC, and was released exclusively on ARM processors, although an unreleased x86 port existed. Symbian was used by many major mobile phone brands, like Samsung, Motorola, Sony Ericsson, and above all by Nokia. It was also prevalent in Japan by brands including Fujitsu, Sharp and Mitsubishi. As a pioneer that established the smartphone industry, it was the most popular smartphone OS on a worldwide average until the end of 2010—at a time when smartphones were in limited use—when it was overtaken by iOS and Android. It was notably not as popular in North America.

Stephen Elop Canadian businessman

Stephen Elop is a Canadian businessman who most recently worked at Australian telecom company Telstra from April 2016. In the past he had worked for Nokia as the first non-Finn CEO and later as Executive Vice President, Devices & Services, as well as the head of the Microsoft Business Division, as the COO of Juniper Networks, as the president of worldwide field operations at Adobe Systems, in several senior positions in Macromedia and as the CIO at Boston Chicken.

Nokia N9 Smartphone model

The Nokia N9 is a smartphone developed by Nokia, running on the Linux-based MeeGo "Harmattan" mobile operating system. Announced in June 2011 and released in September, it was the first and only device from Nokia with MeeGo, partly because of the company's alliance with Microsoft announced that year. It was initially released in three colors: black, cyan and magenta, before a white version was announced at Nokia World 2011.

Nokia's strategic nomenclature can be traced back in 2005 when the Nseries line was launched, offering devices with flagship specifications and premium hardware at various price points. These devices were considered the "bread and butter" of the company and were often positioned to showcase their latest technologies. Thanks to the newfound consumer and enterprise interest in smartphones at the time, the company introduced four additional collections to diversify their product portfolio and meet demands in most market segments. These new phone series were named Eseries, targeting small business and enterprise customers; Xseries, providing consumer-grade multimedia-focused devices; Cseries, which Nokia used to target both the low-end and mid-range market segments; and Tseries, for devices exclusive to the Chinese market.

Nokia Lumia 800

Nokia Lumia 800 is a smartphone from Nokia, first unveiled on 26 October 2011 at the Nokia World 2011 event. It originally runs on Windows Phone 7.5 "Mango"—it was Nokia's first device to run the Windows Phone operating system and marked the company's shift from Symbian for their smartphones. It was Nokia's flagship upon the original release in Europe in November 2011, and was thus also a highly important product for Nokia's mobile phone business.

Microsoft Lumia

Microsoft Lumia is a discontinued line of mobile devices that was originally designed and marketed by Nokia and later by Microsoft Mobile. Introduced in November 2011, the line was the result of a long-term partnership between Nokia and Microsoft—as such, Lumia smartphones run on Microsoft software, the Windows Phone operating system; and later the newer Windows 10 Mobile. The Lumia name is derived from the partitive plural form of the Finnish word lumi, meaning "snow".

Microsoft Mobile Services are a set of proprietary mobile services created specifically for mobile devices, they are typically offered through mobile applications and mobile browser for Windows Phone, Android, iOS, BlackBerry, Nokia platforms, BREW, and Java ME. Microsoft's mobile services are typically connected with a Microsoft account and often come preinstalled on Microsoft's own mobile operating systems while they are offered via various means for other platforms. Microsoft started to develop for mobile computing platforms with the launch of Windows CE in 1996 and later added Microsoft's Pocket Office suite to their Handheld PC line of PDAs in April 2000. From December 2014 to June 2015, Microsoft made a number of corporate acquisitions, buying several of the top applications listed in Google Play and the App Store including Acompli, Sunrise Calendar, Datazen, Wunderlist, Echo Notification Lockscreen, and MileIQ.

Nokia Asha platform mobile operating system

The Nokia Asha platform is a mobile operating system (OS) and computing platform designed for low-end borderline smartphones, based on software from Smarterphone which was acquired by Nokia. The platform inherits UI similarities mostly from MeeGo "Harmattan", and replaces Series 40 on Nokia's low-end devices. The user interface design team was headed by Peter Skillman, who had worked previously on webOS and the design of MeeGo for the Nokia N9.

Nokia X family Range of smartphones

The Nokia X family was a range of budget smartphones that was produced and marketed by Microsoft Mobile, originally introduced in February 2014 by Nokia. The smartphones run on the Nokia X platform, a Linux-based operating system which was a fork of Android. Nokia X is also known generally as the Nokia Normandy. It is regarded as Nokia's first Android device during the company's Microsoft partnership and was in the process of selling its mobile phone business to Microsoft, which eventually happened two months later.

Microsoft Mobile Subsidiary of multinational company Microsoft, involved in the development and manufacturing of mobile phones and mobile computing devices

Microsoft Mobile was a subsidiary of Microsoft involved in the development and manufacturing of mobile phones. Based in Espoo, Finland, it was established in 2014 following the acquisition of Nokia's Devices and Services division by Microsoft in a deal valued at €5.4 billion, which was completed in April 2014. Nokia's then-CEO, Stephen Elop, joined Microsoft as president of its Devices division following the acquisition, and the acquisition was part of Steve Ballmer's strategy to turn Microsoft into a "devices and services" company. Under a 10-year licensing agreement, Microsoft Mobile held rights to sell feature phones running the S30+ platform under the Nokia brand.

The Nokia 3-digit series are a series of feature and smartphones by HMD Global and previously by Microsoft Mobile and Nokia, generally aimed at developing markets.

Nokia is a Finnish multinational corporation founded on 12 May 1865 as a single paper mill operation. Through the 19th century the company expanded, branching into several different products. In 1967, the Nokia corporation was formed. In the late 20th century, the company took advantage of the increasing popularity of computer and mobile phones. However, increased competition and other market forces caused changes in Nokia's business arrangements. In 2014, Nokia's mobile phone business was sold to Microsoft.


  1. Osborne, Adam; Dvorak, John C. (1984). Hypergrowth: the rise and fall of Osborne Computer Corporation . Idthekkethan. ISBN   0-918347-00-9.
  2. Grindley, Peter (1985). Standards, strategy and policy: cases and stories. Oxford University Press. ISBN   0-19-828807-7.
  3. 1 2 Ahl, David H. (March 1984). "Osborne Computer Corporation". Creative Computing. Ziff-Davis. p. 24. Retrieved 4 April 2011.
  4. Cringely, Robert X. (16 June 2005). "The Osborne Effect". The Osborne Effect: Sometimes What Everyone Remembers Is Wrong. PBS. Archived from the original on 28 June 2009. Retrieved 25 November 2009.
  5. 1 2 3 Andrew Orlowski (20 June 2005). "Taking Osborne out of the Osborne Effect". The Register . Retrieved 22 June 2009.
  6. Andrew Orlowski, "Taking Osborne out of the Osborne Effect", The Register, 20 June 2005
  7. Jason Perlow, "Osborne effects: Death by pre-announcement", ZDNet, 21 June 2012
  8. Nokia's Windows Phone "bear hug" is choking the Mighty Finn - CNET
  9. Natasha Lomas, "Windows Phone 8 sucker punches Windows Phone fans" CNET, 21 June 2012. Accessed 24 October 2017
  10. Windows Phone 7 was doomed by design, Microsoft admits - CNET
  11. Ando, Ritsuko; Rigby, Bill (3 September 2013). "Microsoft swallows Nokia's phone business for $7.2 billion". Reuters . Retrieved 17 March 2019.
  12. Jason Huggins (April 2015), What Doomed MakerBot? The Osborne Effect