When a microcomputer company slides into the murky depths of Chapter 11, it rarely goes alone. Dragged along for the ride are its customers, who are left to scramble for parts, service, and, in some cases, software.
Take the cases of Osborne Computer Corp. in Hayward, Calif.; and Nutting Lake, Mass.-based Computer Devices Inc., maker of the Dot Personal Computer. In 1983, the two companies filed for protection under Chapter 11. Both are now reorganizing. Osborne Computer, in fact, filed its reorganization plan last winter and, says new president Ron Brown, "we're putting the company back together again and moving forward."
While Osborne Computer's 30 employees -- down from a high of 1,200 -- are still producing a few micros, the newly organized company, says Brown, will concentrate on distribution and will no longer manufacture or service machines. Computer Devices, which also makes portable printer terminals, is "investigating the possibility" of manufacturing the Dot again, according to Robert Reis, the company's director of sales and marketing.
But no matter what the eventual fate of these companies, the individuals who bought their products are, in the meantime, left holding the bag: A company that files for Chapter 11 protection is under no legal obligation to honor outstanding warranties or service contracts. "For all practical purposes," says Will Rogers, an attorney and administrator of the high-technology group in the Boston law firm of Gaston Snow & Ely Bartlett, "you're out of luck."
Rogers isn't saying anything that Stephen Carrig doesn't know already.
About a year and a half ago, Carrig, an Arlington, Va., consultant, bought an Osborne I. Since most of his work involves writing, and since he often does research at the nearby Library of Congress, a portable micro was, for him, "an absolute necessity." Like many people, Carrig wasn't too surprised when Osborne Computer filed for Chapter 11 in September 1983. Nor was he terribly worried. His machine, after all, had never given him a moment's trouble.
But a few months later, Carrig began having intermittent problems with one of his disk drives, a difficulty he dismissed as "spikes," or voltage surges, in the electrical lines. Shortly thereafter, the drive broke down completely. Carrig's first thought was to purchase another Osborne, a back-up unit that would let him continue to use the data he had already generated, as well as his existing software. But he found few Osbornes for sale. And the handful that were available cost more than he cared to pay.
Next he tried telephoning an Osborne Computer regional sales office in New Jersey to see if it had machines. "I finally got through to someone, and it sounded like they were talking in an echo chamber," he says. He was told, "We're bare to the walls. We don't have anything."
So, Carrig figured, he would get his machine repaired. That, he says, is when he discovered that "you're on your own." Because the Osborne's disk-drive assembly includes a custom circuit board, he couldn't simply order a standard part from the drive's manufacturer. Sears, Roebuck & Co. and Xerox Corp. had the right components, but refused to fix the drive. They would agree only to replace the faulty part for $400 or $500 -- a hefty fee considering that Carrig's machine, with software, cost only $1,995 in the first place.
Carrig decided to remedy the problem himself. He joined a local Osborne user group and spent hours on the electronic bulletin board consulting with other owners. He drove to a dealer 50 miles away and bought a technical manual. Since interest in the computer had spurred him into taking a few electronic courses, he took his Osborne apart and examined its innards. "I had it spread all over the dining room table," he says. "My wife about had a heart attack."
Finally he obtained a few names of local repair people from several dealers "There was a reluctance to work on the machine," he observes. "I never could schedule a time." And, to his surprise, estimates ranged from $40 for a minor adjustment to $400 for replacement. Eventually he found a dealer who patched up his portable for $40. Soon, however, the Osborne was returned to the shop. "I'm having problems [with the drive] again," says Carrig.
Carrig's dilemma, bad as it was, could have been far worse. Instead of purchasing an Osborne, he might have been one of the several hundred unlucky individuals who put their money on the Dot portable computer.
Since an insignificant number of Dots were sold -- Future Computing Inc., a Richardson, Tex., market-research firm, estimates fewer than 2,000 -- service and parts are much more difficult to obtain than they are for an Osborne. Users must rely on Computer Device's service division. Moreover, the Dot was one of the first micros to offer a nonstandard 3 1/2" disk drive, requiring special software, so programs for the machine are limited.
The difficulties that can crop up with one of these more obscure machines, says Doug Cayne, vice-president and financial analyst with Gartner Group Inc., a computer industry research and advisory firm in Stamford, Conn., roughly parallel those you might encounter if your Alfa Romeo conked out in an obscure hamlet in the middle of the country. Good luck, Charley.
By contrast, at the end of 1983, Osborne Computer had an installed base of more than 150,000 machines, according to Future Computing. The large number of Osborne owners fueled the growth of many businesses that manufactured and sold products -- such as interface boards, up-grades, and adaptors -- exclusively for the Osborne. Many of these companies, such as JMM Enterprises in Enumclaw, Wash., are still in business. Besides, most Osborne components are standard, off-the-shelf items.
Software that will run on Osborne machines -- both the Osborne I and the newer Executive -- is also plentiful in stores. And user groups around the country distribute, for a nominal fee, the many public-domain programs available for the machines.
Indeed, for Osborne users, maintains Gale Rhoades, executive director of First Osborne Group (FOG) in Daly City, Calif., Chapter 11 may have been an unlooked-for boon. At first, she says, "a lot of users panicked." But the months be fore the company filed for protection, she insists, were much more difficult thar those afterwards. "With the admission that Osborne was in serious trouble," she says, "we stopped getting a snow job [from the company's management]."
Today, she points out, the company cooperates fully with FOG in providing vital information, such as solutions to bugs in the software or hardware. "They are fabulous," she says. "We get much faster answers. We get more accurate answers."
User groups, generally, have been the brightest -- and sometimes last -- refuge for Osborne users. FOG, for instance, prides itself on having the most up-to-date information for users. For example, if Carrig had called the organization, FOG would have been able to refer him to a source for a replacement drive that would have cost him only $65 or $70. Many entrepreneurs, particularly former Osborne Computer employees, says Rhoades, have entered the Osborne after-market since its Chapter 11 filing. "So we now have a fairly extensive list of where to get parts," she notes.
Osborne Computer also gave the group diagnostic software and the technical manual containing schematics, which was unavailable previously. So a FOG volunteer or staffer could have explained to Carrig how to remove his drive, which he could then have shipped to a start-up in Hayward, Calif., that sells new and refurbished Osborne replacement parts.
For those who aren't excited about do-it-yourself projects, Xerox, under its Xerox Americare program, offers a one-year service contract to Osborne owners for $285. (Carrig, in fact, had received a notice from Xerox before his machine went on the fritz, but passed up the contract as "outrageously priced.") Xerox bought more than $1 million in parts from Osborne Computer, and more than 3,000 dealers have either become Americare dealers or applied to Xerox to start dealerships. And smaller companies, such as Micro Products Repair Centers Inc. in Hasbrouck Heights, N.J., a subsidiary of Computer Maintenance Corp. in Secaucus, N.J., now regularly service Osbornes.
Some owners, though, don't want to fix their existing Osbornes. They want to buy new ones. Why? Bill Purdin, president of Legend Inc., a 10-employee advertising agency in Marblehead, Mass., decided to purchase a third Osborne, his second Executive, last January. (It is interesting to note that he ordered the micro through FOG, which Rhoades claims is now Osborne Computer's biggest dealer. The group, she says, receives no money from acting as distributor, only new members.)
Purdin admits that if he were prescient, his first computer probably would not have been an Osborne. But, he points out, "Osborne didn't bother putting out a notice that said, 'Hey, we're thinking about going out of business in the next two years, so if you're thinking about buying us, you better take that into account.' "
Indeed, when news first reached Purdin of the Chapter 11 filing, he says, "my heart sank. I had this empty feeling. You can't imagine how important a purchase a [computer] can be for a company." Still, he observes, if you are going to go only with companies that are guaranteed to exist in the future, you are stuck buying IBM. And Purdin didn't want IBM -- Big Blue's micro offerings were simply too expensive for his small business.
Now Purdin feels that he must remain with the Osborne line. Since each brand of computer formats its own disks -- that is, prepares them for reading information in a different way -- he can't use data produced on one kind of machine in another computer without a great deal of extra effort. He looked into buying a micro from Digital Equipment Corp., but quickly recognized that there would be problems of compatibility with his Osborne.
"So all of a sudden, I'm operating on an island," he says. "That's not why [I bought the computer]." He heard about software programs that allow one kind of computer to communicate with another brand, but had difficulty obtaining the information he needed. (These programs include UniForm [Micro Solutions Inc., DeKalb, Ill.; $69.95] and Filetran [Business Micro Products Inc., Glenwood Springs, Colo.; $99]. Kaypro Corp., in San Diego, includes a version of UniForm with each Kaypro II portable computer it sells.) Besides, he says, "once you get away from the complete compatibility of unit to unit, you're just in a world of inconvenience."
As a result, he wrote out his check for another Osborne. Although Purdin admits that he "may be digging his own grave," at heart he is a true believer. "There is nothing like an Osborne," he says. "All the rest are just cheap imitations." Furthermore, he is convinced that his new machine is among the best built in the company's history. "To put out a piece of junk now," he says, "would be death for them."
Stephen Carrig too -- who certainly has had problems aplenty with his Osborne -- thinks there is a "whole up-side" to the situation. Shortly after the Chapter 11 filing, for instance, he received a letter from a company that makes the modem for the Osborne. The device's price, the manufacturer announced, had been slashed from $265 to $99. Carrig marched down to his local dealer, showed him the letter, and bought the modem at the same cut-rate price. He also purchased a supplementary word-processing package that counts words and checks spelling at substantial savings. And he anticipates prices for other hardware and software will soon tumble.
Besides, he points out, "the machine is basically sound. You can't beat it for the price." His Osborne, he says, paid for itself in two or three months anyhow. "So I could throw it out the window and break even."
And Carrig has even found hidden benefits in having the machine go down. For one, he has enjoyed meeting new people through his user group's bulletin board. But he is most excited by the fact that his Osborne has given him an interest in electronics -- and a great idea for a new business.
Carrig is now seriously exploring the idea of opening a combined used-computer store and repair center. Judging from his own experience, he says, "I think the market's wide open." In fact, although Carrig is disappointed that Osborne Computer filed for Chapter 11 and annoyed that he had his difficulties, he has no regrets whatsoever. "I see it as a business opportunity," he says. "It might have been the best purchase I ever made."