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Mad Men, season 7, episode 4, describes the computer business in 1969 as follows. IBM would lease computers to businesses, but would do so only for short leases, and would replace them with newer models on the lease renewal. Therefore, a bunch of businesses had started in competition, who bought IBM computers and leased them for longer terms and cheaper.

Of course, Mad Men is fiction, but I wonder: (to what extent) is this true?

  • 3
    This will probably get better answers on History of Science and Mathematics Stack Exchange. – yannis Feb 11 '16 at 12:37
  • @Yannis If that's the case, I'm glad to have it migrated there. (It's more a business question than a compsci one, though.) – msh210 Feb 11 '16 at 13:42
  • @Yannis - Computers are considered serious "Science" over there? I always thought "Computer Science" was just a silly affectation we programmers use to make ourselves sound more important. Kinda like "Library Science". :-) (and this is from someone with a Master's in it) – T.E.D. Feb 17 '16 at 14:37
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IBM started offering the "lease" option in the late 1960s, when leasing became popular in other industries. It seemed like a way to segment the market, but in so doing, IBM opened a window into their business that weakened what had up to that time been a quasi monopoly.

There are quite a few examples of firms that bought IBM computers for re-leasing to others, thereby competing with IBM's leasing business. One of them was a firm called Comdisco, (Computer Discount Corp.) started in 1969 by Ken Pontikes a former IBM salesman. Comdisco competed successfully with IBM by offering "better" prices and terms, because they were better at guessing the "residual" values of the equipment.

I am writing as a former stock analyst who covered Comdisco stock for Value Line.

  • +1 and many thanks. Do you know whether the competitors offered longer leases than IBM, which replaced models on the lease renewals? Can you edit that info into your answer? – msh210 Feb 11 '16 at 15:00
  • Interesting to see that the Comdisco leasing model lasted until the late 1990s: bloomberg.com/bw/stories/1999-09-12/… – Andrew Feb 11 '16 at 19:48
  • @msh210: Extended my second paragraph. – Tom Au Feb 11 '16 at 21:31
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Fascinating history!

There was a first generation of computer lessors, Saul Steinberg's Leasco, Itel, OPM, most of which underpriced IBM by way too much and paid the price.

Then a new generation, led by Ken Pontikes of Comdisco, followed a more disciplined model and prospered. Sadly, After Ken's untimely death at 52, his son ran the company into the ground.

(I was an investor in Comdisco starting in late 70's)

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