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Coleco LogoColeco Industries, which was founded in 1932 as a leather products company, has a history that mimics a roller-coaster ride. Founded by Russian immigrant Maurice Greenberg, the shop originally sold leather supplies to shoemakers. Greenberg's son Leonard, who was fascinated by manufacturing, set up a small factory in the back of his father's shop. Here he created a leather cutting machine, which eventually led to a thriving business in leather craft kits. Since the craze with children at the time included Davy Crockett and Howdy Doody, the kits sold well. Buoyed by this success, Leonard next designed and built a plastic-forming machine, which he used to manufacture wading pools. By 1960, plastic goods, with sales of $1 million, had overtaken leather goods as the company's main business. In 1962, the leather side of the business was sold and the company went public. Coleco continued expanding its swimming pool business and by the late 1960s it was the world's largest manufacturer of above-ground swimming pools.
Concerned about tying his company to only a seasonal product, Leonard, along with his brother Arnold, began looking for new fields in which to invest. Some investments, such as doll carriages and table top hockey games, proved profitable. Others, namely a snowmobile company and a dirt bike developer, were disastrous. As a result, their earnings in the 1970s were unstable, resulting in a close call with bankruptcy in 1978.
But the product that was responsible for turning the company around also had its origins in the 1970s. In 1972, Nolan Bushnell created a video table tennis game called Pong, which was met with enthusiasm in arcades across the country. Coleco decided to bring out a home version of the game, but the development process was a slow one. In 1974, Atari began marketing Pong for the home consumer. Still determined to enter the home video game market, Coleco brought out a similar product in 1975, named the unit Telstar, and sold it for less. The system was immediately successful, and the company's overall sales increased 65 percent.
Riding this wave of success, Coleco designed nine additional Telstar products for release at Christmas 1977. And everything went wrong. Production line problems, a shortage of chips from Asia, and an East Coast dock strike meant that the games didn't make it on to retailer's shelves in time for Christmas. In addition, the market was changing and Coleco hadn't changed with it. In 1978, the company lost $22.3 million and ended up scrapping over a million Telstar units.
But once again, Coleco managed to rise from the ashes. In 1982, the hottest thing in video games was the home video game player that could be attached to a television and use various game cartridges. Atari and Mattel both had products on the market. While these two giants were engaged in a mud-slinging campaign to trash each other's products, Coleco quietly developed their own game machine. Not only did Coleco respond to the criticisms of the other two products by creating better graphics and an expandable machine, they tried a marketing ploy the other two hadn't capitalized on. The ColecoVision video game player came packaged with the extremely popular Donkey Kong game instead of company-generated games no one had played before. ColecoVision was an immediate success, and once again Coleco was on the top of the roller-coaster ride.
But, as with all successful products, the market quickly heated up and the competition came on strong. Atari and Mattel were formidable opponents and Coleco management didn't take this seriously enough. In addition, the video game market peaked and began to decline. Even so, Coleco decide to take its video game adventure one step further. In 1983, it announced that it was coming out with a $200 module that would turn the ColecoVision machines into computers. Coleco claimed that the new computer would be comparable to the Atari 400, Texas Instruments 99/4A, or Commodore VIC-20. Coleco was banking on parents' belief that turning the video game machine into a computer would introduce their children to the much more acceptable world of computers.
Once again, however, Coleco's vision exceeded their grasp. Although the promised computer module and peripherals were developed and advertised under the name Adam, Coleco was unable to deliver on its promises. Christmas 1983 came and went and Adam didn't make it to the stores. Other small computers were already there. Coleco was never able to recoup the lost sales and, in 1984, it withdrew Adam from the market and ended its brief foray into the home computer market. Losses were recorded at $79.9 million.
Still hurting from this financial hit, Coleco turned its attentions back to the toy market. And, once again, Coleco managed to come up with the right idea at the right time, this time in the form of pudgy-faced little dolls from the Cabbage Patch. And also once again, Coleco was unable to produce the amount of product in the time promised. Parents stood in long lines outside store doors trying to find one of the promised dolls for their child's Christmas present. Although the short supply was initially cursed by many parents, Coleco went on to record sales of $600 million in 1985. Ignoring lessons learned in the past, Coleco decided this craze would last and began a massive expansion. In 1986, sales of Cabbage Patch dolls fell to $250 million and the company lost $111 million. In 1987, the company lost another $105 million. In 1988, Coleco filed for bankruptcy.
Coleco's plan was to reorganize and stay in business. It was, after all, the distributor of Scrabble and Parcheesi, two of the most popular board games ever. But Coleco's reorganization wasn't the only plan being formulated. In April 1989, competing toy company Hasbro Inc. announced that it would join with other Coleco creditors to buy the company. And, in June 1989, Coleco lost its battle to stay in business and sold its assets to Hasbro.
ColecoVision and Cabbage Patch dolls were terms that children of the 1980s and their parents will vividly recall, but the company that made it all possible was not able to handle its own success and is now only a name in history.
Coleco History written by: http://www.digitalcentury.com/
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