What You See is What You Get

by Sugar, Alan

  Partway through the night, I told Bob that, no disrespect to him, but the matters now being discussed were all financial, so he should get his arse out of there and down to the hospital to be with his wife. It was ridiculous for him to be hanging around over the bank holiday weekend when she was about to drop. He felt a little guilty in case things went pear-shaped, but Ken Ashcroft and I assured him there was nothing that could go wrong now, so he duly left.

  There’s a bizarre ending to this amazing story. Part of the deal was that Sinclair had to deliver us proof that they owned the source code in the main heart of the chip, which, incidentally, was made by Ferranti. We needed an irrevocable letter from Ferranti saying that they would continue to supply us the chip and would accept that we were now the owner of the intellectual property rights.

  It then turned out that Sinclair didn’t actually own the intellectual property rights to the software in the heart of the chip! At the eleventh hour, on 31 March, just before the debenture was due to expire, they discovered that some bloody hippy had written the software code for them and they would need his signature to assign the whole deal over to Amstrad.

  And where was this hippy? He was fishing by a river in Cambridgeshire. And would he come to London to sign an agreement? Absolutely not – not on bank holiday weekend. But if someone would come to this river in Cambridgeshire with a cheque for £20,000, he would sign. I know you must be thinking that I’m making it all up, but I swear it’s the absolute truth. A taxi was sent from the City of London to somewhere near Ely to locate this longhaired chap sitting on the banks of the Great Ouse river. A banker’s draft from Barclays was handed over to him and he duly signed over the rights. The lawyers must have missed this and if it wasn’t for me and Bob pushing this point, we could have been bang in trouble with a claim after we’d started making the stuff.

  Finally, the deal was done. Everyone agreed that the matter would remain confidential until I returned from my holiday and that it would be announced officially at a press conference.

  Ann didn’t often take much notice of my business life, but on this occasion she realised what a massive coup this was. Even she knew that Sinclair was a big-time brand. When I told her the news that morning, she congratulated me and gave me a kiss and a hug and said, ‘Well done.’

  Bloody hell, it must have been a big coup if she was interested!

  I spent the next week or so in Florida speaking to Bob and giving Avnet the go-ahead for production. As well as tooling, we would now have to commit to ordering large volumes of components in order to meet the very tough delivery schedule. There was no way we could afford to airfreight these products over – they would have to be produced by August and put on a fast vessel to arrive in England by mid-September to catch the Christmas trade.

  On 7 April, a press conference was called in London and the media was invited to receive an announcement from Alan Sugar and Clive Sinclair. The media wasn’t as clued-up in those days as they are now. There was no Sky television, no internet and there had been no leaks, so nobody had any information. People must have thought we were going to join forces or something. The market perception of Clive Sinclair was that he was still kingpin in computers.

  One of the things I recall about the press conference was that it was televised and to avoid the lights reflecting off Clive’s bald head, he had to be brushed with some anti-glare powder. Funny what sticks in your mind.

  Then came the moment when I experienced my first real paparazzi event. Both of us stepped out of a room and walked down a corridor towards the main meeting hall. There were at least twenty-five photographers flashing their cameras at us. Even I hadn’t realised what a sensational story this was going to be.

  I was very careful in choosing my words at that press conference, to make sure that everybody knew what the deal was about. I was at pains to point out that we were not inheriting the past business of Sinclair or its after-sales obligations, but at the same time I had to be careful not to kill off the existing Spectrum, as I had to get rid of the ones I’d agreed to take from AB and Timex. I didn’t mention the new model we were developing and managed to deflect questions about the destiny of the existing Spectrum and what we would be doing in the future.

  I had agreed some words with Clive. There was no merit in me gloating and I wanted to big him up and leave him with some dignity. He announced that I had allowed him to use the Sinclair brand name in a very limited fashion on some of the new and exciting projects that he was going off to develop in the future.

  It did end up a win-win situation because Clive kept his dignity and, I think, deservedly so. Throughout the course of our many meetings and conversations, his assistants told me that he really is just a boffin. He admires the fact that I’m a businessman and accepts that he is not.

  Although I was trying so hard to be careful, Mark Souhami, who was sitting in the audience, cringed at one of my comments. Somebody asked whether we were going to continue producing the Sinclair QL computer and I made the mistake of saying no. I hadn’t realised that Dixons still had a bucketload of them in stock to sell!

  Dominguez could not believe we’d got the Sinclair brand. He was absolutely delighted and got busy advertising it heavily in the Spanish market. Prior to that, the company El Corte Inglés had had exclusivity with Sinclair, but now that we’d acquired the rights, that exclusivity had fallen away and Dominguez was free to sell to the whole Spanish market. Now that Amstrad had acquired the Sinclair brand name and taken out one of its main competitors, it was about to dominate the European market in microcomputers.

  We sold the AB and Timex stock to Dixons at cost price, which made Dixons very happy. I think they took delivery of over 80,000 of the old computers. I had honoured my deal with AB and Timex and, as far as I was concerned, I’d done my bit.

  Colin Heald and his team at Avnet also did a great job. The cargo duly turned up in the middle of September. We increased our order to over 350,000 units to be shipped to Europe before Christmas, but more to the point, we actually sold 300,000 in that period.

  Following that first meeting at the Mandarin with Mark and Stanley in late February, we had done the deal, tooled up and made and sold 300,000 units by early December. You won’t find a story like that in the Harvard Business School manual.

  *

  During my Q&As on businesses and enterprise with young people, one of the most frequent questions I’m asked is, ‘Who do you aspire to?’ Of course, I’ve aspired to different people at different stages of my life. Initially, the only person I knew in business was my Uncle John, who had his shop, but, as the story tells, I rapidly overtook him. Then there were the suppliers – the likes of Gulu and Colin Lewin – whom I also overtook and indeed became a supplier to. Then, later on, I had, and still have, a great admiration for Rupert Murdoch and the late Lord Weinstock, as well as Bill Gates and Sir Richard Branson.

  One event sticks in my mind regarding business aspirations. It seems that around 1985–6 a couple of young entrepreneurs by the name of Richard Schlagman and Mark Futter aspired to me, which I guess is rather complimentary. They had tracked my success and, to a certain extent, had successfully emulated it.

  Richard Schlagman was the grandson of Alfie Goldstone, one of the old warhorses from the early days of electrical wholesaling and fancy goods. Alfie was deemed to be the kingpin in the marketplace, though he wasn’t an importer. He told his grandson to try to follow my example and Schlagman and Futter set up a non-manufacturing electronics company which imported goods from the Far East. They made a clever move in acquiring the brand name Bush from the then defunct Rank Organisation – it was a rather popular brand in the seventies and the two lads bought it while it still had some life in it.

  They were not hostile competition to me because their company was much smaller and they were active in the audio market, whereas we’d successfully moved on to computers. We kept in contact and bumped into each other at exhibitions. In fact, on my way back from the annual Berlin Ele
ctronics Fair in September 1986, Richard Schlagman sat next to me on the plane. As part of his usual questioning of me – about what he and his partner’s next move should be – he mentioned that he’d sold his company to Alba. The duo was now looking to see what else they could do.

  My advice to him off the cuff was, ‘You should step back a moment and enjoy the money you’ve made.’ He asked me if he should invest in Amstrad, but I told him, as he knew, that I couldn’t give him any inside information. And even if I could, I didn’t want the responsibility of worrying whether their money would go down the pan due to stock market fluctuations. Nevertheless, he said that the future for Amstrad looked bright, so he and his partner might well consider buying shares. I did what I normally do in these situations: I didn’t answer. It transpired that they did invest a substantial amount of money in Amstrad and made a packet when the shares went up over the course of the next year. They decided they would buy me a present – a portrait of me, done in oils.

  To be perfectly honest, I wasn’t interested but they were rather insistent. They told me they’d commissioned the artist Bryan Organ to paint me. I didn’t know who he was and, quite frankly, I couldn’t have cared less. It had never occurred to me to have my portrait painted and I guess my initial reaction was ungrateful – even hostile. After saying, ‘Thank you very much, it really wasn’t necessary I added, ‘Look, I have to tell you – I’m not going to sit in front of some bloody artist for hours on end posing for a bleedin’ picture. Please get that idea out of your heads because I don’t want to upset this artistic genius you’ve booked.’

  Schlagman called me a few days later to say that the artist just wanted an hour of my time so he could take some photographs of me and I reluctantly agreed. He wanted me in a pose which represented me at work and painted a portrait which today hangs in my house. As I’ve said, I had no idea who this bloke Organ was, but later found out that he was a very famous artist who’d painted portraits of Prince Philip, Princess Diana, Prince Charles and Harold Macmillan. Some of his work hangs in the National Portrait Gallery. However, as far as I was aware, he could have been one of those blokes you see at the seaside.

  I found out later that his commission for painting this picture was somewhere in the region of £60,000. Considering how much money that was back in 1987 – a small fortune – the boys certainly were very grateful for the money they’d made on their Amstrad shares. I was less than gracious, moaning about wasting my time with the artist.

  Schlagman and Futter never got back into the electronics industry. They flirted with the idea of representing Amstrad in America and opening up a branch there, but the discussions became rather complicated and we gave up the idea.

  On the subject of share dealing, as Amstrad shares at the time were growing year on year, personal friends and relatives came to realise the gains they could have made had they bought Amstrad shares. You can imagine the number of times I was pestered by people to give them the proverbial tip-off as to whether to buy or sell. My stock answer to everyone, including close relatives, was, ‘If I give you a tip and you make a lot of money and people find out I’d been tipping you, you will have to come and visit me in prison because it’s illegal. I can’t do it – it’s as simple as that.’

  This really upset a few people, who felt it was their divine right, being a close associate of mine, to have some insider knowledge. The problem was that even if I were so inclined, you can imagine how any tips I gave them would precipitate down to their contacts and beyond. So, because of this, I became very tight-lipped.

  I was just as careful not to leak information on shares going up or down. Yet, despite this, people outside my circle of friends and family – particularly those in the City who purport to be honourable people working within the Chinese wall in their organisations – would still try to prise the information out of me before anyone else had it. My stock answer to them was, ‘I don’t care whether you represent some massive pension fund; I have to be mindful of the poor old retired colonel sitting in his deckchair in Devon. He has as much right to know about the fortunes or misfortunes of the company as you do. And so we will publish our results every six months and that’s about all I’m prepared to say to you.’

  *

  While all the Sinclair stuff was going on, I was also looking into the possibility of producing an IBM-compatible computer, something my people in Brentwood, France and Spain had been urging me to do. The real personal computer market was about to explode and we could see from the USA that it was the IBM format that was gaining momentum as the ultimate business tool. I asked Bill Poel and Roland Perry to get some IBM computers so we could take a look at what was inside these things. I wanted to see how they justified a sales price of over £2,000 for the main system unit alone – not including the monitor!

  It didn’t come as too much of a surprise to Bob Watkins and myself that when we opened the cabinet, we just saw some PCBs with a load of chips. Even Bill and Roland, hovering over our shoulders, found it hard to justify that the computer should cost more to produce than a standard piece of hi-fi or audio equipment.

  I think that the Amstrad way was a tremendous learning curve for them. When someone is cocooned in a particular industry, such as computers, with no other point of reference, such as to low-priced consumer electronics, it is understandable how they can believe the hype that there’s some mystique in computer technology. External snipers talked about Amstrad buying cheap components to make computers, but this was rubbish. There’s no such thing as cheap plastic, a cheap D-RAM or a cheap floppy disk drive – they cost what they cost.

  After a little discussion with Bob Watkins and a quick back-of-a-fag-packet calculation, I said that we had to target our first IBM-compatible computer – with monitor – at £399 plus VAT. The ‘plus VAT’ was a good way of achieving my magic price point while underlining the fact that it was going to be a business computer (as retail prices for consumer electronics products already included VAT). Had there been any aggro from the advertising standards people, my argument would have been that the £399 plus VAT pricing was justifiable, as I was claiming this was a business computer. The important thing was that I made the ‘plus VAT’ clear in the advert.

  It’s strange how I was already starting to think about the target price and VAT issues when all we’d really done was take an IBM PC to pieces in the lab. But to my mind, and Bob’s, it was a done deal – this was what we were going to do. The question now was: how were we going to make them?

  We called a meeting with Roland Perry, Bill Poel and Mark Jones to discuss the way forward and discovered that in order to get to the target price, we would have to make three custom gate-array chips. On top of this, Bill insisted that we needed something called a ‘mouse’. Bob and I didn’t know what this was at the time – that’s how early-days it was. The specification was defined and I pressed the button to go ahead.

  The plan was to again offer an all-in-one unit with one power cord to fire the whole lot up. We could incorporate the power supply for the whole system into the monitor. We decided to have two types of monitor: a monochrome ‘paper-white’ version (instead of green phosphor) and a colour version offering a palette of sixteen colours. This was highly unusual at the time, as all IBM computers offered just four shades of grey monochrome. For some bewildering reason, we decided to use a European vendor – SGS in Italy – to make the three custom chips. They were one of the biggest European chip manufacturers and they promised they would be able to manufacture this technology for us in the timescale we required, but they screwed up big time. They went way beyond their promised delivery dates for the chips and they were struggling with one particular device, which they couldn’t seem to get right. At the time, Bob and I were away in Japan. We realised the possible ramifications and knew by then to cut and run, based on our experiences with Ferranti, so we visited Toshiba, who had been trying to solicit our business on memory chips and other items for a long time.

  During this meeting,
we discovered they had the identical technology to SGS. They promised us that if we sent them all our engineering data, they would rush the development of our three chips through. That’s exactly what we did. Toshiba were exceptional, delivering the chips on time, and we were able to assemble some samples of the Amstrad PC1512 – code-named AERO’.

  Now, there’s an argument about where we got this code-name from. I always spelled it AERO and have suggested that it came from a discussion where I said, ‘If we make this computer and get it out there for £399, it’ll fly off the shelves, so we should call it AERO.’ Others spelled it AIRO standing for Amstrad’s IBM Rip-Off. The debate still goes on amongst some of my old colleagues as to which one was right.

  Now that we had a clear road map of the hardware, we needed to supply the computer with some software for the DOS (disk operating system). Up till then we had been dealing with the company Digital Research, who made the CP/M software for the PCW8256. Their version of DOS (called DR-DOS), Bill and Roland explained to me, was exactly the same as Microsoft’s MSDOS. At the time, all I knew about Microsoft was that they had dabbled in a games computer and had some kind of operating system which they hadn’t been successful with.

  I wasn’t interested in Microsoft at all and certainly had no intention whatsoever of paying them a high royalty per box for every piece of MSDOS software I shifted. Up till then we’d been paying tiny royalties to people like Digital Research for packaging some of their software, while in other cases we were buying the licence outright. Companies like Locomotive Software, who wrote LocoScript, were paid a moderate royalty on every item we sold. Therefore, we took the decision to ship DR-DOS with our computer.

  One of the things I regret, on reflection, was not adhering to certain industry standards. As an example, the only mouse that was available on the market at the time was manufactured by the company Alps in Japan for Microsoft. The cost of this mouse was approximately $25, a ridiculous amount of money and certainly not acceptable as far as Amstrad was concerned.