by Sugar, Alan
I commissioned Vitus Luk in our Hong Kong office to develop the Amstrad mouse from scratch and, to his credit, he did a superb job. Where we made our mistake was the plug we chose at the end of the cable to connect it to the computer – it was non-industry standard and therefore made the mouse an odd-ball item. Similarly, the physical format of our PC was different from the IBM. In hindsight, it would have been better to have followed the same format. I was to find this out later, when the corporate market became interested in our products. They would always want the industry standard format for everything.
The motivation for us to do it our way was, of course, true Amstrad cost-saving. The plug and socket used on the Microsoft mouse cost $2, whereas that used on the Amstrad mouse cost 20 cents, though they did exactly the same thing. The expression ‘penny-wise, pound-foolish comes to mind, and I’m the first to admit that this was a classic example.
As soon as we had working samples of the computer, we called a meeting with Schneider’s people, Marion’s people in France and Dominguez’s people in Spain and disclosed what we were doing. There was an atmosphere of excitement that I can’t put into words. We were in a dynamic, growing market and I’d just come up with another world-beating product. Credit to Schneider, Marion and Dominguez, the feeling was one of camaraderie. There was no arguing over price or jockeying for the first orders or anything like that – it was just a celebratory feeling.
At that meeting, we decided on a launch date for the PC1512: 2 September 1986. Nick Hewer arranged the PR for the launch at the Queen Elizabeth Conference Centre, Westminster and about 1,200 people turned up – it was absolute mayhem. You can’t really keep things a secret in business and rumours had been flying around the marketplace that Amstrad was going to launch a PC compatible, but nobody knew what the price was going to be.
With the usual fanfare and video screens and presenters, the launch took place, with the French, Spanish and German visitors wearing headphones connected to a translator. Having shown that the average PC cost £2,000 at the time, we eventually announced our price of £399 and there was a gasp of amazement from the audience. The Q&A session afterwards went on for about an hour, with journalists firing one question after another.
One of the funny things I recall was that Nick Hewer had invited the whole world and his brother to the launch. I’m convinced to this day that there were people in the audience from Knitting Weekly and every other magazine in the country. One woman asked a question which had nothing at all to do with the new PC1512 – she wanted to complain about the printer ribbon supplied with her PCW8256 running out too quickly! I was stuck for words for a second, but then responded, Ah, now we know where that one went,’ and there was another wave of laughter from the audience. That shut her up.
It was getting to the stage where people were wearing me down with their questions. It felt as if every one of the journalists there wanted a piece of me. I had to go into a side room for a while to keep away from them, as my head was pulsating to near bursting-point. They didn’t want to talk to Malcolm or Bill or Roland – they just wanted to talk to me. In actual fact, they’d have got far more information from the other guys.
There was an annexe area where we had about fifty of these computers on display, and the only way I can describe the scene is to say that it was like the Saturday before Christmas in Oxford Street. You could not move. All the staff we had there to advise people about the computers were completely drained by the end of the day.
There were massive headlines in the business pages of the next day’s newspapers, followed by write-ups in all the trade magazines. The Amstrad share price shot up to a level whereby the company had a market capitalisation of £1.2bn.
This is possibly a time to step back and reflect. I’ll say that again – one point two billion pounds – £1,200,000,000. Remember, I started from selling tar blocks as a kid. These kinds of numbers meant nothing to my mum and dad. It was mumbo jumbo; it was a figure they simply could not comprehend. I was holding 45 per cent of the shares at the time, so theoretically, on paper, I was worth £540m.
*
Bernhard Schneider had now recruited a specialist manager for his computer business. His name was Fred Koester, a nice enough chap who spoke perfect English and had come out of the computing industry. He immediately pestered us to buy the PC1512 for the German market, but with MSDOS.
I explained to him that DR-DOS was exactly the same; I could honestly put my hand on my heart and say that our computer, with DR-DOS, could do everything that an IBM PC could do. There really was no need for me to pay out money to Microsoft. In short, Fred had nowhere to go. He could either take it as it was or leave it. And things got worse for him because I decided at this stage that I would no longer supply Schneider under their own brand name. By now, the German retail industry knew that we were their suppliers and while it suited me at the time to supply the CPC464 and Joyce under Schneider’s brand, there was no way I was going to do this on the PC1512. I agreed a compromise with Bernhard Schneider: the front panel of the unit would say ‘Amstrad PC1512 by Schneider’ – a joint brand name. Again, this was a take it or leave it offer.
A week or so after the launch of the PC1512, Roland came into my office and told me that some smoothies from Microsoft had flown over on spec and wanted to speak to me about the benefits of putting Microsoft software in every computer box we sold. Bill was also hovering, telling me (off the record) that from a credibility point of view, while it was true that DR-DOS was the same, psychologically people wanted Microsoft’s MSDOS. It was one of those marketing things. I suppose in this day and age you could equate it to having an Apple iPod or some other branded MP3 player. Both do the same, but you go for the name.
In those days, people were very snobbish about the software they ran on their computers. There were always claims that other programs would not run correctly unless you used Microsoft. None of this was true, but when you were trying to sell to a corporate market, to some jobsworth who worked on the principle ‘you never get fired for buying IBM’, you had to appreciate that there was no point trying to convert people; you just had to give them what they wanted.
Reluctantly, I agreed to a meeting with these guys. They had taken a risk turning up with no fixed appointment. Microsoft’s representative was an Asian-looking chap who spoke perfect English with an American accent. He and his colleague tried to convince me to pay $4 per unit for this MSDOS. I told them I had absolutely no intention of doing that and effectively I couldn’t care less about MSDOS. As far as I was concerned, I had produced an IBM-compatible PC at £399 that worked perfectly. I sent them away with a flea in their ear.
I think these guys must have stayed overnight in Brentwood because the next morning, they asked to see me again. This time the Microsoft arrogance had evaporated and they were desperate. They must have been given instructions by Bill Gates to ‘get in the box’. There was no way that he could afford to have hundreds of thousands of IBM-compatible computers thrust into the market without Microsoft in the box.
I am not going to disclose what I paid (it’s been one of the best-kept secrets in the computer industry) save to say that I agreed to take one million licences with Microsoft, at a price that suited me. I’m not sure whether the non-disclosure agreement has run out by now, but for safety’s sake, I’ll let it remain a secret. No matter what you may read in the industry archives and what other tittle-tattle you might hear in the computer industry, this was the true story of how Microsoft got itself into Amstrad products.
After the launch, Dixons were champing at the bit, as usual demanding all the stock that was coming in, but there were lots of other customers in the marketplace for this type of product. Large computer distributors who were already selling IBM were chasing to stock our product to sell on to the dealer networks throughout the country. It’s true to say that we were now dealing with a completely different customer base. The PCW8256 word processor was deemed a consumer product; the PC1512 had moved us into
another category.
Then came the sniping. IBM salesmen were running around telling customers that our product was rubbish. Mind you, what would you do if you were an IBM salesman trying to flog computers for £2,000 when ours were £399? The computer magazines had endorsed our computer from a compatibility point of view, explaining clearly to the trade and the public that everything the IBM did, the Amstrad did. So what was the best argument these IBM salesmen could come up with? ‘There’s no fan in the Amstrad – it will overheat and if it overheats, it will conk out. Therefore it’s unreliable.’ It was a complete load of cobblers, but it does go to show how the whole market can change its opinion about a product based on a rumour spread by a competitor.
As I explained earlier, the power supply for the whole system was actually in the monitor. The reason IBM computers had a fan inside them was that their power supply was in the base unit and therefore needed a fan to cool it down so that the sensitive microprocessor circuits wouldn’t get hot. In our computer, there was nothing inside the base unit that got hot, so it didn’t need a fan.
Despite this, the BBC put out a statement saying that they wouldn’t buy these Amstrads because they had no fan. Understandably, I went berserk. I got hold of our corporate lawyer, David Hyams, and asked him to deal with the BBC and a few others. Within a week, the BBC were forced to make a public apology. The managing director of IBM UK, Tony Cleaver, called me to say that this rumour was not a corporate position they were taking; it had been put around unofficially by some of their sales staff. He started rattling off the IBM employees’ manual guidelines stating what measures were going to be taken against these individuals, but I wasn’t interested at all. The damage had been done. People were still saying, ‘Don’t buy the Amstrad because it hasn’t got a fan.’
Believe it or not, I immediately asked the factory to fit a fan in the base unit of the PC1512. The fan did absolutely naff all – it was cooling a cool area – but we could now say that the Amstrad PC1512 had a fan.
I am a marketing man – I give people what they want. It seemed an obvious solution to me. As I said to the Financial Times, ‘If they want a fan, I’ll give them a bloody fan. If they want a computer with pink spots on, I’ll give them a computer with pink spots on. I’m not here to argue.’ That statement made a lot of people at Amstrad laugh and as I walked around the engineering floor, I could see everybody had stuck pink spots all over their computers. Stanley Kalms called, laughing (unusual for him, the miserable sod) and saying, ‘Now, now, young Alan, we’re very proud of you here at Dixons, but you know you really shouldn’t talk to the Financial Times in that way.’
Adding the fan stuffed IBM and the BBC.
*
The original Amstrad PC1512 was sold at £399 with a paper-white monitor and a floppy disk drive. The twin floppy disk drive with paper-white monitor was an extra £100 and the twin floppy model with colour monitor was £649. To our amazement, the biggest seller was the dearest machine. Clearly we had moved into a marketplace where businesses were buying this product. It was the dawn of office automation, when the computer rapidly became a must-have, one-per-desk item.
Then there was the advertising campaign. I came up with the strapline ‘Compatible with You Know Who. Priced as only We Know How.’ The advertising agency we used at the time tried to change a couple of words, so they could claim that the brilliant strapline was theirs. I said to Malcolm Miller, ‘Tell them to forget it and use my strapline without changing it. Tell them they’ll still get their fee and can still tell the world it was their idea.’
Imagine my surprise a month or so later when I visited the Comdex Computer Show in Atlanta, Georgia and saw that some American monkey manufacturer had copied our strapline and plastered it all over their stand. Malcolm and I contacted the exhibition organisers to explain to them that this guy was using our strapline on his stand without our permission. He’d nicked it from us. This is typical of Americans – they feel it’s their divine right to take something they see in the colonies and use it without any repercussions. Well, they hadn’t yet come across me.
Amstrad was becoming the biggest personal computer supplier in Europe, but these Yanks claimed they’d never heard of us. My complaint to the organiser was met with derision, as if to say, ‘Who are you?’ Nevertheless, we kicked up a fuss and told them we’d get an injunction not only to shut down the stand, but also to close their show. This got their attention and in the end the manufacturer was forced to take down their signs.
The strapline was used by Dominguez in Spain and Marion in France. Of course, Schneider was unable to use it, due to the goody-goody law in Germany that made sure that IBM’s feelings weren’t hurt.
So great was the impact we’d made in the market, I was contacted again by Tony Cleaver, the managing director of IBM UK, who told me that we needed to enter into a licence agreement with them over certain patents they held. Most certainly, some of the techniques used in our design did infringe IBM patents, so we needed to sort this out to avoid any legal problems. The royalties offered were very fair and we duly entered into an agreement for worldwide sales.
My mind went back to 1963. There I was at sixteen, failing IBM’s aptitude test and here I was twenty-three years later, signing a licence agreement with them. Within three months, I’d taken 27 per cent of the total European market away from them. Mr Gates was right to want to be in our box.
11
Everything Was Going Wrong at Once
Losing the Midas Touch
1987–9
By now, Amstrad was such a big player that I was constantly being invited to attend government functions. I recall getting invitations from Prime Minister Mrs Thatcher, the Chancellor and various other ministers, as well as Prince Charles. Naïvely thinking these might be interesting events and that maybe I’d get to meet the person who invited me, for a one-to-one chat, I schlapped along to a few of these bashes, but soon realised that most of the time they were packed with hundreds of people and if you stood on a chair you might see the Prime Minister somewhere in the middle, mingling with the crowd.
Margaret Thatcher in particular used to haul me out from time to time as a glowing example of the new breed of chirpy-chappy entrepreneur, a kind of role model to help endorse her policy of widening the opportunities for anyone from any background to become successful in business.
On one occasion, she invited Ann and me to a rather large luncheon arranged in honour of the Prime Minister of Malta. I went, but had no idea why I’d been invited – after all, what’s Malta got to do with me? Poor Ann looked at me nervously when we saw the table plan and realised that not only was she going to be split up from me, but she was sitting with Mrs Thatcher! I just shrugged my shoulders, a bit heartlessly, as I couldn’t do anything about it.
I was sitting next to the wife of Rocco Forte and some big cheese from Malta. Unlike Rocco Forte, who had hotels in Malta, I still didn’t know what I was doing there. We’d never invested a penny in Malta; in fact, we never even sold stuff there.
I got to the bottom of it by subtly probing the official. It transpired that the Maltese Prime Minister had requested certain guests to be at the lunch as representatives of British companies that had invested in Malta. Get this. It seems the Maltese Prime Minister’s son, who was interested in computers, worked in a microchip factory in Malta owned by the Italian chip-maker SGS. The son had seen millions of chips rolling down the production line with Amstrad’s name printed on them (we always had our name and part number printed on any custom chip when we owned the intellectual property rights). This kid must have assumed the factory was ours and told his dad – and that’s why I was invited!
When we left, Ann told me that Thatcher had bent her ear and insisted she tell me that I should start to make my computers in England. I said, ‘If Thatcher only knew how Ferranti, a British company, had screwed up, forcing me to use others like SGS, she wouldn’t be saying that.’
I soon put paid to these bashes, as they were
a waste of my time, plus there was the risk that you’d get lumbered with a load of boring people. I told my secretary, Frances, ‘Ditch all these invites and reply that I’m busy. If they come back enquiring why, try to suss out if it’s one of these bum-rushes with hundreds of people or whether it’s more intimate. If it’s the latter, I might go.’
One day, Frances came to me all excited. ‘You’ve received an invitation from Her Majesty the Queen and Prince Philip to attend Buckingham Palace.’
‘Calm down, Frances,’ I said. ‘This is bound to be another of those bashes with five hundred people. Tell them I’m busy.’
A few minutes later she came into my office and said, ‘Sorry, Alan, but you are going. I’ve been told by the Palace that you will attend.’
‘What do you mean, I will attend?’
Alan, this is a private lunch, just you and no more than five others with the Queen and Prince Philip, and I’ve been told to tell you that you will attend.’
Bloody hell – of course I’d attend! Can you believe it? Alan from Clapton was going up to London to see the Queen.
An official invitation duly arrived along with security instructions telling me to turn up at 12.30 p.m. on 25 February 1987. I took it home to show Ann, who couldn’t believe it either, and she in turn called all our family and friends.
On arriving at the main courtyard of the Palace in my chauffeur-driven Rolls, I was met by some fellow who escorted me up the stairs into the very grand dining room. It was a beautiful room with a high ceiling decked out with gold leaf and a wonderful large dining table with ornate chairs to match. One of the equerries hovering about said, ‘Hello, Mr Sugar, please come this way. May we offer you a drink before lunch?’
I don’t drink at lunchtime, as it gives me a heavy head, so I replied, ‘Yes, a tomato juice, please.’