by Sugar, Alan
He explained that my offer of 30p was below the total asset value of the company, to which I replied, ‘Exactly, that’s why I’m so annoyed! If the share price was fifty or sixty pence now, I’d be quite happy and get on with my work. But I’m pissing in the wind at the moment – no matter what we try to do, it is not reflected in the sentiment of the market.’ Reluctantly, he agreed to the 30p price and an offer was sent out to shareholders in September 1992.
Margaret Mountford warned me to keep schtum during the privatisation transactions. She added, ‘There will be a lot of shareholders – particularly institutional ones who paid a lot of money for these shares in Amstrad’s heyday – who won’t be happy bunnies to find that you’re the one buying them back.’
Did I take any notice of Margaret? No.
As soon as the privatisation announcement was made, Nick Hewer was pestering me every minute of the day. Every national newspaper in the country suddenly woke up to Amstrad again, having been quiet for the past eighteen months while we struggled. Like a bloody idiot, I fell for it hook, line and sinker and I got sucked into discussing my reasoning behind privatising the company. Of course, the real reason was that I wanted to get it back on the cheap and effectively pay for it with the cash that was sitting inside it, but I didn’t feel I was doing anything wrong. After all, if the shareholders felt the company was worth more, why wasn’t the share price 50–60p?
Pages and pages of articles were written, slagging me off. Outraged shareholders were commenting to the press. It was a great story for the financial newspapers and the adverse publicity created a groundswell of anti-Sugar feeling. One chap, Gideon Fiegel, who owned a few shares as a private individual, decided to go on a one-man crusade and was championed by the newspapers as ‘this poor fellow being done down by the multi-millionaire’. As you can imagine, he became a star overnight. They practically had to operate on him to prise the microphone out of his hands. He was like Posh Spice, having his photograph taken at every opportunity.
Margaret’s advice was 100 per cent right and I will never know whether the deal would have gone through had I taken it. As it was, the shareholders voted it down and my attempt to privatise the company failed. Gideon Fiegel was hailed a hero. I guess he’ll dine out on that story till his dying day.
When the dust settled on the failed privatisation, there were complaints from heavy-hitting institutions with large shareholdings that I was too much of an autocrat, that Amstrad was not being run in accordance with public company standards. There were no non-executive directors; I had the role of chairman and chief executive officer. They were demanding that I restructure the company in a different way.
It was not a nice feeling, having the investors turn on me while the media was damning me as someone who’d reached his peak and was on the way down. I think it was one of the lowest times in my life. Most people in my position would have taken the view, ‘Well, I’ve made loads of money and I’m a multi-millionaire. These days I’m just left running a load of aggravation, and to top it all I’m getting a load of stick from the outside. Why bother?’ The easiest thing to do would have been to hand over the keys to someone else and I even recall Ann saying something to me along those lines. But I had built this baby from scratch and I just couldn’t bring myself to walk away.
I don’t know what came over me at the time, but I heeded the City’s call to adopt public company structures. Uncharacteristically, I agreed to toe the line and pad out the board in the proper public company way, to keep all the shareholders happy. In March 1993 we appointed two non-executive directors: Jeoff Samson, who had lots of experience as a director at GEC, and Michael Beckett, who was similarly experienced in public company life. They were tasked to find a chief executive to run the company while I remained in the position of chairman.
I wasn’t the only one hit hard by these events. Bob Watkins was starting to feel a little despondent about the direction in which Amstrad was moving – in fact, he wanted out. He’d noticed a similar air of despondency in me since I’d failed in my attempt at privatisation.
Bob told me one day that he’d been approached by Gulu Lalvani, who’d clearly assumed that a lot of our past success was down to Bob. In one way, he was right, as Bob got stuff into production in a timely fashion, which was vital to the success of Amstrad in its heyday. Gulu perhaps didn’t understand that the product ideas didn’t actually come from Bob, though he was great at transforming the rough ideas I’d conceived into production. Nevertheless, Gulu had made him an offer to run his Hong Kong organisation, with a remit to develop products and try to take his company, Binatone, to a different level.
To be fair to Bob, he struggled with his conscience over this – he didn’t want to do anything behind my back. He told me quite openly that this opportunity had come his way and he was seriously considering it, but he didn’t want to offend me in any way, as we’d kind of grown up together through the good times of Amstrad’s meteoric rise. But now we’d lost the computer market and were struggling to come up with new ideas, he saw Gulu’s offer as a much-needed fresh challenge.
Although I felt upset that one of my long-term colleagues wanted to leave me and should have expressed my feelings, I just said that if he wanted to go, he should, and there’d be no hard feelings as far as I was concerned. I was very grateful to him for the effort he’d put in over the years, which had helped me make hundreds of millions of pounds. He felt he had an opportunity to better himself and any objection or attempt to stand in his way seemed unfair.
Bob left Amstrad and joined Binatone in January 1993. I’m sure Gulu felt he had pulled off a great coup, although we never spoke about the situation – he was under the impression that his negotiations with Bob were entirely confidential and that he was doing a bit of a dirty on me. I guess, when you analyse Gulu’s tracking of my career, it must have been motivated partly by admiration, but also partly by resentment. While Amstrad had been growing into a massive organisation, his company was still messing around trading in low-cost, low-technology products such as radios and telephones.
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As part and parcel of our rationalisation and cost-cutting, we decided to shut our French, Spanish, Belgian, Italian and Dutch subsidiaries. They really had no more potential, as we’d lost the PC market. For the same reason, we also shut down our subsidiary in Australia. Bordan Tkachuk, who had worked there with Gary Meyer, was a very good salesman and I decided to bring him over to head up the UK sales department. He helped out with the closure of our European subsidiaries, a task which is easier said than done. From time to time, he had to visit these places to assist in the liquidation process. Once you’ve built a monster, it’s not so easy to shut it down in an orderly fashion. Indeed, in all those markets, there were commitments to creditors, landlords and the equivalents of our Inland Revenue to be dealt with.
None of this was helping my mood, but there were times when, with the rationalisation behind me, it seemed I’d got my old spark back. For instance, Ian Saward came to me one day in early September 1993, having heard that a Danish company called Dancall was about to go into bankruptcy. They had some great technology in mobile phones and were developing what was known in those early days as a GSM phone, a phone that could be used anywhere in Europe. This was the type of stuff that gave me some enthusiasm again. The mobile phone market was starting to explode and every businessman had an analogue mobile phone, but GSM was going to be the future.
The company Orange, run by Hans Snook, had started to take massive adverts in the national newspapers to say that Orange was coming. They had been talked into this mad scheme by some Hooray Henry advertising agent. On these full-page adverts, 95 per cent of the page was black and in the bottom left corner was an orange square with the word ‘Orange’. The idea of this campaign was to get everyone asking, ‘What is Orange?’ Sure enough, it worked – but who bloody cared? It must have cost a fortune.
Hans Snook sent me a free Orange phone to try out and invited me to the offi
cial launch of the Orange mobile network. On the day, when all the guests were seated, the lights went down, the curtain went up and a plump advertising executive came to the centre of the stage dressed in a bright-orange suit to unveil their next brainwave, the new TV advertising campaign. It was a newborn baby swimming underwater, with the strapline ‘The future is bright – the future is Orange.’
I was thinking to myself that Hutchinson, the massive Hong Kong investment company who had recruited Snook to launch Orange in the UK, really must have money to burn. The adverts said nothing about the phone, nothing about the service, nothing about how these new phones would work in other countries. It was a total joke.
At the cocktail party after the presentation, Hans was strutting about like a peacock. He grabbed hold of me and steered me over to his Chinese bosses. ‘Well, Alan, as a great marketing man, what do you think of that then?’
All I can say, Hans, is that it’s about time you started shipping some of these phones, getting some subscribers and getting the show on the road.’
There was no point expressing my real opinion in front of his paymasters.
Anyway, a few days after Ian Saward told me about Dancall, I hired a private jet and went there with one of our accountants, Tony Dean, as well as Jeoff Samson. The factory was located in Aalborg and had about 200 employees, half of whom worked in the engineering department. Scandinavian companies were far more advanced in radio telephony than those elsewhere in the world; indeed, the industry was promoted by the Scandinavian governments. Dancall had received certain government grants to develop mobile telephones, but had got itself into deep financial trouble.
When we arrived at the factory, I was met by a couple of the employees, who wanted to give me some long-winded storyboard presentation of their history, where they were going and what they were planning to do. I could see this was going to take at least an hour, so I cut them short and asked them to walk me round the factory premises and the engineering department and show me what was going on.
Having spent so long in the industry, I could sniff out a good factory and a good engineering department simply by walking round, seeing how things are made and talking to the engineering people to get an understanding of what they’re up to. What I saw in this organisation was a little pot of gold. They’d spent many years developing products and were just at the stage of being able to start production of the only thing that was likely to sell, but they’d run out of money at the wrong time. The employees were about to be made redundant that week. I was starting to feel a buzz again, just like the day Rupert Murdoch talked to me about his satellite plans.
I asked them to call a meeting of all the staff. They assembled in the canteen and I spoke to them openly and honestly. I asked them to do me one favour: even though they wouldn’t be paid beyond this week, I asked them to be patient and remain for at least one more week, as I intended to buy the company and take it forward.
Staff representatives questioned me about my plans and I explained to them who I was and what I’d achieved in the past. Of course, they didn’t know me – in those days, there was no internet on which to search for information on Alan Sugar. However, some of the technical guys had heard of Amstrad and knew it was a reasonable and substantial company.
The firm of accountants administrating the liquidation quickly sent a representative to England to see me. I struck a deal with the guy to buy the whole lot – lock, stock and barrel – for £6m and agreed to incur the liability of the employment of all the staff.
Despite the fact that Samson had come with me to inspect the factory, both he and Beckett were a little disappointed that I’d made the final decision to do the deal without any real consultation with them. For the first time, I lost my rag with them and told them that business is all about risk and if they didn’t trust my nose on this one then I’d better clear off altogether. This was a mere £6m from the giant cash mountain the company had and either they trusted me or not. I added, ‘If Amstrad does not do this deal, then I will personally.’ My forcefulness seemed to get through to the two non-executives. They agreed the acquisition was very good, but were just pointing out that they would have liked to have been part of the thought process behind it.
While I was on a roll, I also told them that things were going to get even worse in the sense that Dancall was going to burn a bit of money while we got the new products into production, and that I was going to send Claude Littner to look into the immediate situation and report back. I’d recruited Claude initially to look after the French subsidiary after Marion’s departure. He was introduced to me by my brother-in-law Mark as a kind of company doctor and spoke very good French. He did a good job there and also spent a lot of his time visiting Amstrad Spain before we shut it down. He’d become a real asset to me.
As far as Dancall was concerned, he also did a great job in getting back to me quickly. He was talented at getting to the bottom line, cutting through the crap and spelling out to me in simple terms the strengths and weaknesses of a company. One of his weaknesses, which he was open about, was his inability to understand the technology. As far as business was concerned, if it had to do with sales, inventory, stock control and general management, he could handle everything, but making decisions on technology was out of his domain.
Luckily, Bob Watkins had kept in touch with me. His new job in Hong Kong, as I’d anticipated, wasn’t as wonderful as Gulu had painted it. Bob said, ‘People know where they stand with you, Alan. Gulu’s not as straight-talking as you, and you don’t know what the direction is.’
I told Bob I’d acquired this company in Denmark and it was right up his alley. All he had to do was to make sure the newly designed products got into production and, more importantly, apply the Amstrad philosophy in cost-cutting and negotiation on component parts. Bob promptly resigned from Binatone and came back to take over Dancall.
I made a second acquisition in June 1994. The computer market had been changing from traditional selling (via retail channels) to direct marketing and I spotted one company, Viglen, which operated in this way and looked attractive. It was run by four of its founders and, having appraised the business, I suggested to the board that we purchase it, but take extreme care that we didn’t allow the vendors simply to run off after we’d paid them the money. My suggestion was that we pay £60m for this company by way of an up-front payment of 50 per cent, then structure an arrangement based upon three years’ profits, over which the other 50 per cent would be paid. In this way, we could at least get our own management’s feet under the table before the lucky vendors were able to come up with the inevitable ‘irreconcilable differences with the board’ and clear off with their money.
Meanwhile, Beckett and Samson had briefed some head-hunters to find a chief executive for the Amstrad group – someone who’d be able to take this tiger by the tail and professionalise it. Having gone through many interviews with many candidates, they found it hard to put anyone forward. Most of the applicants were certainly not experienced in consumer electronics, others were quite hesitant to take on the role because they feared they would be suppressed by me.
Eventually, they found David Rogers, an ex-Philips executive based in Eindhoven who was active in some of the markets we were involved in, such as telephony and fax. After meeting Rogers a couple of times, I wasn’t that impressed, but we weren’t having any luck getting anyone else to join, so I reluctantly agreed he could be employed. To be perfectly honest, I had lost my fighting spirit. Rogers was appointed to the board in September 1994 and engaged the services of one of the big management consultant firms to review all of the company’s activities.
Rogers’ arrival was welcomed by people like David Hyams and Ian Saward, who became good allies of his, signing on to his new large corporate systems. Hyams was the type of person who tends to get deflected away from what they’re good at and wants to be more involved in the business side of things. I’ve seen this many times, with engineers, lawyers, accountants, even footb
all managers who don’t want to play to their strengths, but feel they have some entrepreneurial spirit and are better at other things. I could clearly see this was a disaster waiting to happen.
Malcolm Miller, another long-term employee from the early days of Amstrad, left just before Rogers arrived. He was head-hunted by the games company Sega in Japan and, like Bob Watkins before him, couldn’t see any prospects at Amstrad – there seemed to be no direction and, more to the point, no further opportunity for large windfalls by way of share options. However, his departure was not conducted in the same manner as Bob’s.
Out of the blue, Malcolm told me one Monday morning that he’d flown to Japan the Friday before, met Sega in Tokyo over the weekend and had flown back on Sunday. He told me flatly that he was taking the job. There wasn’t much I could say – I had to let him go.
Miller, like Watkins, was head-hunted in the belief that he might be able to help replicate Amstrad’s successes. I could have expressed my disappointment about the lack of loyalty in the manner Miller went about his departure, but instead I bottled it up inside me.
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After a few months, Rogers presented the board with his going-forward plan. His idea was that every product category we were active in should be called a ‘line of business’ (or LoB – he liked abbreviations and buzzwords) and that each should be headed up by a separate product manager. His master plan was to have LoB managers for computers, satellite, fax machines and audio/TV. He named the UK sales office and the subsidiaries Betacom, Dan-call and Viglen ‘business units’ or BUs.
I could see problems on the horizon. Why on earth would you set up a line of business for fax machines when, in fact, the market was already dwindling? Not only that, every Tom, Dick and Harry in Hong Kong and China was now making a cheap fax machine. If anything, he should have decided to get out of that business, not try to expand it. Similarly, in the satellite market, he employed some product manager who decided to expand the range beyond that of the products we were shipping to BSkyB. They came up with a new series of specialised satellite receivers – complex and up-market models, none of which had a hope in hell of succeeding. And in the computer market, he was talking of relaunching a whole range of new models. Anyone could see this was like shutting the stable door after the horse had bolted.