Another measure of his genius quickly followed: a trebling of Amstrad profits from £9.5m to £27.5m. In trebling his profits, Sugar had shown his opponents in the computer market who was boss. One of those opponents would soon come knocking on Sugar’s door with a very interesting proposal.
While in Hong Kong in 1986, Sugar was called to an unexpected meeting with the managing director and chairman of Dixons. They told him that, in short, Sir Clive Sinclair was looking for somebody to take the Sinclair computer operation off his hands. Clive Marles Sinclair was born on 30 July 1940, and had enjoyed a comfortable childhood living near posh Richmond in Surrey, just west of London. Even as a child, he was an inventor, and his bedroom was always chock-full of wires and electrical equipment. Indeed, at a young age he had designed a new type of submarine. His first job was an editorial assistant for a magazine called Practical Wireless. In 1972, he invented the first true pocket calculator, and he then went on to create the Sinclair Spectrum, which was a popular home computer during the 1980s.
However, by the end of 1985, Sinclair Research (the company behind his computers) was not making financial sense. He was having to sell his computers to Dixons at a dramatically knock-down price just in order to keep his business viable. However, the company was still a strong player in the computer industry so Sugar was quickly tempted by the possibility of taking over the operation, a deal that at a stroke would make him the biggest player in games computers. He was also convinced that his famously efficient and lean business ways would no doubt see him make the operation more efficient and profitable. So it was that Sugar and Sinclair met for lunch in Liverpool Street, London, to discuss the deal. This was indeed a power lunch, with two of Britain’s leading businessman at the table. Sugar felt very much on the rise, while Sinclair was perceived as being on the way down. As the Guardian had recently commented: ‘[1985] was the year that Mrs Thatcher’s golden hopes for Britain’s high-tech future – Sinclair, Acorn and Apricot – came a cropper. And the year that former replacement car aerial salesman and budget hi-fi king Alan Sugar skilfully steered his company Amstrad to become the driving force of the UK micro scene.’
Sinclair was as posh and geeky as Sugar was brash and outspoken, but the struggling inventor liked his opposite number. ‘I found Alan Sugar a delightful man to deal with,’ he said. ‘He tended to say this is the deal. He never tried to improve his position or deviate from what he said he would do. He was very straightforward and clearheaded. He was very pleasant company, enjoyable to meet – a witty man.’
However, the amount of money that Sinclair expected to receive in the deal was far more than Sugar envisaged. He left the meeting convinced that the deal would never go ahead.
But Sinclair was keen to close a deal and so, at Eastertime, the prospect of a deal appeared to be back on. At a meeting in the City, Sugar offered £5 million for the operation and was prepared to part with £11 million for the stock inventory. He was about to go on holiday – his ticket for the Concorde flight to Florida was in his briefcase – so Sugar summed up in particularly concise style. ‘That’s the deal I’m offering, but I haven’t much time. So if you’re interested, fine. If not, it’s nice to have met you and I’ll say goodbye.’
Those representing Sinclair attempted to negotiate a higher figure from Sugar. At one point they even asked him to leave the room, and then asked him to increase his basic offer to £10 million. Sugar refused, and Sinclair backed down to accept the original offer. Sugar left the meeting, dashed to the airport and settled into his seat on Concorde. It must have felt good.
Over the next week, the final details were thrashed out and, at times, it looked as if the deal might stall after all. Sugar was tough and steadfast throughout, and reflected afterwards that the Sinclair people thought they were dealing with ‘a boy who had just got bar-mitzvahed … someone with too much money and didn’t know what I was doing.’
However, Sugar got his way and the deal was sealed. He returned to England and just 48 hours later was at the joint press conference to announce the deal. He remembers that the assembled press encouraged him to goad Sinclair about the deal. But, ever the gentleman, Sugar resisted the bait. ‘The deal is good for both of us,’ Sugar told the hacks. ‘Sinclair is good at research and this gives them money to press on with it. We are good at marketing and this gives us another wonderful product to sell.’
Clive Sinclair echoed the sentiment that each side of the deal would play to its strengths. ‘We pioneered the market. Now we’ve handed it over to the people who are experts in international marketing. It gets us out of a business we were not doing very well in, and allows us to continue in interests we do well in. We chose the Amstrad deal because it was a better deal. We sold off the traditional business.’
The Amstrad press release announcing the deal read: ‘Amstrad Consumer Electronics PLC today announced that it has purchased from Sinclair Research Ltd the worldwide rights to sell and manufacture all existing and future Sinclair computers and computer products, together with the Sinclair brand name and those intellectual property rights where they relate to computers and computer-related products.’ The Sinclair announcement used the same wording.
Naturally, the deal made huge news around the world. ‘Sinclair Research Sold’ ran the headline in the New York Times. The International Herald Tribune called the deal the ‘most widely followed $7 million corporate transaction in British history’. ‘Sinclair forced to sell patents to pay debts,’ echoed The Times in London. The Guardian ran with ‘Sinclair 20 million pound debts force sale to rival: Amstrad buys out pioneer home computer firm’ and Canada’s Globe and Mail went with ‘Sinclair Sells Out to Rival Amstrad’. The Economist described Sugar’s deal as a ‘neat catch’. The report began: ‘What goes up must come down, and British entrepreneur Sir Clive Sinclair this week did – into the arms of rival Mr Alan Sugar, founder and boss of Amstrad Consumer Electronics.’ The Financial Times said that the deal was so logical ‘it could have been conceived by an electronic brain’. Meanwhile, Campaign magazine said, ‘Only the foolish would attempt to dispute Alan Sugar’s claim that he has a natural talent for business, just as others have for music.’ However, even this praise would probably not have made Sugar as happy as the Daily Telegraph comment that ‘The man who knew what the technology could do has lost to the man who knew what the customer wanted.’
As expected, Sugar immediately made sure the Sinclair part of his empire was run in a more streamlined manner. He took the manufacturing overseas, having quipped at the press conference that ‘We would like to manufacture in the United Kingdom, but we’re a computer company, not a benevolent society.’ Production was moved to the Far East as Sugar injected some lean, wise Amstrad thinking into the Sinclair operation. By happy coincidence, Amstrad had recently appointed a designer with Sinclair experience. Soon, Sugar was shifting tens of millions of Sinclair computers each year.
He was also becoming an increasing media star. As Amstrad rose and rose, he was widely profiled and even appeared on the BBC’s flagship chat show Wogan. Indeed, his triumphant year in 1986 saw him awarded gongs in newspaper round-ups. David Kelly wrote in the Guardian, ‘If 1985 was Atari’s year, then last year belongs to Amstrad. After triumphant sales of its PCW home workstation during Christmas 85, Amstrad surprised everyone buying up Sinclair with the change from its back pocket.’
Not that all the coverage was so complimentary. Gareth Powell, of the Sydney Morning Herald, wrote, ‘Sugar has spice, but he is not quite nice. At least this is the attitude of the computer journalists in Britain.’ However, on examining the case of Sugar, Powell concluded that much of the criticism of him seemed unfair. ‘In the past few weeks,’ he wrote, ‘I have been told by journalists that Sugar is a “business thug”, whatever that may mean, and that he is never seen in public without two bodyguards.’ However, when Powell encountered Sugar at a public press conference, he said no bodyguards were to be seen and that numerous enquiries failed to produce any proof that
Sugar employed bodyguards at all. Powell concluded that jealousy and snobbery were largely to blame, together with a very English suspicion towards success.
Powell has a point on both envy and snobbery. In contrast to, say, America, success seems to be something that is rarely celebrated in Britain. This is a country where spectacular failures such as ski-flop Eddie the Eagle Edwards are treated as heroes, but golfing winners such as Nick Faldo are often treated with disdain; a country that produced the poet Rudyard Kipling, who encouraged readers to treat triumph and disaster as ‘impostors’ to be reacted to in exactly the same way; a country whose most stirring battle poem is, as George Orwell pointed out, ‘about a brigade of cavalry which charged in the wrong direction’. Meanwhile, as the Daily Telegraph pointed out in 1987, ‘Yet despite … the rise of a new species of working-class entrepreneurs like Alan Sugar, most of Britain’s largest fortunes remain in the hands of the landed aristocracy.’
But Fortune magazine had just dubbed Sugar one of Europe’s key ‘new entrepreneurs’, The Times called him one of the men ‘who hold the aces’ and the New York Times had just described him as ‘Europe’s most successful entrepreneur of the 1980s’, and this three years before the decade ended. Fortune’s profile of him had been gushing. ‘Sugar, who started out hawking car antennas at 16, relishes price wars. He shook up the British stereo and PC markets with cut-rate products that are technologically conventional but expensive looking. In the year ended June 30, Amstrad’s sales more than doubled, to $426 million. “We produce what the mass market wants,” declares Sugar, “not a boffin’s ego trip.”’
Speaking of ego trips, Sugar never entered business for public acclaim or out of any need for acceptance, so he may have taken all this praise with a pinch of salt. Nonetheless, it was a good reflection of his growing stature that so many column inches were being devoted to him. This media attention would stand him in good stead, for in the next two decades he would become even more famous.
Away from the business, Sugar is a keen tennis player. He particularly got into this game during the 1980s, and the combative zeal that marked all his business dealings was just as apparent on the tennis court. By the end of the decade, he had become a very fine tennis player, so much so that he organised a pro-celebrity tennis evening at the Royal Albert Hall. It was June 1989 and the Wimbledon tennis tournament was just around the corner, and, as ever at this time of year, tennis fever was sweeping the nation. The event, sponsored by Amstrad, was held in the prestigious Royal Albert Hall in London. Among the television personalities to compete were Minder star Dennis Waterman, comedian Jimmy Tarbuck and chat-show legend Terry Wogan. Footballer Bobby Moore also turned up.
In the semifinal of the tournament, it was very much a battle of the business giants when Sugar was drawn against Virgin tycoon Richard Branson. Sugar was not without support as he took on Branson. Alongside him was Indian tennis legend Vijay Amritraj, and all round the plush venue were supporters. There were banners and chants offering him their support. ‘Come on, Alan!’ and similar chants, filled the air. Sugar and Amritraj beat Branson and his partner, and marched on to win the final. He had really developed a great technique for the game, having practised on holiday in the Catskill Mountains and in Florida, and also while at home at weekends. However, the real winner was the Muscular Dystrophy Group, for which the evening raised a wonderful £170,000.
Having incorporated the computer operation of rivals Spectrum into the Amstrad fold, it was now time for Amstrad to turn its gaze to another computer giant. This time, though, rather than making it part of the family, Amstrad would take on its rivals head on. With more than 388,000 employees worldwide, IBM is a technology giant and is widely considered to be the world’s largest computer company. Back in the mid-1980s, IBM were shifting in excess of 2 million computers every year. It was around this time that Amstrad decided to build its own IBM-compatible model. This was a response to pressure from its overseas contacts. When Sugar badgered them to sell more of his word processors, they would reply, ‘No, no, no, we can’t sell that. We want an IBM-compatible.’
So, in the second half of 1985, the project to build the first IBM-compatible Amstrad machine was launched. This time, the codename for the project was Airo, which stood for Amstrad’s IBM Rip-Off. This was merely a joke, though, because Amstrad was making sure that its new machine would not copy an IBM model. Once experts saw the finished product, they were impressed. Paul Bailey of Digital Research hailed it as ‘revolutionary’. The Times called it ‘a personal computer coup for Amstrad’; the Economist described Amstrad at this point as ‘A British David’ (as opposed to Goliath) in the computer world. A week on from the launch, The Times reported again on the PC1512, rounding up the critical response: ‘First reports from those few computer reviewers who have been able to lay their hands on a new Amstrad computer are encouraging – more impressed than expected seems to be the most popular view.’ The Guardian described the model as ‘a fast 8086 machine that costs a fraction of its IBM competitor’. The newspaper added, ‘While Amstrad is famous for cost cutting, the company has not skimped on the PC1512’s performance.’ Personal Computer World was little short of gushing in its praise: ‘It goes faster than the IBM, it’s smaller, has better onscreen colours, and includes functions which have to be added (and paid for) separately on normal IBM-style machines.’ The following year, Which? magazine named the PC1512 its ‘best buy’.
As for Sugar, he saw it as a multipurpose machine. ‘I see it as a real home computer where father can bring work home from the office on a floppy disk, put it in his machine and work on it on his own desk, before taking it back with him into his office in the morning,’ he said. ‘At the same time, “Sonny Jim” can use it to play Space Invaders if he wants.’ He made this statement at the grand launch of the model, when nearly 1,000 hacks turned up to the Queen Elizabeth Conference Centre in London to be met by a huge pair of red lips on a giant screen. Those lips explained what the many benefits of the PC1512 were. The eight differing models that formed the PC1512 range were then unveiled. A reported £3.5 million was spent on advertising the model, and the accompanying television advertisement cheekily said, ‘Compatible with you know who. Priced as only we know how.’
A tempting prospect. Too tempting, at first, it turned out. In the opening months of sales, customers found it increasingly hard to get their hands on a PC1512 model because initial demand had far outstripped Amstrad’s projections. Obviously, this was a nice problem for Amstrad to have and contributed to a 50 per cent increase in the company’s share price. A more serious problem was the rumours that the models overheated. Although there was some truth to these rumours, there was also evidence that a dirty-tricks campaign was under way against Amstrad’s new computer. Sugar was incensed by this, and said it was worse than anything he had experienced in previous years. ‘When I was competing against 40 other small-time dealers [in the hi-fi market], who’d kill their grandmothers in order to beat me to a deal … these dirty tricks and lies were never thrown at us.’
To counter the overheating rumours – rumours Sugar denied – he agreed to build a fan into the PC1512. This did not constitute an admission on his part that a fan was needed. It was more about reacting to customer concerns. He joked that, if customers wanted bright-pink spots on the computers, he would react the same way.
However, the rumours had proved damaging and Sugar’s fury and disgust at the dirty tricks is justified. In October 1986, it was reported that chemicals company ICI had opted not to buy the PC1512 for use in its offices, due to concerns about overheating and performance. However, the truth was that ICI had made no such decision and were still involved in tests. To clear the matter up, ICI wrote an open letter to Amstrad. It read, ‘During the trials no problems were experienced with overheating when the Amstrad PC was connected to a token ring network. The Amstrad PC1512 has now been approved for purchase by ICI operating units.’ Nonetheless, damage had been done to the model’s reputation by the regu
lar whispers and reports.
Not that Amstrad has ever been backwards in coming forwards, and after a report in the BBC staff magazine Ariel, which threw doubt on the safety of the PC1512, Sugar put his men into action. Nick Hewer, of Michael Joyce Associates Public Relations, and the man who would later stand alongside Sugar on The Apprentice, spoke of how he responded to the growing controversy. ‘When the safety of the PC1512 was being questioned by the BBC in its magazine Ariel, the writ came so fast their feet tingled. Harmful publicity was difficult for us to deal with. We waited for the biggest one to get it wrong – and they apologised within 24 hours. We couldn’t let it carry on.’
At the launch of the model, Sugar had proudly boasted that he expected to sell 300,000 models by the end of the year, and in the first full year of sales he expected to shift 800,000. More than 50 per cent of these sales, he predicted, would come from outside Britain. These optimistic projections, combined with the whizzing early sales, led to disappointment when the projections were not ultimately reached. There was a dramatic decline in Amstrad’s share price in 1987. In June of that year, almost £300 million was knocked off the company’s market value. Relations between the City and Amstrad were often not great. One City analyst accused Sugar of being a Trappist monk, and then –even more bizarrely – compared him to the Islamic prophet Mohammed, a rather strange combination of characters to compare any man to. Sugar was succinct as ever: ‘There should be some professional exam for these analysts. Most of the time they talk through their backsides.’ If such an exam were to include a mathematics question, then the analysts could have feasted their eyes on the following set of statistics. In the financial year 1986/97, Amstrad’s profits were up 80 per cent at £135.7 million. Sales were up 68 per cent at £511.8 million.
Sir Alan Sugar Page 6
