Meanwhile, Sky’s rivals BSB struggled from embarrassment to disaster and back again. Sugar watched this as a particularly interested party because he had nearly got involved with them a few years previously. He could afford a smile when he realised that he had once again been proved right. He noted, though, with disdain that, despite BSB’s woes, the City did not treat them with the same paranoia they had sometimes exhibited towards Amstrad. He joked that he was going to commission a sculptor to build a huge cement hand giving the famous two-finger salute. He would then, he quipped, get it placed right in the middle of the City. No Christmas card for the City analysts that year, then.
But what was the legacy of his involvement with Murdoch for Sugar himself? He said he suspected that, within two years of Sky’s launch, Murdoch would have forgotten all about him. But Murdoch was more impressed with Sugar than that. ‘I call him once or twice a month to see how things are going – to keep in touch and get his opinion on the marketplace,’ he said after the launch of Sky had been and gone. Murdoch was very impressed with Sugar, and there was no evidence he considered him a bighead. Instead, he was gushing with praise. ‘He’s very entrepreneurial, a tremendous worker. In negotiations, he’s a master of detail. I found he came to the point, to the bottom line very quickly. He’s been very straight with me – totally. He’s kept his word on everything.’
Might they work together again? ‘I’d be surprised if there aren’t other things we do with him,’ Murdoch said with a smile. It would prove to be a very big deal when Murdoch’s words eventually came true. Before then, there was much water to pass under the bridge – and not all of it was to be happy.
Every business and every businessperson goes through a rough patch. From the world’s richest men to the modest small-business owner, everybody has ups and downs. However, it is at times such as these that the men get separated from the boys. There are those who respond defensively and there are those who react well, and Sugar belongs firmly in the second camp. The late 1980s became, in many ways, a bad time indeed for Amstrad, which lost £114 million in sales because it did not have the products to meet the demand. Its foreign subsidiaries began to perform less than ideally, and its share value collapsed. Dark times for his company, but Sugar did what every successful person does at such times: he analysed what had gone wrong and worked out what could be done about it. This may sound an obvious response to make, but the business world is full of people who were too busy stroking their own egos to have found their way out of trouble.
So you can imagine the surprise of the City analysts when they turned up at Amstrad’s headquarters in Brentwood in February 1999 to find Sugar neither defensive nor in denial about his company’s plight. Amstrad and the City had never enjoyed a close relationship, so, when the chips were down for the former, many of the latter would have been overjoyed at the chance to rub it in. Their defiance will not have been dampened by the fact that rail delays meant their journey out to Essex had been less than straightforward.
Sugar showed them in and went about explaining why pretax profits for the six months to the end of 1988 were down 16 per cent to £75.3 million. He was not about to attempt to put any glossy spins on this. Quite simply, he said, he wanted to call the financial year ‘the year of disaster’. True, his advisers had suggested that this was not a sensible term to employ, but that did not stop Sugar from using it in front of the assembled City throng. His honest, open style was matched by Amstrad’s marketing director Malcolm Miller, who sat next to Sugar at the gathering. ‘We’ve been critical of ourselves,’ said Miller. ‘We’ve tried to understand what went wrong, so we can decide what to do.’
As mentioned, one of the major factors behind this dramatic drop in profits was that Amstrad was unable to supply the demand for its goods, which was largely due to a hike in the price of microchips. Amstrad tried to keep a flow of the microchips necessary to build its computers, printers and so on. However, at times during this dark period it was being forced to pay what Sugar called ‘blackmail prices’. Eventually, Sugar paid for a stake in a company that produced microchips in the hope of securing a regular flow of them. This decision was lauded by the Wall Street Journal, who called it a ‘wise investment’. However, even here things were to turn sour for Sugar. Soon after his investment, the problems that were forcing up the prices of microchips began to evaporate, wiping much of the value off the investment, which Sugar later acknowledged ‘was not the greatest deal I’ve done’.
Meanwhile, over in Taiwan, labour shortages were slowing down the production of audio goods, and the production of video recorders was also failing to move quickly enough. Problems with the West German distribution of computers did little to help make the picture any brighter. ‘Nineteen eighty-eight was planned to be the first year that Amstrad Germany was to show a major contribution to the group result,’ said Sugar. ‘I am sorry to say that in the first half this did not go according to plan … we accept in hindsight that this situation was self-inflicted.’ Drawing to a conclusion, Sugar was honest yet upbeat. ‘We made some bad mistakes. I don’t really know why so many things went wrong at the one time. But, come the new financial year, we will be firing on all cylinders again.’ Sugar had performed brilliantly at the meeting, but even his greatest performance could not stop Amstrad from taking a kicking at the City. That day the share price fell 12 per cent, knocking £57 million off the value of his personal stake in the company.
This time, the Wall Street Journal was less positive, running a story headed: ‘Amstrad takes humbling turn for Alan Sugar’. The Times echoed this, reporting that: ‘Profits tumble to £75 million after Amstrad “mistakes”’. Martin Waller’s story read, ‘Amstrad, the consumer electronics group, saw £125 million wiped off its market capitalisation yesterday after reporting a year-on-year pre-tax profits drop for the first time in its history.’ Meanwhile, the Independent sneered, ‘Things turn sour for Sugar’.
At least the Guardian noted that Sugar was responding to these sour times with a sensible head: ‘Sugar owns up, and doesn’t try to sweeten the pill,’ wrote Roger Cowe. His fair report went on, ‘Seldom are chairmen’s statements of interest except to students of public relations. It is always interesting to see what depths can be represented as “a firm foundation for future growth” and what windfalls are credited to clear strategy and professional management. But company chairmen are not supposed to tell the truth – or certainly not the whole truth.
‘All credit, then, to Amstrad founder and chairman Alan Sugar for owning up to a series of mistakes which have led to his company making the worst kind of history by reporting a drop in profits for the first time. Of course Mr Sugar is in a slightly more comfortable position than most company chairmen, since he still owns nearly half the company. And he has always been one to speak his mind, usually at the expense of his City critics. But even so, his frankness is surprising as well as more than welcome, and worthy of extensive quotation: “The result is below our expectations and our true potential due to a chain of events, some outside our control and others the results of our own mistakes.”’
However, none of this could hide the fact that Amstrad had gone through a bad period, and had done so in front of the eyes of the world. As the Economist magazine concluded, ‘Amstrad’s Alan Sugar has not exactly tripped, but he is limping.’ He would soon be back in his normal confident stride, but not before a major legal battle.
Amstrad had launched itself selling audio equipment, but, by the end of the 1980s, such goods had become a minority concern. Indeed, in 1989, audio sales contributed to less than 4 per cent of the company’s turnover. ‘There’s no margin left in the product and we’re just wasting our time chasing it,’ he commented. Taking a long, hard look at the structure of his company, he added, ‘We have had such phenomenal growth over the past few years that we are still operating with a management team you would expect to be running a company a fraction of our size,’ he admitted to the Sunday Times. He also said that there was ‘no f
inancial policing within the organisation’. All of this was to change, not least because he appointed new directors to the board to address these and other matters. He also appointed a group inventory controller to keep a tighter rein on stock. As Sugar said, Amstrad was not carrying out ‘mundane and boring tasks’ that were required from a company such as his. Another change he ushered in during this testing era was a new dawn in customer service. To this end, 111,000-square-foot premises in Harlow, Essex, were purchased and crammed full of customer-service operatives who sat at their phones, answering questions from customers and computer dealers. Director Jim Rice said he saw this development as ‘a very important aspect of our future strategy, and it’s going to be developed much more than it currently is’.
Another part of their strategy was taken up by a lengthy legal battle with a US company. On 16 September 1991, Amstrad announced that it was suing electronics firm Seagate, seeking ‘in excess of $150m compensation for financial loss caused to Amstrad and loss caused to Amstrad’s reputation as a result of delivery of ST277R Hard Disc Drives’ (for Amstrad’s PC2386 personal computers), which, Amstrad alleged, ‘were initially defective and had to be reworked by Seagate’. Seagate said it would vigorously defend the action, which it said was ‘without merit’. The resulting poor quality of the PC2386 and its sister computer, the PC2286, damaged Amstrad’s reputation in the early 1990s. It was a costly and lengthy battle, but, eventually, in May 1997, Amstrad won £57 million in damages. Judge Humphrey Lloyd, QC, the official referee for the case, ruled that the disk drives made by Seagate had been faulty and awarded damages to Amstrad under the Sale of Goods Act.
A relieved Sugar said, ‘Nobody will ever know where Amstrad would be today if this had not happened. The great efforts of myself and my small team were demolished. The financial award we have received today only goes some way to compensate us.’
Seagate said they were stunned. ‘I was shocked and appalled,’ said their coincidentally named chief executive Alan Shugart. ‘I think we got home-courted.’
The media were quick to pick up on the significance of all this. ‘Amstrad hits the legal jackpot’, cheered the Guardian. The accompanying story on the City page outlined that this victory had far-reaching consequences for Amstrad. ‘The fortunes of Amstrad, Alan Sugar’s struggling electronics company, were transformed yesterday by a surprise court victory which will boost the company’s value by nearly half. Amstrad won a decision in a case dating back to the late 1980s which will bring the once high-flying computer company a windfall of more than £100 million in damages and interest.’
It had been a bitter battle for the man with a sweet surname. However, his involvement in the beautiful game was to lead to more than a few ugly moments, too.
CHAPTER SIX
COME ON, YOU SPURS!
Tottenham Hotspur has always been a football club that considers itself to be a bit different, a bit special. Founded in 1882 as Hotspur FC, with the motto Audere est Facere (‘To dare is to do’), it has an illustrious history, and a reputation that actually exceeds its achievements. Not that it is entirely short of achievements. It became the first British club to win the domestic double in the 20th century. This came in the 1960/61 season, when Bill Nicholson guided the team to the League title and FA Cup. Then, in 1963, Tottenham became the first British club to win a major European trophy, the European Cup Winners Cup.
The 1980s was also a good decade for the side, who won the FA Cup twice, the FA Charity Shield and the UEFA Cup. However, even when Tottenham have not been winning trophies – and recent times have been mostly lean in that regard – they have managed to maintain a reputation as a stylish club, with a team who play stylish football. Such football royalty as Danny Blanchflower, Jimmy Greaves, Glenn Hoddle, Chris Waddle, Gary Lineker and Ossie Ardiles have turned out in their colours. So too have Pat Jennings, Jürgen Klinsmann and Teddy Sheringham.
In the early 1990s, a slump in the property market had left the then owner Irving Scholar – and therefore the club – in financial turmoil. Scholar was a lifelong Tottenham fan. As a boy he had dreamed of playing for Spurs, and he went as close as he could to fulfilling that dream by buying the club in 1982. The club was £4 million in debt, and Scholar appointed Douglas Alexiou as chairman. However, his ambitions for the club to become a global power were not realised, and instead Tottenham was heading towards financial disaster.
Before long, Scholar began to try to raise funds to bail out the club. In July 1989, he approached newspaper publisher and Derby County chairman Robert Maxwell in a bid for financial backing. However, in due course Maxwell would attempt to go even further than this. This attempt would put him on a head-to-head course with Sugar, who, though not a football fanatic like Scholar, had had connections with the north London giants on more than one occasion in the past. As a youngster, he had been taken to watch Spurs play at White Hart Lane by his father. Later, in the 1980s, the Amstrad office was in Garman Road, a mere goal kick away from Tottenham Hotspur’s stadium. Furthermore, he had once used the Tottenham team in an advertising campaign for Amstrad. So he was no stranger to the team.
However, in the 1990s these connections would be mere trailers to the main feature: Alan Sugar would buy Tottenham Hotspur Football Club. In June 1991, Sugar teamed up with Spurs legend Terry Venables to bid to buy the club from the departing Scholar.
As a player, Venables had enjoyed a successful career. He left school in 1957 and joined Chelsea FC as an apprentice. Three years later, he became a first-team regular and ultimately club captain. With him wearing the armband, Chelsea came agonisingly close to winning silverware a few times before they did finally hit the jackpot, winning the League Cup in 1965. Within a year, he had fallen out with manager Tommy Docherty and he was sold to Tottenham Hotspur, where he again tasted success, in the shape of an FA Cup final defeat of his old club Chelsea.
After retiring as a player, Venables turned to management, and he guided Crystal Palace to two successive promotions; he then moved across town to Queens Park Rangers whom he led to the Division Two title. By now, this hot young managerial ace was attracting widespread global attention in the game. Indeed, so high was his stock that he was approached by one of the game’s most prestigious clubs: FC Barcelona. He quickly accepted their offer and found himself swapping the small, tight surroundings of Queens Park Rangers’ Loftus Road stadium for the sprawling majestic splendour of the Camp Nou, where he earned the nickname ‘El Tel’. The charismatic Venables would not disappoint. He steered the club to their first League title in 11 years, a League Cup win and a European Cup Final, which they lost on penalties to Steaua Bucharest.
However, such was his reputation and success that El Tel found it hard to live up to his early glories at the club, and, in fact, he became a victim of his own success. By the time his side lost to Dundee United in the UEFA Cup, his time was up and he was sacked.
Within eight weeks, he was back in work, this time at the helm of Tottenham Hotspur, the team of his playing days. It was here that he was destined to cross paths with Sugar. However, it is instructive to understand the full character of Venables in order to comprehend fully what subsequently unfolded.
A man who has had widespread business interests for many years, Venables has often been surrounded by controversy. He vigorously denies allegations of financial impropriety that have been made against him in the past. That said, he was banned from holding company directorships for seven years after choosing to not contest nineteen specific allegations made against him by the Department of Trade and Industry (DTI). The DTI case arose from alleged mismanagement of four companies – the London drinking club Scribes West Ltd, Edenote plc, Tottenham Hotspur plc and Tottenham Hotspur Football and Athletic Company Ltd. Venables was not at the London courtroom where Elizabeth Gloster QC, for the DTI, told Mr Justice Evans-Lombe that his conduct in relation to the four companies ‘has been such as to make him unfit to be concerned in any way with the management of a company’. The Competitio
n and Consumer Affairs Minister Nigel Griffiths reacted to the verdict thus: ‘Mr Venables has admitted the serious allegations made in the disqualification proceedings and recognises the serious nature of the allegations by consenting to a substantial seven-year period of disqualification. We recognise his great achievement in football coaching, but even our national heroes cannot be allowed to fall below accepted standards of probity when they enter the business world.’
Venables has also become famous away from the world of football, having co-authored four novels with author Gordon Williams and co-created a television series for ITV. He has also created a football board game and appeared on a pop song. All this, together with his perma-tanned appearance and hugely charismatic cockney persona, has long helped to cast Venables as one of the more colourful characters in the game. He was at the helm when England reached the semifinals of the 1996 European Championships, which remains to date the joint-second (with the 1990 World Cup run) most successful tournament performance the national side have managed since winning the World Cup in the glorious year of 1966.
However, much of that was yet to come when Venables and Sugar – who had for a while been associates but not what one would call friends – approached Spurs with their bid. After much speculation, Sugar revealed that there had indeed been a bid. ‘I can’t deny that Terry and I have made an approach to the board of Tottenham Hotspur and we are awaiting the outcome of that offer,’ admitted Sugar. Referring to rumours that Robert Maxwell was also preparing a bid, Sugar made it clear how he saw proceedings panning out were there to be a bid to rival his and Venables’s. ‘If Mr Maxwell or any other party wish to come along for the benefit of the club and put forward proposals which are better than I am, I will gracefully step to one side, because one thing that is not going to happen is an auction,’ he said.
Sir Alan Sugar Page 8
