What You See Is What
You Get – Alan Sugar
I’ll now
tell you a story which will be hard for so-called business experts to
understand. What I was about to embark on, you can’t learn from a book. Nor can
you go into Boots and buy a bottle of entrepreneur juice to teach you how to do
it.
In February
1986, Bob Watkins and I were on one of our regular trips to the
I thought
this rather strange and called him back to ask what he, a retailer, was doing
in
‘Have tea
with
‘Alan, why
are you so sceptical? Why are you so suspicious? We’re friends! We’re all in
‘Nothing
wrong with that, Mark, but rather strange, to say the least.’
Intrigued by
the invitation, next day I took the ferry from
‘Good
afternoon,
Usually,
nobody would talk to
‘So, what do
you want,
‘Calm down,
Alan. I just thought it would be nice for us to touch base.’
‘Yeah, okay,
‘Oh you are terrible, you really are terrible, Alan. All
right, well, look, let me tell you this – this Clive Sinclair fellow is going
bust.’
I was
shocked, but seconds after digesting the statement I remembered hearing rumours
that he was running out of money fast and I’d seen a front-page story in the Mirror about how the mogul Robert
Maxwell was going to rescue Sinclair.
‘Right,
okay. . .’ I said cautiously.
‘Well, we
sell hundreds of thousands of his products and we’ve
been approached by Price Waterhouse to see whether we would take over his
company to get him out of trouble. Now as you know, Alan, we are retailers.
We’re not interested in this, so I’m giving you the heads-up. You need to jump
in quickly and see if you can sort a deal out.’
Wow! Now
that was interesting. It actually
took the wind out of my sails.
First of
all, I couldn’t help feeling some satisfaction that my arch-competitor was
going down the pan. I know it’s not a nice thing to say, but I’m being honest.
Secondly, the acquisition of the Sinclair brand would be a massive coup for
Amstrad.
After
further discussion with Mark and Stanley, the story became clearer. The truth
of the matter was that the man at Price Waterhouse had not suggested that Dixons buy the company, but had actually asked
for an introduction to me, knowing that I was also a supplier to Dixons.
Dixons quite
selfishly realised that if Sinclair went bust, they would be stuffed in two
ways. One, they would lose a lot of business because they were selling hundreds
of thousands of Sinclair Spectrums; and two, they would have no after-sales
service path for the millions of Sinclair units they’d put into the
marketplace.
From
Clive
Sinclair at that time was a national treasure and the guy at Price Waterhouse
explained to me that there were deep political connotations here. They could
not allow Sinclair to go into bankruptcy – it would be deemed a disaster for
the flag-bearer of the British computer industry to go under. So many songs had
been sung about his enterprises and Barclays Bank would be seen to be the
people that shot Bambi’s mum. It’s true to say that if Clive Sinclair, who by
then had been knighted, wasn’t as famous or popular as he was, the company
would have simply been slung into liquidation and no one would have heard any
more about it.
I agreed to
call the guy from Price Waterhouse back in a couple of hours as I didn’t want
to discuss my business affairs in front of Stanley and Mark. On my second call
with the chap, it became clear to me there was a deal to be done. I discussed
this with Bob Watkins who was very excited at the prospect and understood what
a blockbusting event this would be.
Now, here is
where I defied all business logic. With no deal done, I decided there and then
– before meeting Clive Sinclair or discussing numbers with banks – that I was
going to buy the Sinclair business one way or another.
We rushed
over to our
Bob called
Colin Heald, the production director of Avnet, a Taiwanese manufacturer we
used, and asked him to jump on a plane and get over to our
With the
usual Amstrad efficiency, this information was waiting for us first thing in
the morning. In our meeting with Colin Heald, we realised we could produce a
fantastic new version of the Sinclair Spectrum with a built-in data-recorder
and sell it at a retail price of £139.
By that
afternoon, Isaac Ip, one of our draftsmen in
If we were
to get stocks into the market for the Christmas season of 1986, we would have
to press the button on tooling there and then and if we wanted to bring 100,000
computers into the market quickly, we would need at least three sets of tools.
Now, here’s
another reality check: I’d done no deal to buy the company (I’d never even met
Clive Sinclair) and I hadn’t discussed anything with his bank. Despite this, I
pushed the green button and told Avnet to go ahead with the tooling, an
expenditure of approximately $100,000 for three tools. The way I saw it, if
everything went tits up in my negotiations when I got back to
While Mark
Souhami and Stanley Kalms were still on their
Souhami and
Wilkinson couldn’t believe their eyes. Souhami said, ‘I only met you a couple
of days ago, Alan. My God! What are you doing? You haven’t bought Sinclair yet
– you haven’t done a deal. What are you playing at?’
I explained
to Souhami that I’d spoken a bit more with Price Waterhouse and my gut feeling
was that this deal would happen. I said, ‘All you need to focus on is whether you want to be the first to buy
Incredible
as it may sound, they placed an order there and then for 100,000 units on the
basis that we would start shipping them to Dixons in mid-September.
It was time
for me to get back to
As I had
recalled, a few weeks earlier the Daily
Mirror and their infamous owner Robert Maxwell had declared, ‘We are going
to rescue Sir Clive’. The guy from Price Waterhouse told me that Maxwell was
full of shit. When it came to putting some cash on the
table, he was all talk.
The purpose
of the meeting was to try to come up with a mutual win-win situation. It was a
momentous event meeting Clive for the first time – after all, he was a national
hero, the so-called father of the computer industry in
I was very
polite in return and showed him the respect he deserved. Having said that, I
did need to keep the meeting on track and every so often, in a diplomatic way,
reiterate that he was bust and I was there to find a
mutually acceptable way out. Clive was angling for me simply to rescue the
company and allow him to run it, but there was absolutely no chance of this.
All I was interested in was acquiring the intellectual property rights and the
brand name Sinclair – and that’s it. I had no intentions of inheriting any of
the problems his company had got itself into.
Clive left
the meeting very despondent. He’d thought I was a white knight who was going to
rescue his company, leaving him in charge to continue developing his new ideas.
I was also disappointed – it seemed the arrangements
I’d made in
Next day,
the Price Waterhouse man called me and told me that Clive wanted to see me
again. Clive had digested the very blunt stance I had taken and was starting to
realise that there weren’t any other options. I jumped in a car with Bob
Watkins, who was very excited at the prospect of meeting Clive,
and drove to
Once again,
I had to be blunt. I told him that I was a simple-thinking man with a very
narrow focus on my objectives and that I didn’t like over-complicated
situations. All I would be interested
in was acquiring the Sinclair rights so that Amstrad could make stuff under the
Sinclair brand, with no other strings attached. (I had not mentioned the model
we’d designed to Clive or Price Waterhouse.) This second meeting with Clive was
his last throw of the dice to try to rescue his personal integrity and secure a
few quid for himself for this massive albatross he had built.
Things went
quiet for a few days. I was not prepared to move from my stance.
On
20 March 1986 I was due to fly to
I arrived at
Barclays’ headquarters and was greeted by the guy from Price Waterhouse who
asked if I’d mind waiting outside for a while. I agreed but said, ‘Whatever
happens, I’m leaving here at half three, so you can forget about
He’d
obviously relayed this to the people in the meeting and I was rapidly called
in. It was a massive boardroom packed with people from Barclays. Sitting at the
other end of the boardroom table was Clive and a few of his blokes. More
importantly, his suppliers and sub-contractors were there. One of
They wanted
to hear my proposition and I spelled out very clearly that I would throw £5m on
the table today in exchange for all Sinclair’s intellectual property rights,
including its brand name and any software applicable to the operating system. I
made it plain that I was not interested in anything else. I did not wish to
take on any of their staff, I did not wish to acquire any of their premises and neither would I be responsible for any of the
work in progress at AB or Timex or any other sub-contractor.
I could see
this was a massive smack in the face for all the people at the table. I don’t
know what the guy from Price Waterhouse had told them about me, but they must
have had visions that I would come in as a white knight and rescue the
situation. Not only had the bank presumed that I was going to step into
Sinclair’s shoes as far as its debts were concerned, AB and Timex had presumed
I was going to simply take over the reins and it would be business as usual.
They asked
if I would step outside again while they discussed my proposition. The guy from
Price Waterhouse escorted me into another room and I asked him, ‘What the hell
have you told
‘No, not at
all, Mr Sugar, not at all. Look at me as a kind of catalyst; look at me as someone who’s just trying to come up with a
win-win situation for everyone. Barclays is very embarrassed here, as is Her
Majesty’s Government. Grants have been given to Sinclair up in
He was
trying to big me up, to play to my ego, and I have to say that in some cases
that might have worked – sometimes people do silly things that cost them a lot
of money if they don’t think rationally. In this case, my ego wasn’t going to
get in the way. While this was going to be a great coup for Amstrad, I knew
enough about Sinclair’s business to see it was double-barrelled bust and I
wasn’t going to get involved with taking over its debt. What’s more, their way
of manufacturing was wrong – they should never have made their low-cost
computers in the
I reminded
the guy from Price Waterhouse that ‘In one and a half hours’ time, I’m walking
out of here and frankly I don’t care what they say; I’m catching my plane.’
Just at that moment, the door opened and Clive
appeared and asked me whether there was any possibility of me increasing my
offer. I knew then that I had them on the hook. I rejoined
the meeting.
It occurred
to me that one of the ways to win over this deal was to see if I could find a
way out for Timex and AB. This would also be good politically – the last thing
I wanted was to be branded as the person who put a load of people out of work
in
I came up
with my final offer: £5m on the table there and then, plus I would take
responsibility for all of the work in progress that Timex and AB had for the
current model. In other words, if they had 50,000 computers in various stages
of assembly, they should finish assembling them and I would pay a fair price
for them and take responsibility for selling them. I had Dixons in the back of
my mind to dump this lot of cargo on, even if I had to sell them at the price I
negotiated with AB and Timex.
Once again,
they asked me to leave the room and now AB and Timex joined me in a small
sub-office. They wanted to know how much I would pay them per unit. I told them
that I was going to get them out of jail and they
should be happy if they recovered all their costs and not start looking for any
profit.
I asked them
to tell me there and then what their costs were. After a few phone calls
backwards and forwards, they presented me with some figures which I didn’t
believe. When I compared their costs to the retail price of the Sinclair
Spectrum, there was a big discrepancy. They were trying it on. I made them an
offer of £40 per unit – take it or leave it. A few more phone calls, a bit more
negotiation, and they agreed at £48. We went back into the meeting. Now that
Timex and AB were onside, this just left Barclays Bank.
‘In a half
an hour’s time,’ I warned them again, ‘I’m going. I’m sorry, gentlemen, but I
have to leave to catch my flight.’
Having been
coached by the man from Price Waterhouse, I made a little speech to Barclays
that must have rung their bells. ‘I understand that on 31 March 1986 you
have no alternative but to foreclose on Sinclair, as the debenture expires. It
is now 24 March and you have exactly seven days to find another solution.
I have bent over backwards trying to help AB and Timex with their employment
problems in
They still
hadn’t made a decision, so I stuck to my guns. I
wished them farewell and departed for the airport.
As you can
imagine, my head was spinning on the journey to
The next
day, in
I replied,
‘You know my number – you’ve just called it.’
‘Yes. . .’
he said in a puzzled voice.
‘Well, then
you’ll know you dialled
‘Fair
enough, Mr Sugar, we’ll do that then. I’ll let you know where and when the
meeting will be.’
The meeting
was scheduled for 30 March, which was a bank holiday weekend. I insisted
that someone from my lawyers, Herbert Smith, together with David Hyams, Ken
Ashcroft and Bob Watkins attended this meeting. My people were happy to do
this, but Herbert Smith sent a junior intellectual property lawyer who was
unfamiliar with the computer industry, but was the
only one prepared to work over the bank holiday. He wasn’t the brightest star
in the sky, but it turned out that we didn’t really need him in the end. Bob
was at the meeting, even though his wife was on the verge of having a baby.
The meeting
started at 9 a.m.
Throughout
the course of the day, the phone was red-hot. My team was going backwards and
forwards, speaking to me then arguing with the Barclays mob. Finally, they got
to the stage of having a draft contract, which Ken insisted I see.
At my house
in
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
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
On 7 April,
a press conference was called in
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.
Dominguez
could not believe we’d got the Sinclair brand. He was absolutely delighted and
got busy advertising it heavily in the Spanish market. In fact
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
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