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 Far East. I was staying at the Peninsular Hotel in Hong Kong, on the Kowloon side, a fantastic place that brings back so many great memories for me. While there, I received a message asking me to call Mark Souhami of Dixons at the Mandarin Hotel.

 

     I thought this rather strange and called him back to ask what he, a retailer, was doing in Hong Kong. He explained he was there with Stanley Kalms on a general trip around the Far East and that Stanley thought it would be a nice idea for me to pop over and have tea at the Mandarin.

 

     ‘Have tea with Stanley?’ I said, puzzled. ‘What are you going on about? Stanley doesn’t have tea. What’s going on, Mark? What do you really want?’

 

     ‘Alan, why are you so sceptical? Why are you so suspicious? We’re friends! We’re all in Hong Kong. Pop over, have tea. What’s wrong with that?’

 

     ‘Nothing wrong with that, Mark, but rather strange, to say the least.’

 

     Intrigued by the invitation, next day I took the ferry from Kowloon across Victoria Harbour, which dropped me right outside the Mandarin Hotel. I went up to Stanley’s suite.

 

     ‘Good afternoon, Stanley, I’m surprised to see you here. What are you trying to do – contact my suppliers, as usual? You’re wasting your time, mate. You can’t screw me any more, you know.’

 

     Usually, nobody would talk to Stanley in that way, but I had this cheeky knack of getting away with it, as it came across as half-joking. I am like an elephant – I never forget – and this was my little dig at him for the way he’d screwed me on VCRs. While Stanley liked me personally, there would be no favours coming from him in business terms. And the feeling was mutual.

 

     ‘So, what do you want, Stanley? What have you schlapped me over here for? I’m busy. I’ve got no time for tea.’

 

     ‘Calm down, Alan. I just thought it would be nice for us to touch base.’

 

     ‘Yeah, okay, Stanley, forget all that touching base stuff and tell me what you want.’

 

     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 Stanley’s suite in the Mandarin Hotel, we called London to speak to the guy at Price Waterhouse. From what I could gather, Sinclair was in dire financial straits. Barclays Bank had a debenture over the company and by 31 March 1986 either Sinclair had to cough up the money they owed them or they were going to force them into administration.

 

     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 Hong Kong office and instructed the designer to look up pictures of the Sinclair computer in some trade magazines. My concept was to redesign the Sinclair Spectrum to incorporate a built-in cassette data-recorder in line with the Amstrad philosophy. By noon next day, with a bit of tweaking from Bob and myself, we had a full colour picture on the drawing-board of our version of the Sinclair computer. Remember, still no deal discussed.

 

     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 Hong Kong office. The night before, Bob had telephoned Ivor Spital back at Amstrad and instructed him to go and buy a Sinclair computer at Dixons, open it up and report back to Bob in the morning with a list of components on the PCB – this was to be our preliminary bill of materials for us to cost in Hong Kong.

 

     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 Hong Kong, had drawn up the external cabinet dimensions of this new Amstrad Sinclair. His drawing included details of the internal construction and showed the size of the PCB and cassette mechanism module. We faxed the whole lot through to Avnet and asked them to give us an estimate of the tooling cost. Again, still no deal with anyone.

 

     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 England, it was just a bad outing that didn’t come off.

 

     While Mark Souhami and Stanley Kalms were still on their Far East trip, Souhami met up with his senior buyer, Brent Wilkinson. I invited them over to Amstrad’s Hong Kong office and we showed them the drawing of the new Amstrad Sinclair. Not only that, one of the Amstrad Hong Kong engineers had carved out of polystyrene the profile of what the thing would look like in real life. They had stuck the drawing on top of it and generally painted it up, so that one could get an idea of the size.

 

     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 these. The retail price is £139.99 and I’ve already pushed the button on making the first production of a hundred thousand units. So, do you want to buy them – yes or no? You’ve got nothing to lose really – if it doesn’t happen, you’ve lost nothing.’

 

     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 England and meet the Price Waterhouse chap for the first time, as well as Clive Sinclair. The following week, Clive Sinclair came to our Brentwood headquarters late in the evening, slipping in through the rear fire escape. If anyone from the industry or the media had seen him creeping into my offices, it would have been front-page news.

 

     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 Britain. He was quite polite, even humble, with no hint of arrogance, and admitted that his passion for research had caused him to take his eye off the ball and overspend. He was no fool and could see there was no way out for him. With his reputation about to go down the pan, he was clearly looking for an elegant way to preserve his image.

 

     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 Hong Kong the week before were premature. Perhaps I’d jumped the gun.

 

     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 Cambridge. We met Clive at his house rather than his famous research centre, as that would have caused a furore in the marketplace and the media. This time, the Price Waterhouse people were not present, as Clive wanted to see whether he could come out of this deal with some money for himself.

 

     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 Florida with the family. I was contacted by Price Waterhouse who asked me whether I would be prepared to attend a meeting on 24 March (which happened to be my birthday) at Barclays’ headquarters in the City. I agreed and suggested that Ann and the kids travelled to Florida ahead of me. Family holidays were important to Ann, so she was not a happy bunny, but I promised her that I would be there on the 24th, one way or another. I worked out that if I left the City at about 3.30 p.m., I could catch the 5 p.m. Concorde to New York and from there fly down to Fort Lauderdale, which would get me into Boca Raton by about 10 p.m.

 

     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 these City meetings that go on till midnight – I’ll be gone, like it or not.’

 

     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 these was the company AB Electronics who were based in Wales. They were his main sub-contractor and were very badly exposed by events. If Sinclair went bust, then AB would lose millions, as would their other sub-contractor, Timex in Scotland, who were in the same boat.

 

     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 these people? It seems to me that they were all shocked at my offer. Have you been bullshitting and telling them that I was going to rescue the company?’    

 

     ‘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 Scotland to help employment in the Timex factory and AB employs hundreds of people in Wales. The whole Sinclair image is now about to go down the pan. You are the white knight.’

 

     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 UK, but rather in the Far East, as we did.

 

     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 Scotland and Wales.

 

     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 Wales and Scotland. What happens now is entirely up to you.’

 

     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 Florida. I was wondering whether I was going to get this deal or not. I was also wondering whether I should throttle-back and cut my losses with Avnet in Taiwan.

 

     The next day, in Florida, I got a call from the Price Waterhouse man. He told me that he thought everybody had agreed, though Barclays would make the final decision. They wanted to know whether I could come to a meeting with lawyers to draft up an agreement.

 

     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 America. I am not coming to any bloody meeting in London. I’m over here with my family. Now cut the crap and tell me what the next move is. Have I got a deal or not? If I have, then I’ll get a team of my people to meet with you – they are more than capable of thrashing out a contract. I don’t need to be there.’

 

     ‘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. UK time. When I woke up in Florida at 7 a.m. (noon UK time), I got in touch with Bob and Ken and they told me we’d got virtually nowhere. Barclays, Sinclair and everyone else had been trying to throw in all sorts of other obligations, such as after-sales service. I’d already told them that I had no interest in inheriting their past problems, but they still tried it on.

 

     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 Florida, I had installed a giant Panasonic fax machine which would make a real racket. It was in the dressing room adjacent to my bedroom and if faxes came in at night, all the clanging, clattering and beeping would wake Ann up and she would give me a load of stick. I had to train my staff in Hong Kong and England not to send faxes until 7 a.m. Florida time. On this occasion, however, the fax machine was running right through the night. I stayed up the whole of that night and, by 8 a.m. the following morning, 31 March, we had finally agreed a contract.

 

     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 London to sign an agreement? Absolutely not – not on bank holiday weekend. But if someone would come to this river in Cambridgeshire with a cheque for £20,000, he would sign. I know you must be thinking that I’m making it all up, but I swear it’s the absolute truth. A taxi was sent from the City of London to somewhere near Ely to locate this long-haired chap sitting on the banks of the Great Ouse river. A banker’s draft from Barclays was handed over to him and he duly signed over the rights. The lawyers must have missed this and if it wasn’t for me and Bob pushing this point, we could have been bang in trouble with a claim after we’d started making the stuff.

 

     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 Florida speaking to Bob and giving Avnet the go-ahead for production. As well as tooling, we would now have to commit to ordering large volumes of components in order to meet the very tough delivery schedule. There was no way we could afford to airfreight these products over – they would have to be produced by August and put on a fast vessel to arrive in England by mid-September to catch the Christmas trade.

 

     On 7 April, a press conference was called in London and the media was invited to receive an announcement from Alan Sugar and Clive Sinclair. The media wasn’t as clued-up in those days as they are now. There was no Sky television, no internet and there had been no leaks, so nobody had any information. People must have thought we were going to join forces or something. The market perception of Clive Sinclair was that he was still kingpin in computers.

 

     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 Europe before Christmas, but more to the point, we actually sold 300,000 in that period.

 

     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 Harvard Business School manual.