What You See Is What You Get: My Autobiography (58 page)

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By the autumn of 1988, we were ready to enter the new Intel 20286 and 20386 PC market. Mark Jones came up with a design for a whole new range of computers - the PC2000 series - which would comprise the model PC2086 (which was simply a re-engineered PC1640 based on the Intel 8086 processor), the model PC2286 (using the 20286 processor) and the model PC2386 (using the 20386). This range of computers would offer a combination of twenty-four different configurations. One of our designers came up with the aesthetics for the product and it looked excellent, thanks to a front profile that was more stylish and much thinner than that of the competition.

This design was to play a part in the impending demise of Amstrad in the PC market.

Because of my supposed Midas touch, final decisions on how a product should look from a cosmetic point of view were made by me, based on the options put forward by our designer. Normally, I'd agree the design and pass it on to the engineers as a fait accompli. I did the same for the PC2000 series.

In the case of the PC2086, this was no problem. However, big problems arose on the PC2286 and PC2386. When it came to engineering the internal construction, we had to split the circuitry between two PCBs and it was a real pig's ear of a design. I recall being in Japan at the time with Bob when the reality of this design mess hit us squarely in the face, but we made the very bad decision to carry on. We
did
discuss scrapping it and starting from scratch, but unfortunately the pressure was on for Amstrad to bring out 286 and 386 machines fast. We were already seen to be late entrants into the 286/386 market, considering we were supposed to be the bigshots of the PC world, having taken over 30 per cent of the total European sales. What's more, rumours that companies like Olivetti were also about to bring out low-cost 286/386 machines added to our panic. We made a bad call and ended up making a bad product.

I won't get too technical, but to understand the disaster that was about to unfold, I need to explain something about hard disk drives and how they work. In those days, the hard disk drive had to be connected to the computer using a hard disk controller card which would plug into one of the slots available on a standard IBM PC. The card itself was a very expensive item.

Amstrad's philosophy had always been to condense everything onto one PCB and not have separate items, so I commissioned our team to design our
own hard disk controller chip and lay it down on the main PCB instead of buying a separate hard disk controller card, which I believe in those days cost around PS60. The chip that we laid down on the PCB would cost some money but we saved approximately PS45 this way.

We bought the hard disk drives from two different companies - Seagate and Western Digital, the world's leading manufacturers of hard disk drives. We obviously assumed their products would be of good quality - one didn't even think of questioning it, just as you wouldn't think of questioning Sony or Philips if you bought their screens to use in monitors.

The PC2000 series was launched on 13 September 1988. It received a lot of interest from the European media and all our subsidiaries' order books were full. To meet the promised delivery date of October, as we were running slow on the development side, we chartered a Korean Airlines jumbo jet to deliver the cargo in time for the winter season sales.

Then we hit a snag. The PC2000 series used a certain type of D-RAM chip and we had problems starting production on some of the models because, like a couple of years before, the supply of D-RAMs completely dried up. Due to a general downturn in the market the previous year, the price of D-RAMs had bottomed out, so much so that many manufacturers gave up making them, as they'd ended up selling them at a loss. The only way to encourage manufacturers to produce them again was to start paying high prices.

My next disastrous move was down to a knee-jerk reaction. I decided to take some money off the cash pile we'd amassed and buy a 9 per cent shareholding in the American D-RAM manufacturers Micron in exchange for them loosening up some of the supply to us. However, we then discovered it would take them several months to ramp up additional production to accommodate us, so by the time they were in a position to supply D-RAMs to us ad infinitum, we didn't need them any more, as all chip-makers were now supplying freely again. This episode added insult to injury.

Then, shortly after the PC2000 series hit the market, we started receiving complaints about hard disk drive errors on the 286 and 386 machines. Generally, when you hear the first one or two complaints, you think maybe the customer got something wrong, but the complaints started to increase, not only in the UK, but throughout Europe.

It pains me to talk about this situation, so I want to be as brief as possible. We had to admit there was some unknown fault with our PC2000 series and we recalled the whole lot from the market. Imagine the disaster of such a move and the negative publicity it attracted, not to mention the effect it had
on our share price. 'At last,' some of the sniping commentators said, 'Amstrad stumbles!' They were right.

Further cracks were starting to appear. To be honest, the level of engineering we had back then was not capable of recognising the root cause of the problem. I made an assumption that it was all our fault - we'd been far too adventurous in trying to design our own hard disk controller chip. We were warned by the suppliers of hard disk controller cards that we'd be stirring up a hornets' nest, that it was no simple thing to design. They said they had spent many man-years developing this technology and that Amstrad couldn't do it on its own. So with these 'I told you so's ringing in our ears, Bob and I made the reasonable assumption that the culprit was our own hard disk controller.

We sent samples of our products to Seagate and Western Digital and asked them to give an opinion as to why things were conking out. They told us, 'It's not our hard disk drives; it's definitely this non-standard hard disk controller you've designed.'

So the first phase of our attempted recovery of the PC2000 series was to disable our own hard disk controller and buy hundreds of thousands of hard disk controllers from the supplier who'd warned us not to go it alone. That supplier was Western Digital.

We set up a production line at Shoeburyness and converted all the computers drawn back from the market, as well as all those on the way to us. On top of this, we sent thousands of hard disk controller cards to Orion in Korea, so that they could restart production.

We relaunched the computer into the marketplace the following spring, apologising to our customers and telling them how we'd now fitted new hard disk controller cards and that everything was hunky-dory and back on track.

Wrong.

After the relaunch of the PC2000 series containing Western Digital's hard disk controller cards, we were
still
getting complaints of hard disk failures. We turned to Seagate and Western Digital again. 'What's your excuse now?' They told us that our box was too hot and the hard disk drive was overheating. The sad thing about this whole situation was that we did not have the engineering capability within Amstrad to look at this situation independently. We'd made the assumption that Seagate and Western Digital knew what they were talking about - they were the industry leaders in hard disk drive technology, after all. Surely there was no way the fault could lie with them, could it? It
had
to be something Amstrad was doing wrong.

Eventually, one of our engineers, Bill Weidenauer, working closely with John Beattie and a few others, learned enough about hard disk technology to
realise that a gigantic coincidence had occurred - both Seagate
and
Western Digital had shipped us faulty hard disk drives! Who could have dreamt of that scenario? No wonder we thought that
we
were doing something wrong. We had poured good money after bad changing all the hard disk controllers and relaunching the product, only to find that it was their drives to blame. It was our misfortune that both suppliers had shipped us rubbish. If at least one of them had shipped us good stuff, we'd have known far earlier that the problem didn't lie with Amstrad.

I make no excuse for the fact that I was too focused on launching new products at the time. I didn't give enough care or attention, or allocate enough funds, to building up an engineering department with more analytical resources in high-level technology. I wrongly thought that this would lead to having non-productive people hanging around. This was a big error. We were entering the 16-bit computer business. The philosophy of viewing a computer like a piece of audio equipment might have been fine in the early days, but now we were moving into territory where the technology was beyond the scope of the guys that had made us successful so far.

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In the midst of these dark times, one positive event occurred. On 5 December 1988, London's City University awarded me an honorary Doctor of Science degree in recognition of my so-called contribution to the information technology industry. It was a rather formal ceremony in a grand hall and all the students being awarded their gongs were present. They dressed me up in a long robe and I had to wear a large flat cap. I climbed the stage and said a few words about how honoured I was to receive this great accolade. I felt a bit out of my depth and was quite nervous, as I didn't want to make a fool of myself by saying or doing the wrong thing during the ceremony.

From now on, I was to be known as Alan Sugar DSc. I was very honoured to have my first title, so to speak, though as most people will tell you, these honorary things are not really respected by true academics. Nevertheless, I milked it amongst some of my family, friends and close colleagues, jokingly telling them they had to call me 'Doctor' from now on.

In fact, I had been invited to make a speech at the university previously, at the time when I was flying high and Amstrad was ruling the world in the PC business. It attracted a full house, so much so that the managing director of IBM UK, Tony Cleaver, was locked out of the room and missed it!

It started off with a bang when I addressed the question I'm most
frequently asked - 'How did you make all your money?' Bear in mind that the audience had already read many stories about me selling car aerials from my PS50 minivan, so with a deadpan face, I explained, 'It's very simple. I started at the age of nineteen selling car aerials and bought a few for forty quid. I sold them all the same day and bought a load more with the profit. Then I realised there was a
new
style of car aerial which came in a coloured blister-pack, so I only bought and sold those. Then I decided to cut out the middleman and buy the aerials raw and get my own blister-packing machine.' I paused for a few seconds, with the audience hanging there, waiting for my next pearl of wisdom, and then said, 'Then my uncle died and left me fifty million quid.'

The audience laughed. They were loosened up. As for the rest of the speech, it rambled on a bit and was quite boring. However, there was one Sugarism within it which was to be quoted many a time afterwards by the media. I was trying to explain Amstrad's philosophy compared to those of other large companies. I said, 'Pan Am takes good care of you, Marks & Spencer loves you, IBM says the customer is king. At Amstrad, we want your money!'

Maybe not the cleverest thing to say, but the most honest. All that crap spouted by those companies is nonsense - they're in business to make money from their customers. Anyway, I was young, honest and inexperienced in public speaking and, more to the point, in gauging media reaction.

Any negative coverage I got then was mild compared to what was heading my way now. The PC2000 series ruined Amstrad's credibility in the market and this was the first time that I started getting real stick from the media. The praise I got from the media on the way up never went to my head, but when they started slagging me off, I'd be lying if I said it didn't affect me. It was quite a depressing time.

Companies such as Olivetti and Dell started to get a grip in the marketplace with low-cost 286 and 386 machines. We made an attempt to re-establish ourselves with the PC3000 series, which was well engineered and worked perfectly, but the damage had been done. What's more, by the time we came to market with this model, prices had dropped tremendously and we were no longer miles cheaper than the competition. Everybody had jumped on the low-cost PC bandwagon. And because the PC2000 series completely bombed, we lost the whole computer market.

An inevitable fall in profits resulted. In June 1989 they dropped from the previous year's PS160m to PS76m, but, strangely, based on our last published set of financial results, people in the outside world who didn't follow the UK media so much still thought we were high-fliers!

During this disastrous time, I was visited by Andy Grove, the founder of Intel, who'd come to see this 'genius' who'd taken 30 per cent of the European PC market. Little did he know what was around the corner. When he arrived, I was very depressed, and the meeting lacked anything of significance. I couldn't be bothered; I had nothing to brag about. He was banging on about some new processor they were working on and I just drifted through the meeting, preoccupied with our troubles.

It never rains but it pours. My secretary took a call from Bill Gates's office. He was over in Europe and he too wanted to meet face-to-face for the first time. He planned to fly into London on a Saturday, come and see me at my home, then fly back to the USA. I agreed to meet him, but again, in a deep depression, I was at a loss to think about what we would discuss.

Bill arrived at Bramstons in a chauffeur-driven car. Like most Americans, he had thought London was about the size of his home town. He wasn't expecting a two-hour slog around the M25 to get from Heathrow to Chigwell and when he arrived he was flustered to say the least. Ann popped into the lounge to offer him some refreshments and he asked for a Coke. We don't do Coke at my home, but we did have some Diet Coke, which he reluctantly accepted.