What You See Is What You Get: My Autobiography (59 page)

We spoke for an hour or so. Again, I had no real enthusiasm. He must have gone away thinking that this Sugar guy was no big deal, no spark of inspiration at all, and that this meeting had been a bloody waste of his time.

Everything was going wrong at once. Inventories of our PC2000 series, as well as a lot of our other consumer electronics products, had reached an all-time high. We had PS335m of unsold stock and I owed the bank PS114m. Lloyds Bank was starting to get sweaty and they came in for many meetings to try to understand where we were going.

I recall one meeting with Lloyds' senior management when I told them quite openly that things had got out of control. The subsidiaries had been ordering stuff based on their sales forecasts; we had made the goods, but they weren't selling. On top of this, the PC2000 series inventory was massive, but we couldn't ship any until we'd fixed them. These were the reasons we had such high levels of inventory and borrowings. To be fair, there was never a suggestion from Lloyds Bank that they would bring in the administrators, but clearly they were worried. In any case, I didn't need them to warn me - I knew that if I couldn't resolve the situation in the next six months the inevitable would happen.

After that meeting with Lloyds, I called a meeting with all of Amstrad's
senior sales staff and told them that we were going to have an organised fire sale. I put the situation to them bluntly. 'If the bank were to call in a receiver or a liquidator, the outside world would know they could nick the stock from us. I've told the bank, "I will deal with it." And now I'm telling you,
"You
will deal with it."'

We spent the whole of September through to December 1989 doing deals. I remember calling Stanley Kalms and telling him I had 40,000 camcorders in stock. Stanley explained that Amstrad wasn't the only company in trouble; Dixons was experiencing a terrible downturn in business at the time, due to the recession that was about to kick in. He said there was no way he was going to buy stock from us and take the risk.

I told him, 'The stock is sitting in my warehouse doing nothing. You might as well stick it in your shops and sell these camcorders at PS399 [which was an amazing price]. They will fly off the shelves over Christmas.' He had nothing to lose and he agreed, but of course he wanted his 25 per cent margin.

We reduced the price of our audio equipment and cleared the stocks through giant chains like Rumbelows, Currys and the Dixons group. Marion did the same in France, reducing stocks of VCR and audio.

By 30 June 1990 we had managed to change the situation. We'd slashed our inventory to PS188m and we had PS24m in the bank. I remember Lloyds inviting me to lunch and telling me they'd never experienced anything like this before when they'd seen a company in trouble. They were highly complimentary of what we'd done. I recall joking with them and asking to look at their accounts - I wanted to see if they were worthy of holding our PS24m.

The majority of the PS188m inventory on hand was the PC2000 series, which was still being reworked. The market prices had dropped so badly that we had to make a decision about this product. Do we spend a load of money buying hard disk drives from reliable Japanese sources such as Sony and Hitachi, then rework the whole series again and relaunch it? Or do we just cut and run and sell the stuff at any price to a jobber? Even if we spent good money on new hard disk drives and the labour involved in reassembling the machines, the market had moved on, plus there was now a stigma attached to the Amstrad PC2000 series. So Daniel was tasked with getting rid of the inventory, and someone bought them off us at a steal.

I had rescued Amstrad from inevitable liquidation when our business was in the pits, with the computer side of things gone. The near demise of Amstrad was as horrible a period as anyone could imagine and our annual
profit plummeted from its peak of PS160m in 1988 to PS44m by June 1990. And worse was yet to come.

However, while all this was going on, another market-changing event was about to take place.

When You See a Satellite Dish, Think of Sugar

1988-90

'Alan, I've got Rupert Murdoch on the phone,' my secretary Frances said. 'Can I put him through?'

'Nah, not really. Tell him I'm not in - do the usual,' I said.

About five minutes later, she walked into my office and asked, 'Do you know who Rupert Murdoch is?'

'No, who is he?'

'He's the man who owns the
Sun
and
The Times.
He's the man who had that trouble down in Wapping with the strikes and all that.'

It suddenly dawned on me that I hadn't bothered to pick up the phone to speak to one of the world's biggest media moguls. I was totally cocooned in my own little world - I knew everybody's names in the electronics business, but I couldn't tell you the names of any government ministers, pop stars or other celebrities.

'Okay, Frances, get him on the phone straightaway.'

Rupert told me that my company had been recommended to him and he wanted to come and talk to me about the possibility of launching a satellite TV service in England. He'd heard that at one stage Amstrad had joined Granada and Virgin in a consortium to bid for the right to put up a satellite TV service known as BSB. He was right - we
had
done that. However, when I got the measure of some of the people in this consortium, and their lack of ideas, I decided I was no longer going to play. Richard Branson followed shortly afterwards.

Murdoch's idea was to broadcast sixteen additional TV channels in the UK via a satellite launched by the company Astra. In those days, only four television channels existed: BBC1, BBC2, ITV and Channel 4. When I heard
his idea, I knew immediately it would be a great consumer product - the punters would go bananas for an extra sixteen channels if it could be done cheaply.

We agreed to meet and Rupert was driven from Wapping all the way to my headquarters in Brentwood. To be fair, he told me straightaway that he had done the rounds - he'd gone to the likes of Sony, Philips and even GEC, but no one was prepared to make any decisions unless he was willing to lay out a lot of money for development.

Lord Weinstock, the chairman of GEC, told him, 'Go and see Sugar, he's the man who can bring a consumer electronics product to the market faster than anyone else. In fact, while Sony and Philips are still thinking about it, he will have them in the market for you.' Those are the very words Rupert told me he'd heard from Lord Weinstock.

The proposition I put to him was this: 'If you, Mr Murdoch, provide sixteen channels of additional television, including movie channels, news and sports, I will find a way of making satellite receiving equipment so that it can be sold in places like Dixons for a hundred and ninety-nine quid.' It was my opinion that if we could achieve this, the whole thing would work. In fact, I told Rupert I was so confident about this that he didn't need to underwrite any orders. If he would agree to press the button on renting the space on the satellite and putting up the sixteen channels, I would be prepared to start development and production at my own risk. There was no official agreement, just a handshake. His transmission date was February 1989 -
my
job was to make sure that we had equipment in the marketplace by then.

It was now June 1988, so we had eight months to do it. Rupert called a press conference and asked me to attend. It was a massive bash held in the BAFTA auditorium in Piccadilly. After promising to launch Sky Television by February 1989, he turned to the audience and said, And this man here is going to make the equipment to receive the broadcasts - and it's going to be available for a hundred and ninety-nine quid! The proposition is, ladies and gentlemen, sixteen more channels of television for a hundred and ninety-nine quid.'

I started to feel a bit nervous, sitting there in front of the world's media, smiling as if to say, 'Yes, that's right.' Little did Rupert know that we didn't have a bleedin' clue how to make them yet - it was just my gut instinct that we could do it. I didn't realise what I'd let myself in for.

A few days before the press conference, I spoke to Mark Souhami and told him what was about to happen. As ever, Dixons wanted in on this new and exciting market and agreed to buy 500,000 units.

One thing you'd have to say about Stanley Kalms is that he understood his products and he understood his consumers. While his company had layers of product managers, marketing managers and buyers who used industry statistics to gauge product sales, all these systems could do was track and assess
existing
product categories. When something new came along, like satellite, this threw a spanner in the works. That's when old-fashioned gut feeling kicks in. Stanley had that feeling and he backed this new satellite business. So, to give myself more to worry about, I proudly announced in June that these units would be available in Dixons next February.

The press conference created a load of attention, but after the euphoria wore off, while walking down Piccadilly to my car, I was thinking to myself, 'What have you done, you bloody lunatic?!'

I got back to the office and told Bob Watkins, 'I've only gone and committed to supply this stuff! Now we need to work out how we're going to do it.' Bob and I had done a quick bit of research after the first meeting with Rupert as to what was available in the market as far as satellite receivers and dishes were concerned. We'd seen some very expensive pieces of equipment capable of receiving satellite transmissions from the Middle East - these were normally purchased by rich Arab customers. Looking inside the box, as usual, we could see there wasn't really much in there. However, the technology for the
tuner
within the satellite receiver was completely different from that used in our hi-fi units or TVs - it needed a specialist designer.

In view of the commitment I'd made, Bob and his team got weaving and made good progress. One of our engineers was capable of designing the main circuitry for the satellite receiver and Bob found a fellow who specialised in tuner design. All in all, we got on stream for developing the receiver. The bigger question was: how would we be able to make the receiver plus dish for PS90, so that we could sell it to Dixons for around PS120, so they could sell it to the customers for PS199? Remember, satellite receivers and dishes in the market at the time were around PS5,000!

I learned that there's a device which is mounted at the front of the satellite dish called an LNB (low noise block). This picks up the signal from the satellite after it bounces off the dish. From this LNB, a cable runs into the house which connects to the receiver. I wondered where the hell we were going to get all this stuff from. My engineering people told me that the LNB and dish are very similar to the spinning radar antennae you see at airports, and that people like Marconi were the experts in this field.

As Marconi was owned by GEC, it was time to call Arnold Weinstock. First, I thanked him for his introduction to Rupert Murdoch, then I asked
him whether he could put me in touch with his mob who made these LNB things. I told him, 'I want to pay a couple of quid for them, not two million pounds each.'

Arnold quite liked my sense of humour. His background was also in consumer electronics - he'd taken over his father-in-law's business fifty years earlier and built it into the giant GEC. After a series of discussions with his technical people, we managed to get GEC-Marconi to talk sensible consumer electronics prices. Based on an order for a million units, they told me the LNB would come in at around the PS31 mark. Using our past philosophy on bills of materials, PS31 was a giant chunk if our cost price for the whole system was to be no more than PS90.

At the time, Arnold's company was dealing in high-level stuff - they were getting contracts from electricity providers for huge generators, council contracts for traffic lights and military contracts for radar-guided missiles. Yet here he was on the phone to me, negotiating like a market trader back in the days when he used to make televisions and radios under the Sobell brand. I could detect he was enjoying every minute of it. In fact, people told me afterwards that Arnold didn't usually get involved in price discussions. We had some good banter over the phone and after a lot of backwards and forwards bartering, I agreed to place an order for a million units at PS28.50 each. This was a major breakthrough.

The gamble I had taken telling Rupert Murdoch I'd have his product in the market was massive, given we had no idea about the technology, but we were learning fast. We had one final nut to crack. Where on earth were we going to get a satellite dish made, not forgetting all the brackets required to mount it on the wall? Bob's mechanical engineering people drew up the bracketry - that was easy, we were conversant with steel prices and we knew how much it should cost - but there was
science
behind the dish.

As one would expect in the early days of satellite, a number of so-called 'specialist satellite dish manufacturers' sprang up. We spoke to some of these people, who really tried to blind us with science about the angle of curvature of the parabola and all that stuff. When we sent a drawing to one of these fellows and asked him to quote for this bowl-shaped disc, he came back with some ridiculous price of around PS30. We thought he'd made a mistake and it was supposed to be something like PS3, but no, he was serious - thirty quid for just the dish. On questioning him, he continued with his bullshit about the tooling accuracy required, the close tolerances involved and other such nonsense.