What You See Is What You Get: My Autobiography (53 page)

It didn't come as too much of a surprise to Bob Watkins and myself that when we opened the cabinet, we just saw some PCBs with a load of chips. Even Bill and Roland, hovering over our shoulders, found it hard to justify that the computer should cost more to produce than a standard piece of hi-fi or audio equipment.

I think that the Amstrad way was a tremendous learning curve for them. When someone is cocooned in a particular industry, such as computers, with no other point of reference, such as to low-priced consumer electronics, it is understandable how they can believe the hype that there's some mystique in computer technology. External snipers talked about Amstrad buying cheap components to make computers, but this was rubbish. There's no such thing as cheap plastic, a cheap D-RAM or a cheap floppy disk drive - they cost what they cost.

After a little discussion with Bob Watkins and a quick back-of-a-fag-packet calculation, I said that we had to target our first IBM-compatible computer - with monitor - at PS399 plus VAT. The 'plus VAT' was a good way of achieving my magic price point while underlining the fact that it was going to be a business computer (as retail prices for consumer electronics products already included VAT). Had there been any aggro from the advertising standards people, my argument would have been that the PS399 plus VAT pricing
was justifiable, as I was claiming this was a business computer. The important thing was that I made the 'plus VAT' clear in the advert.

It's strange how I was already starting to think about the target price and VAT issues when all we'd really done was take an IBM PC to pieces in the lab. But to my mind, and Bob's, it was a done deal - this was what we were going to do. The question now was: how were we going to make them?

We called a meeting with Roland Perry, Bill Poel and Mark Jones to discuss the way forward and discovered that in order to get to the target price, we would have to make three custom gate-array chips. On top of this, Bill insisted that we needed something called a 'mouse'. Bob and I didn't know what this was at the time - that's how early-days it was. The specification was defined and I pressed the button to go ahead.

The plan was to again offer an all-in-one unit with one power cord to fire the whole lot up. We could incorporate the power supply for the whole system into the monitor. We decided to have two types of monitor: a monochrome 'paper-white' version (instead of green phosphor) and a colour version offering a palette of sixteen colours. This was highly unusual at the time, as all IBM computers offered just four shades of grey monochrome. For some bewildering reason, we decided to use a European vendor - SGS in Italy - to make the three custom chips. They were one of the biggest European chip manufacturers and they promised they would be able to manufacture this technology for us in the timescale we required, but they screwed up big time. They went way beyond their promised delivery dates for the chips and they were struggling with one particular device, which they couldn't seem to get right. At the time, Bob and I were away in Japan. We realised the possible ramifications and knew by then to cut and run, based on our experiences with Ferranti, so we visited Toshiba, who had been trying to solicit our business on memory chips and other items for a long time.

During this meeting, we discovered they had the identical technology to SGS. They promised us that if we sent them all our engineering data, they would rush the development of our three chips through. That's exactly what we did. Toshiba were exceptional, delivering the chips on time, and we were able to assemble some samples of the Amstrad PC1512 - code-named AERO'.

Now, there's an argument about where we got this code-name from. I always spelled it AERO and have suggested that it came from a discussion where I said, 'If we make this computer and get it out there for PS399, it'll fly off the shelves, so we should call it AERO.' Others spelled it AIRO standing for Amstrad's IBM Rip-Off. The debate still goes on amongst some of my old colleagues as to which one was right.

Now that we had a clear road map of the hardware, we needed to supply the computer with some software for the DOS (disk operating system). Up till then we had been dealing with the company Digital Research, who made the CP/M software for the PCW8256. Their version of DOS (called DR-DOS), Bill and Roland explained to me, was exactly the same as Microsoft's MSDOS. At the time, all I knew about Microsoft was that they had dabbled in a games computer and had some kind of operating system which they hadn't been successful with.

I wasn't interested in Microsoft at all and certainly had no intention whatsoever of paying them a high royalty per box for every piece of MSDOS software I shifted. Up till then we'd been paying tiny royalties to people like Digital Research for packaging some of their software, while in other cases we were buying the licence outright. Companies like Locomotive Software, who wrote LocoScript, were paid a moderate royalty on every item we sold. Therefore, we took the decision to ship DR-DOS with our computer.

One of the things I regret, on reflection, was not adhering to certain industry standards. As an example, the only mouse that was available on the market at the time was manufactured by the company Alps in Japan for Microsoft. The cost of this mouse was approximately $25, a ridiculous amount of money and certainly not acceptable as far as Amstrad was concerned.

I commissioned Vitus Luk in our Hong Kong office to develop the Amstrad mouse from scratch and, to his credit, he did a superb job. Where we made our mistake was the plug we chose at the end of the cable to connect it to the computer - it was non-industry standard and therefore made the mouse an odd-ball item. Similarly, the physical format of our PC was different from the IBM. In hindsight, it would have been better to have followed the same format. I was to find this out later, when the corporate market became interested in our products. They would always want the industry standard format for everything.

The motivation for us to do it
our
way was, of course, true Amstrad cost-saving. The plug and socket used on the Microsoft mouse cost $2, whereas that used on the Amstrad mouse cost 20 cents, though they did exactly the same thing. The expression 'penny-wise, pound-foolish comes to mind, and I'm the first to admit that this was a classic example.

As soon as we had working samples of the computer, we called a meeting with Schneider's people, Marion's people in France and Dominguez's people in Spain and disclosed what we were doing. There was an atmosphere of excitement that I can't put into words. We were in a dynamic, growing market
and I'd just come up with another world-beating product. Credit to Schneider, Marion and Dominguez, the feeling was one of camaraderie. There was no arguing over price or jockeying for the first orders or anything like that - it was just a celebratory feeling.

At that meeting, we decided on a launch date for the PC1512: 2 September 1986. Nick Hewer arranged the PR for the launch at the Queen Elizabeth Conference Centre, Westminster and about 1,200 people turned up - it was absolute mayhem. You can't really keep things a secret in business and rumours had been flying around the marketplace that Amstrad was going to launch a PC compatible, but nobody knew what the price was going to be.

With the usual fanfare and video screens and presenters, the launch took place, with the French, Spanish and German visitors wearing headphones connected to a translator. Having shown that the average PC cost PS2,000 at the time, we eventually announced our price of PS399 and there was a gasp of amazement from the audience. The Q&A session afterwards went on for about an hour, with journalists firing one question after another.

One of the funny things I recall was that Nick Hewer had invited the whole world and his brother to the launch. I'm convinced to this day that there were people in the audience from
Knitting Weekly
and every other magazine in the country. One woman asked a question which had nothing at all to do with the new PC1512 - she wanted to complain about the printer ribbon supplied with her PCW8256 running out too quickly! I was stuck for words for a second, but then responded, Ah, now we know where that one went,' and there was another wave of laughter from the audience. That shut her up.

It was getting to the stage where people were wearing me down with their questions. It felt as if every one of the journalists there wanted a piece of me. I had to go into a side room for a while to keep away from them, as my head was pulsating to near bursting-point. They didn't want to talk to Malcolm or Bill or Roland - they just wanted to talk to me. In actual fact, they'd have got far more information from the other guys.

There was an annexe area where we had about fifty of these computers on display, and the only way I can describe the scene is to say that it was like the Saturday before Christmas in Oxford Street. You could not move. All the staff we had there to advise people about the computers were completely drained by the end of the day.

There were massive headlines in the business pages of the next day's newspapers, followed by write-ups in all the trade magazines. The Amstrad share price shot up to a level whereby the company had a market capitalisation of PS1.2bn.

This is possibly a time to step back and reflect. I'll say that again - one point two billion pounds - PS1,200,000,000. Remember, I started from selling tar blocks as a kid. These kinds of numbers meant nothing to my mum and dad. It was mumbo jumbo; it was a figure they simply could not comprehend. I was holding 45 per cent of the shares at the time, so theoretically, on paper, I was worth PS540m.

*

Bernhard Schneider had now recruited a specialist manager for his computer business. His name was Fred Koester, a nice enough chap who spoke perfect English and had come out of the computing industry. He immediately pestered us to buy the PC1512 for the German market, but with MSDOS.

I explained to him that DR-DOS was exactly the same; I could honestly put my hand on my heart and say that our computer, with DR-DOS, could do everything that an IBM PC could do. There really was no need for me to pay out money to Microsoft. In short, Fred had nowhere to go. He could either take it as it was or leave it. And things got worse for him because I decided at this stage that I would no longer supply Schneider under their own brand name. By now, the German retail industry knew that
we
were their suppliers and while it suited me at the time to supply the CPC464 and Joyce under Schneider's brand, there was no way I was going to do this on the PC1512. I agreed a compromise with Bernhard Schneider: the front panel of the unit would say 'Amstrad PC1512 by Schneider' - a joint brand name. Again, this was a take it or leave it offer.

A week or so after the launch of the PC1512, Roland came into my office and told me that some smoothies from Microsoft had flown over on spec and wanted to speak to me about the benefits of putting Microsoft software in every computer box we sold. Bill was also hovering, telling me (off the record) that from a credibility point of view, while it was true that DR-DOS
was
the same, psychologically people wanted Microsoft's MSDOS. It was one of those marketing things. I suppose in this day and age you could equate it to having an Apple iPod or some other branded MP3 player. Both do the same, but you go for the name.

In those days, people were very snobbish about the software they ran on their computers. There were always claims that other programs would not run correctly unless you used Microsoft. None of this was true, but when you were trying to sell to a corporate market, to some jobsworth who worked on the principle 'you never get fired for buying IBM', you had to appreciate that
there was no point trying to convert people; you just had to give them what they wanted.

Reluctantly, I agreed to a meeting with these guys. They had taken a risk turning up with no fixed appointment. Microsoft's representative was an Asian-looking chap who spoke perfect English with an American accent. He and his colleague tried to convince me to pay $4 per unit for this MSDOS. I told them I had absolutely no intention of doing that and effectively I couldn't care less about MSDOS. As far as I was concerned, I had produced an IBM-compatible PC at PS399 that worked perfectly. I sent them away with a flea in their ear.

I think these guys must have stayed overnight in Brentwood because the next morning, they asked to see me again. This time the Microsoft arrogance had evaporated and they were desperate. They must have been given instructions by Bill Gates to 'get in the box'. There was no way that he could afford to have hundreds of thousands of IBM-compatible computers thrust into the market without Microsoft in the box.

I am not going to disclose what I paid (it's been one of the best-kept secrets in the computer industry) save to say that I agreed to take one million licences with Microsoft, at a price that suited me. I'm not sure whether the non-disclosure agreement has run out by now, but for safety's sake, I'll let it remain a secret. No matter what you may read in the industry archives and what other tittle-tattle you might hear in the computer industry, this was the true story of how Microsoft got itself into Amstrad products.

After the launch, Dixons were champing at the bit, as usual demanding all the stock that was coming in, but there were lots of other customers in the marketplace for this type of product. Large computer distributors who were already selling IBM were chasing to stock our product to sell on to the dealer networks throughout the country. It's true to say that we were now dealing with a completely different customer base. The PCW8256 word processor was deemed a consumer product; the PC1512 had moved us into another category.

Then came the sniping. IBM salesmen were running around telling customers that our product was rubbish. Mind you, what would
you
do if you were an IBM salesman trying to flog computers for PS2,000 when ours were PS399? The computer magazines had endorsed our computer from a compatibility point of view, explaining clearly to the trade and the public that everything the IBM did, the Amstrad did. So what was the best argument these IBM salesmen could come up with? 'There's no fan in the Amstrad - it will overheat and if it overheats, it will conk out. Therefore it's unreliable.'
It was a complete load of cobblers, but it does go to show how the whole market can change its opinion about a product based on a rumour spread by a competitor.