What You See Is What You Get: My Autobiography (62 page)

The specialised components for the outstanding orders came to a few million quid and we were able to convert the rest of the stock for the German market. It must have come as a great relief to Sam when I told him that the orders currently outstanding - which were worth in the region of PS40-50m and which he was contractually
obliged
to take - could all be cancelled for a few million. We struck a deal and they paid up.

*

Once BSB had launched, they and Sky were beating each other up. This wasn't a healthy situation for Murdoch. It was like his newspaper business, where the
Sun
was forever competing with the
Daily Mirror.
There was also some
inevitable confusion in the marketplace amongst retailers. BSB had commissioned Philips and Tatung to make the D2MAC receivers and retailers stocked both BSB and Sky (Amstrad) equipment. BSB was burning money like there was no tomorrow. They were a totally useless, uncommercial mob compared to the great marketeers at News Corporation and Sky.

In late October 1990,I took a call from Sam advising me of a big summit meeting being held with BSB and Sky. Rupert had flown in and was currently in a hotel room, locked in negotiations. I learned it was likely that an agreement would be reached whereby Sky Television would combine with BSB as a single entity. This sounded the sensible thing to do.

About an hour later, I got a call from Rupert telling me they'd come across a stumbling block - the bloke in charge of BSB and his team were trying to salvage some dignity out of the deal. What they wanted was an assurance that the new company would not use the PAL system but D2MAC instead. This was BSB's attempt to win some brownie points rather than face the humiliation of all the senior management being chucked out for making a real Horlicks of it.

I told Rupert that this was absolutely unacceptable, not just because the units Amstrad were making for him were PAL, but because so were Thomson's. Sky already had hundreds of thousands of PAL units in customers' homes - how could they change over to D2MAC mid-stream? In view of the much smaller number of BSB squaerials installed, if anyone
had
to be disappointed, it would have to be the 20,000-odd BSB customers. I advised him, for his own sake, to go back in there and insist that there was no way he was going to agree to the D2MAC system. Once I'd pointed out the logic to him, he realised I was right.

Later that evening, Rupert called me to say the deal was done, but that it wouldn't be announced for about a week while some technicalities and contracts were being sorted out. Until then, everything was confidential. He finished the call in a strange way, saying he was going to send me a letter the next day. What was that all about?

A couple of days later, Frances gave me a single sheet of paper. It was from Rupert Murdoch and read, 'Dear Alan, it has taken me three hours to write this letter. You should be aware that it is the first letter I have ever written on a computer. Thank you very much for the laptop you gave me - it's great.' I'd forgotten that I'd sent Rupert a real leading-edge portable computer with a fantastic colour screen which we'd recently launched - the ALT1000.

Now, just to show you that I'm not a nasty guy to my friend Stanley Kalms, Dixons was, of course, selling Philips and Tatung BSB receivers and
squaerials, having disposed of all the Sky ones. Effectively, they had placed their bets with BSB. Little did Stanley know that in a week or so's time there was to be an announcement which would render his BSB inventory at Dixons redundant.

I called Stanley and suggested he take me out to lunch at Harry's Bar, around the corner from his office, as I had something that was important for him to know. He was intrigued. During lunch, I said, 'I'm about to do you a favour. Now don't forget this because I know you wouldn't do the same for me. I swear you to secrecy.'

I quickly explained the situation and told him, 'You're going to be well and truly lumbered with all that Philips and Tatung stuff you've got in stock. I suggest you get back to the ranch quickly and get Danny Churchill to come up with some cock-and-bull story - because he's very good at those, as you know - and tell Tatung and Philips that you're sending all the stuff back. And might I suggest,' I added, 'that because Tatung and Philips need you more than you need them - in that you sell their TVs, VCRs and everything else - you have far more bargaining power in getting
them
to take the stuff back than you had with me when I made you cut your losses.'

I warned Stanley, 'This time, even if you agree to take
half
of what you paid for those satellite receivers, they're totally useless - there will be no more broadcasts to watch on them! So you need to go and do what you're best at doing, and screw Philips and Tatung.'

Stanley was dead shrewd and he got the plot straightaway. I think he grunted a thank you to me and he might even have paid for lunch!

About a week later, Sam Chisholm called and asked me whether I would show up at a television studio to be interviewed in front of ITV and BBC cameras about Sky taking over BSB. They wanted some comments from me, as the leading supplier of equipment in the marketplace.

The deal was announced late on a Friday night, 2 November, and on Saturday I went to a studio somewhere in the West End. Rupert had given the BSB mob a little bit of dignity in that the name of the company going forward would not simply be Sky Television - it would be BSkyB, standing for British Sky Broadcasting. I heard a rumour that the company name was one of the things that clinched the deal. If so, it shows you how pathetic some people can be in business - little things please little minds.

*

Looking back on Amstrad's spectacular growth, one of the things I regret was the lack of financial control for a company of our size. We certainly allowed
the entrepreneurial spirit to flourish through Marion, Dominguez, Jost and myself, of course, but we were all marketing people who paid little attention to detail when it came to general housekeeping. That was fine when everything was going well and we had hot products that everyone wanted, but caused problems when things started going wrong, as with the PC2000 series. Despite the excitement of the satellite business, realistically, it was only part of the whole. The computer side was slugging us down, people were not paying, and stocks were building up in the subsidiaries.

When you get to that stage, desperate for sales, you start making arrangements you wouldn't normally make with customers - things like offering goods on sale-or-return, or agreeing extra-special discounts if they bought a certain volume.

Alarm bells started to ring in early 1989. Ken Ashcroft and I decided to appoint one of our accountants as an internal auditor and send him regularly to the overseas subsidiaries to see what was going on. It must sound crazy to think about doing this after the horse had bolted, so to speak, and it goes to show how lax we were in those days of spectacular growth. We posted a senior accountant, Tony Dean, to Germany on a permanent basis. Jost was turning out to be a bit of a Jack the Lad - he was running the company as if it were his own, with no regard for authority or policy.

As a result of these internal audits, a horror story emerged - terrible financial control and customers owing us lots of money with no clear road map as to when we would get paid. Spain was particularly bad, with the debtors' list getting bigger and bigger and payment running out further and further. I discovered that some customers had been allowed over 180 days' payment and in many cases payment terms weren't even specified. The exclusive distributor in Barcelona owed Amstrad Spain a fortune.

When we delved into the financial arrangements, it was as clear as mud. Dominguez had let the thing run wild. He had lost his enthusiasm when he realised that Amstrad had run out of ideas and that customers were no longer begging for stuff. He was confronted with having to deal with mundane housekeeping and problems with customers and he didn't like this at all. He wanted to focus on new blockbuster products and create advertising campaigns and sell hundreds of thousands of units, but those days were gone. He'd cashed in a load of money when we bought his company and I was hearing rumours that he was dabbling in real estate and property and not focusing at all on the shit we were in.

I liked Dominguez as a person and it was a sad day that September when I flew to Madrid with Malcolm Miller and told him that he and his senior
staff were fired. We needed to put in some sensible people with a good accounting background to try to sort the mess out. Similarly, in Germany, Jost was a loose cannon. We removed him and promoted the sales manager, Franz Simias, to take over the company.

We were in fire-fighting mode. Every single week there was another problem. My focus turned to shrinking the company and stopping the bleeding. In Spain, France and Germany, we shed our luxurious office premises and incorporated them into the warehouses we rented. This cost-cutting exercise also entailed the removal of a lot of staff. I had turned from an entrepreneur - thinking up products and ideas - into a liquidator.

We had chased our tails on the PC2000 series for over eighteen months - including the fiasco of exchanging the hard disk controllers - till eventually, in 1990, we threw in the towel and flogged the stuff off. The full ramifications of this meant write-downs which affected our accounts. It was clear we'd been legged-over by the hard disk drive manufacturers. This rankled with me and I instructed David Hyams to engage Herbert Smith to investigate whether we had any legal claims against Seagate and Western Digital. Both denied any liability for effectively ruining Amstrad's computer business.

We decided to issue legal proceedings against Seagate through the English courts and, for some reason better known to the lawyers, we issued proceedings against Western Digital in the United States. The preparation for these highly complicated court cases would take hours to explain. I won't bore you with the details, save to say it would be years before we ever got to court to fight the cases. There was no quick solution.

It was an awful time and very demoralising. Ken Ashcroft came to me one day with some story about wanting to retire. He explained that he'd spent his whole life working and now he'd made some money on the share options, he wanted to move on. He wasn't at retirement age; I think he was one of those people who liked to be associated with success. Clearly the Amstrad bubble had well and truly burst and there was no single product or idea that was suddenly going to elevate us to our former glory. All Ken could see was aggravation ahead and he wanted out.

He suggested we recruit a heavy-hitting senior accountant and offered to bed the guy in for six months before leaving. We hired a very experienced finance director from Gillette, Peter Thoms. Having worked for this large international company, he most certainly would be capable of putting systems into place which would get Amstrad and its subsidiaries into reasonable shape again - at the very least, we would have proper credit control, not to mention control of over-optimistic salespeople. Unfortunately, Peter wasn't
as sharp as I had hoped and didn't last long. Eventually, we promoted Tony Dean, one of our existing senior accountants, to the role.

Marion was very frustrated. She had seen her shares-wealth dwindle and she kind of blamed me for the fact that she'd held on to half of her shares. I reminded her (and some of the others) that I'd
gifted
them their share options and that the million-pound windfalls they'd enjoyed a couple of years ago were just that -
a gift.

Also, her reputation had waned in the French marketplace as our fortunes declined. She had become a legend there. She'd been bigged-up by the press and had won lots of awards, such as Businesswoman of the Year. She was now suffering a bit of a downer, like a fallen star. On top of this, giant companies such as La Redoute and FNAC were refusing to take stocks - she ended up rowing with her customers about their lack of loyalty.

To their credit, Bob Watkins and Malcolm Miller were hanging in there with me, assisting in whatever way they could with the fire-fighting process, constantly trying to think positively about new product sectors we should enter.

*

In between bouts of fire-fighting, I used to cheer myself up with new ideas. I was always on the lookout for new innovations. One of those ideas came from thinking back to how we went from the single cassette tower system to the twin cassette version. I wondered if the same philosophy could be applied to VCR. I was conscious of copyright issues, however. I had to think carefully about how we could justify a twin-deck VCR without getting ourselves into lots of trouble, because in those days people rented pre-recorded tapes from Blockbuster and a twin-deck VCR might be thought of as a means to copy them.

However, after a bit of fancy work in the software and electronics, we designed a product that would allow a customer to load the double-deck VCR with two tapes and set the thing to record for eight hours. Bingo - that was it - the true justification of why we would make a twin-deck VCR.

It was not easy to convince Funai to produce this product. They started to worry that the licence-holder, JVC, might complain that the product incited copyright infringement. There were many twists and turns and arguments which I won't bore you with, but eventually we managed to convince Funai that the product was viable. I knew if we could reach the magic PS399 price point, it would be a big hit.

Of course, our advertising displayed a bold warning of how it was illegal
for people to copy copyrighted material and we also put large red labels on the front of the unit and outer packaging. There was uproar within the media industry about this product, but despite their protestations, there was nothing they could do. Amstrad had cleverly warned consumers - using the same reverse psychology trick as we used on our audio units - that the Double Decker must
not
be used for illegal purposes. The product was born and became a tremendous hit in 1990.