What You See Is What You Get: My Autobiography (82 page)

Realistically, I must be a bit of a control freak. I was intimately involved with every single item Amstrad sold over the years. I knew where every single nut and bolt was within my company. I often admire others who run giant organisations - the likes of the great Arnold Weinstock and indeed Rupert Murdoch - who have managed to master the art of delegation, allowing other people to run sections of their business. Clearly the Alan Sugar way had its limitations, but in its defence, we must have broken all-time records in reaching the dizzy heights we did in the mid-eighties. Nevertheless, I was effectively a one-man band, albeit with a lot of good workers around me.

I can't recall any of our successful product ideas coming from anyone other than me. Having said that, I do not underestimate the importance of people like Bob Watkins, Bill Poel, Roland Perry and a host of others. In those early days, they did a lot of explaining to me about what things were and how they worked.

I still quite liked the idea of selling off Amstrad and perhaps restarting again in a small way, with a slimmed-down organisation.

Having sold Dancall, Amstrad had amassed a cash pile of nearly PS200m. The organisation now comprised the main consumer electronics division, the computer company Viglen and our 66 per cent shareholding in Betacom. I
consulted Margaret Mountford and suggested that perhaps, with this PS200m in the kitty doing nothing, rather than spend it irresponsibly on some harebrained idea and possibly lose it, it might be an idea to distribute it to the shareholders, one of whom was me.

Margaret came up with an idea called a scheme of arrangement. This would result in the shareholders receiving a share in every asset we owned, by way of a reorganisation. The shareholders would receive, pro rata according to their percentage holding in Amstrad, their share of the PS200m in cash and a portion of Betacom. We would also seek a separate listing on the Stock Exchange for Viglen and the shareholders would also get pro rata shares in that. We would also issue letters of entitlement for the ongoing litigations against Seagate and Western Digital so that if a windfall from these court cases should accrue post-reorganisation, shareholders would be entitled to a pro rata share of that as well.

The scheme was very complex, but also very clever. It got me what I wanted. When the company was split up, I would receive a considerable amount of cash plus a shareholding in Betacom. It was my intention to rename Betacom 'Amstrad PLC and effectively make it the consumer electronics division. Once the whole transaction had gone through, Betacom (now Amstrad PLC) would be my new vehicle going forward.

Mike Ray, one of Amstrad's accountants, was appointed finance director to the board of Viglen, which became a separate public company in its own right. Based on the pro rata scheme, I held a 36 per cent shareholding in it. From my point of view, I was quite happy to allow Bordan Tkachuk and Mike Ray to run Viglen. It was a specialised business supplying schools, education authorities and corporations, which was not the consumer-oriented market I had grown up in.

I pressed the button on this scheme in August 1997. It received no objections whatsoever from the shareholders, as it was a very fair way of divvying up the giant Amstrad organisation. It would be entirely up to the existing shareholders to do as they wished with the various elements that came from it.

It kind of gave me a little injection of enthusiasm, to have a much smaller but publicly listed company again, the newly named Amstrad PLC. There was a start-from-scratch feel about it and all the baggage of the larger Amstrad was now behind me. Internally, going forward, we would call the company New Amstrad. I moved the whole of Betacom's activities from its Ponders End premises to Brentwood.

Norman Becker, the managing director, was not at all happy at having to
work at Brentwood, especially under my control. I had also come to realise that he wasn't the brightest star in the sky. He was one of those old hacks from the industry that everybody liked, but who had few ideas. We agreed severance terms and he left. My son Simon became sales director of New Amstrad and we created a new share option scheme. Betacom's new financial director, Martin Bland, moved across to Amstrad and he turned out to be a bit of a gem, a really serious and good professional.

I decided that in addition to traditional consumer electronics products, we would continue to pursue the telecoms market, where Betacom's core business lay. Up until then, Amstrad had not been involved in fixed-line telephones. It went against my philosophy because these items would sell for only PS15-20 retail. However, although the net margin was small, it was a high-volume business.

Bob Watkins had kept in contact, even though he was at Binatone, and once again he told me there wasn't much going on in Hong Kong - Gulu didn't want to invest in the development and production of mobile phones. I offered Bob another opportunity to come back on the basis that he'd give up any idea of being a business guru and stick to what he was best at - getting stuff made at the right price. I said it was a chance for us to start over again, as New Amstrad. He didn't need much convincing and he swiftly resigned. Even though I'd brought him back to deal with engineering and costs, he was awarded the title of managing director of New Amstrad.

We had a small team of around sixty employees left, including Vitus Luk, Isaac Ip, Ian Saward, Cliff Lawson, Ivor Spital, John Beattie and quite a few others who had been with Old Amstrad for many years. Now, like me, they felt a buzz of enthusiasm at our remit to try to replicate what we'd achieved in the past. It was a new birth.

Old Amstrad owned only 66 per cent of Betacom. When I got my portion of shares after the pro rata scheme, I ended up with 22.9 per cent of Betacom. I was confident I could take the company forward and was interested in increasing my shareholding. While the market accepted the break-up arrangement, they weren't exactly champing at the bit to invest in New Amstrad and the share price was languishing at low levels. I wanted to take the opportunity of picking up another 7 per cent to bring me up to the maximum shareholding I could have (29.9 per cent) before I had to make a full offer to all the other shareholders. My brokers informed me they'd identified a shareholder who owned 7 per cent of the company and who'd expressed an interest to sell. However, under some confidentiality agreement, they were unable to disclose to me the seller's name. This sounded rather stupid
because it was possible simply to look at the list of shareholders and see which of them owned 7 per cent of the company.

And who
was
this mystery seller? None other than Gulu Lalvani! He had bought 7 per cent of the shares in Betacom shortly after Amstrad had acquired the company a few years earlier. I'm sure in your eyes this guy must now be starting to sound a bit obsessed. As you know, he had closely tracked me all the way through my career, though at the time I hadn't really taken much notice of the attention he was paying me.

Knowing Gulu, I could understand the secrecy he had imposed on the brokers because he would think that once I knew it was him, I'd get on the phone to him directly and start bargaining. He was totally wrong. I knew exactly how to deal with him: boost his ego by playing along with his little game; let him think he was pulling the wool over my eyes. I offered a price discounted to the market - something one typically does when buying such a big chunk of shares - and acquired Gulu's shares, bringing my own shareholding up to 29.9 per cent.

Old Amstrad was no more. It was now a shell company, left with just a fighting fund to pay the costs of the litigations against Seagate and Western Digital, as well as some other claims we had from the Spanish market. The Old Amstrad shell
did
need to remain in existence in case we received some windfalls from the pending Seagate or Western Digital actions.

It turned out we were right to issue the letters of entitlement and leave the old shell running. The judge in the Seagate case, having taken over a year to deliberate, awarded Amstrad the equivalent of $150m!

You'll recall my references to Tony Grabiner and how I'd considered him to be a bit unlucky for Amstrad, despite being an excellent barrister. Well, in a similar way, this fellow Peter Goldsmith, who'd been against me twice (for Seagate and the FA) was clearly my lucky barrister - he'd failed against me on two occasions.

The $150 million was made up of a refund for every single hard disk drive we'd ever purchased from Seagate, plus damages, plus the interest which had accrued over the past nine years. Seagate immediately announced they were going to appeal. The CEO of Seagate USA made a public statement saying this was a typical 'home win' - a tainted judicial system - and made some rude remark about the judge.

Under UK law, when a judgement is made, the money has to be paid. But as Seagate were going to appeal, the money would be kept in a lawyer's escrow account and could not be released to us. This was a pain in the arse. After all this hard work, we were going to have to face another three or four
years of arguing in court to see whether the judgement would be upheld. We'd won, but we hadn't got the money.

Throughout the course of the Seagate action, it was clear, in evidence shown to the court, that Seagate knew they were shipping us crap. As an example, one of their internal memos came to our attention through the discovery process, which required that all Seagate documents referring to Amstrad had to be disclosed, and vice versa. Seagate's internal memo clearly showed that the stock they were about to ship us had already been rejected by another customer.

Under American law, there are actions which can be brought to claim for punitive damages if you can prove the company in question had damaged you intentionally and not accidentally. It occurred to me that while we'd brought the action against Seagate
in the UK,
one way of encouraging them to release the money was to start making noises about bringing an action against them for punitive damages in the United States. This was a bit of a long shot, as punitive damages had never been awarded to a company. Typically, they would be paid out to members of the public who had suffered illness or injury - for instance, if a pharmaceutical giant sold duff drugs or a car manufacturer knowingly shipped faulty vehicles. These companies would get punished, sometimes by having to pay sums that are ten or twenty times more than the actual damage caused.

I was advised by Herbert Smith and the US lawyers acting on our behalf in the Western Digital case that bringing a punitive damages case against Seagate would be unlikely to succeed. While we could prove they had deliberately sold us faulty stuff, a company can't be hurt in the same way as a person, so while the principle was the same in theory, in practice their opinion at the time was that
companies
would not be awarded punitive damages.

Despite this advice, I decided to instruct a separate set of lawyers in America to make waves, knowing I wasn't going to take it all the way. This was designed to aggravate Seagate and, more importantly, allow us to ensure that the media and the electronics industry in America knew that Amstrad had won their action in the UK and were now going to bring a punitive damages action against Seagate in the USA. We boasted loudly that our claim could result in Seagate having to stump up ten times the amount we'd been awarded by the UK court.

The basis of my claim was that it wasn't me personally - as a 36 per cent shareholder - claiming, but the other 64 per cent of the shareholders who had been disadvantaged. They had invested in Amstrad in good faith and due to
no fault of Amstrad's management, but rather by the fraudulent action of Seagate, individuals had lost out in their pension schemes. I cited the old colonel from Devon, who had retired and was relying on his dividends and growth in his shares to see him through his remaining days. David Gold was impressed by my creative idea, saying I'd become a bit of a legal strategist, having picked up lots of tips from him. Bloody cheek! Yeah, brilliant strategies like writing letters to Jonathan Crystal.

This tactic certainly rattled Seagate's cage. By now they understood I wasn't someone to mess with. And we had a $150m judgement against them, a fact they had to declare in their accounts as a public company. I waited to see what they'd do next.

*

In December 1997 we went to our house in Florida, as usual, for Christmas. At the time, television channels in America were still based on the analogue cable system and there was no way of watching things like Premier League football from the UK. I'd made it a tradition at Christmas time, with the help of Vic Wakeling of Sky TV, to have some live Spurs games beamed up to an obscure satellite. I arranged for a small firm to come and set up a giant dish at my Florida house, so I could tune into the games, and would invite some of our friends who were also staying in Florida to join us and watch games such as Spurs v Arsenal or Manchester United.

One day, while I was outside de-rigging the satellite dish, a man came up to me and asked whether the house was for sale. You'll recall that my house was somewhat special in the sense that it had two plots, one of which was used for the tennis court. The fellow told me he wanted to be in this location and that if I was interested in selling, he would buy both plots, as he wanted to redevelop the site. The real estate market in Florida had started to rise since I'd bought the house.

By now my kids had grown up and had decided that going on holiday with Mum and Dad was
not
the thing to do any more. Understandably, they wanted to do their own thing. It occurred to me that maybe Ann and I had come to the end of an era, owning a house in Florida. With that in mind, I considered the offer. I said I wasn't really interested in selling the house, but if I
were
to sell it, he'd need to be thinking in terms of $900,000 (I had paid $525,000 for it in 1983). To my amazement, he stuck out his hand and said to me, 'You have a deal.'