Sugar’s Baby

Alan Sugar believes he has a winning product in the em@iler – a mass-market e-mail console with huge potential for advertising in the home. He is throwing his full weight behind his latest venture, and aiming to sell one million units in two y

Sir Alan Sugar has never been short on enthusiasm. He is renowned for having a sharp tongue and shortage of patience – so much so, that high-octane media executive Christine Walker, who worked with him at Zenith, was provoked into saying: “Alan Sugar’s aggression is a wonder to behold.”

Essex’s most famous entrepreneurial son is a bundle of energy. This is true even more so, now that the founder of Alan Michael Sugar Trading, or Amstrad, is back in the consumer business.

The em@iler, the fax/phone/e-mail console Amstrad launched with great fanfare two weeks ago, is without doubt Sugar’s great hope of returning to the big time.

Although he’d be loath to admit it, the atmosphere at his Brentwood, Essex, headquarters suggests that this – his attempt to strip down the Internet revolution for the mass market – is make or break if he is to return Amstrad to the success it enjoyed in the late Eighties with its personal computers and hi-fi stacking systems.

There’s no doubt he is excited about the em@iler’s prospects. He says: “I am truly, truly confident about the em@iler. I have made enough consumer products in my lifetime to know that this is a people’s product – a winning product.”

In the past decade, Amstrad has performed quietly, with pre-tax profits last year of &£4m on sales of &£94m. But the company, which receives most of its revenue from the manufacture of Sky’s digital set-top boxes, has been a shadow of itself in the late Eighties.

Then, Amstrad was a by-word for personal computers, and before that Sugar’s plan to stack hi-fi separate parts to create the cheap but trend-setting Amstrad hi-fi stacking systems had already made him a multimillionaire. By 1988, he was the UK’s 15th wealthiest individual.

Amstrad’s blow

But the Nineties recession, combined with the resurgence of Japanese and US technology manufacturers hit Amstrad hard. In 1997, the original company was reversed into Sugar’s telecommunications unit, Betacom, following a failed merger with rival computer group Psion. It signalled the break-up of the company that had come to embody the entrepreneurial boom that was Margaret Thatcher’s dream for the UK.

As part of the deal, Amstrad was reborn as the new name for Betacom, while Viglen, the barrow-boy-made-good’s personal computer manufacturing arm, was separated from Amstrad.

By June 1996, the slump had reduced Sugar’s own estimated paper wealth to just &£60m from a high in 1988 of &£600m.

Sugar could have bubbled with impotent frustration at his failure to make a major impression on consumer markets since those heady days. Instead, he has been racking his and his employees’ brains for a product which takes advantage of the new wave of technology – a process which two weeks ago saw the launch of the em@iler.

He says: “The marketing world has missed the plot. Imagine if you could have an electronic billboard in the home of a million consumers. A direct mail shot costs 35 to 37p per envelope, to which there is a 1.5 per cent response rate. It all works out at more than &£30 per response and half the envelopes are not even read!

“With this device we can charge advertisers, say, 10p for each customer to receive an ad they will see all day, and charge the advertisers &£10 whenever a customer calls them by pressing the ‘services button’. Or it may be that we give them the ad free but they pay &£25 whenever somebody calls – it’s a no-brainer.”

“A no-brainer” is a favourite term of the Amstrad chairman. It reflects how simply he sees things and how complicated he feels everybody else seems to make them. But, in this case, its use reflects his frustration over the City’s “obtuse” reception of the em@iler.

For it turns out the idea came not from an eagerness to join the dot-com crowd, but to place electronic billboards in people’s homes to generate advertising revenue.

He says: “That’s where we started. It could have been a fridge or a microwave, but it needed to be linked with communication.

“Initially, revenue will come from e-mail calls. We have an arrangement with BT and we take a bit from the e-mail [charges]. Then, once we have the population in the market, that money will shade into insignificance – eventually it could go away altogether – we could offer free e-mails in two years’ time.”

Amstrad’s share price slipped by one sixth following the launch, losing Sugar &£57m in paper wealth in the process. Observers say the City’s reaction reflected disappointment that the company had not joined the dot-com revolution with a dot-com or WAP (wireless application protocol) launch of its own.

Howard Brooks, analyst for Amstrad broker Beeson Gregory, says: “It had been built up in expectation. But the City was silly to assume that the company would launch a dot-com or something in that area. Amstrad is about consumer electronics and the mass market.”

The share slip rankled Sugar, who has made no secret of his incredulity at the soaring valuations put on Internet companies that show no discernible potential for making a profit.

He is seeking to put things right by persuading observers that his latest venture is as big as he thinks it is.

Promising sales

He has started well – at least with the public. The initial 500 em@ilers available in shops on launch were sold out in three days. One retailer says he sold his allocation of 40 in one and a half days and had 15 on the waiting list immediately afterwards.

But more pleasing still, says Sugar, is the fact that 450 of those initial 500 buyers registered on the service almost immediately. The information em@iler owners provide when registering for their e-mail application is to be his money-spinner. It will be sold to advertisers as part of plans to build advertising on the em@iler systems.

He says: “My biggest worry was that people wouldn’t register. But people have – and they’ve had no problems doing it.”

Sugar is also in negotiations with mail order and utility companies about developing applications for the em@iler. Equity stakes in Amserve.net, which runs the advertising booking system and customer database, may also be used as a bargaining tool in partnerships.

Sugar aims to sell one million em@ilers in two years’ time. They will be rolled out at 20,000 units per month and once critical mass has reached 100,000 – expected by September – he will start selling ad space on the screens.

He says: “All we have to do is tempt people to have it in their home.”

At current sales rates, he says, the target of one million population in two years is more than achievable, but Sugar has too much riding on his company’s latest brainwave to exaggerate its chances.

The em@iler, he claims, will revolutionise advertising and direct marketing. It will need to, if Sugar is to return himself and Amstrad to their former glory.

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