Sugar’s vision sweetens risk

Has the wizard of Brentwood finally lost his magic? Alan Michael Sugar, the man who brought us bargain basement stereos that got rid of the spaghetti, cheap personal computers and word processors – and made himself a fortune, once valued at £600m – is at it again. This time he has vowed to bring Internet benefits to the masses.

But oh dear! A wave of the wand revealed not some shiny WAP phone or palm device at one third the usual price, but a boring e-mail product attached to an antediluvian fixed-line phone. The effect was certainly transformative – of Amstrad’s share price. It plummeted.

Sugar is seething. Not for the first time, he has been “misunderstood” by the City. Only this time, the stakes are higher. The em@iler, as it is called, has been dubbed a make-or-break product for Amstrad. And judging from camera-shy Sugar’s unaccustomed willingness to personally promote it to the press, that assessment is not far off the mark.

So who is right in this, the gut-instinct entrepreneur who’s prepared to bet his shirt on it, or the cynical and dismissive City? The reasoned case against the em@iler is that the commercial arithmetic doesn’t add up. Sugar plans to sell the Amstrad product at a loss in order to attain high household penetration. Where Amstrad hopes to coin it is through advertising, which will appear on a screen that remains illuminated all day. Sugar produces some beguiling figures that suggest advertisers will receive a much better return on costs than conventional mail shots. What’s more, the environment in which the ads appear will make viewing them a lot more compelling. It’s a “no-brainer”, he claims.

For advertisers maybe, say the sceptics, but not for the punters. Poor consumer uptake will mean Sugar’s baby is still-born.

That’s a little harsh and premature, in view of the product’s sell-out success. Sugar has often dealt, successfully, in what seems rather unexciting fare to the technologically initiated. Stereo dust covers and word processors say it all. What’s unique about him is the common touch. In other words, his clarity of vision in stripping down unnecessarily complex products, bristling with “functionality”, so that they appeal to the unsophisticated consumer. The em@iler launch displays exactly this kind of thinking.

Never mind that in the rush to market, reliability sometimes suffers. Reliability has never been a factor seriously holding back Amstrad sales. A more serious criticism of Amstrad is that it risks being left behind by the surging pace of technology.

Where ten or 15 years ago it was relatively easy to surf, then quit, the latest fad, now the risks are much greater. The Amstrad satellite receiver, which quickly went obsolete because it could receive only 16 channels, is a good case in point. Indeed, Amstrad overall has a slightly old-fashioned feel about it when contrasted with new economy enterprises. It is preoccupied with hardware solutions rather than killer software applications.

Then again, unlike most of its sector brethren, it knows how to turn a profit. There’s nothing old-fashioned about that.

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