Sinclair and the 'Sunrise' Technology: The Deconstruction of a Myth (30 page)

Mounting problems in the micro industry were highlighted by the collapse of Prism, a distributor of Sinclair machines, and the obviously troubled Oric Products. When February came round, Acorn computers, with the flagship BBC machine still at £400 and the Electron uncompetitive at £199, having lost out in the Christmas period, were revealed to be in deep trouble. The essentially one-product company had placed its sunrise-industry shares on the Unlisted Securities Market in late 1983, had seen a brief midday glory in 1984 when the shares touched 193p, but the investors became uneasy, and the shares fell steadily, slumping from around 100p to just over 50p in the last three months of 1984. When the shares hit 44p the directors of Acorn sacked bankers Lazards and brokers Cazenove, then resigned. By the time the news broke, Acorn’s shares were at 23p, and were suspended at 28p on 7 February. The sun had set on a hi-tech high-flyer. Olivetti eventually staged a rescue bid, only to have to repeat the rescue and increase its stake to 79 per cent six months later.

Unsurprisingly, Sinclair Research aborted its proposed market flotation twenty-four hours after the initial Acorn collapse. This had been proposed for March or April, any possibility of going public the year before having been fouled up by the QL catastrophe. Michael Richardson of Rothschilds, after commenting that Sir Clive was ‘enormously relaxed’ about the postponement, went on to say:

Even if Sinclair had produced the most brilliant figures and marvellous sales, we would still be reluctant to put them into the market in the face of the Acorn problems. (Quoted in the Financial Times, 8 February 1985.)

The further information that the investors, who were sitting on 10 per cent of Sinclair Research equity, had no objection to the postponement was unsurprising. From projected values of £300m placed on the company in mid-1984, expectations had been rapidly revised downwards, despite the statements from Sinclair that trading profits for the nine months to December were above those for the same period last year. Within Sinclair Research, the situation must have looked a little disconcerting. QL production was halted, just as the ICL One-Per-Desk was finally launched. The workstation went on to do very well, transmuting into the British Telecom Tonto and earning ICL enough to compensate for the fact that it had to pay royalties to Sinclair on all machines sold.

Something clearly needed to be done within Sinclair. The investors, actual and potential, were worried about Sir Clive’s reputation as a businessman and manager and probably, with the C5 scenario running concurrently, his marketing and inventive capabilities. Searle had not done a very good job of providing an alternative figure who could be seen to be reliably in command. Additionally, Sir Clive’s response, on past performance, to problems is (as we have seen) to blame them on others. Despite Sir Clive’s statement to us that Searle ‘
just didn’t want to do the job any more
’ (interview, 6 November 1985) it seems likely that he was shunted sideways. The form that this took was a restructuring of Sinclair Research, in which Searle was effectively packed off back to the States (where he’d been head of the Sinclair US subsidiary before Timex took over the marketing of the computers). The company was restructured into two divisions. One, the Television and Communications Division, was headed by a new face, Bill Jeffrey, brought in from Mars Electronics to see what could be done about the flagging flat-screen television. Dave Chatten, the production director, took on a new role as MD of the Computers Division. Hugo Davenport, who had been with Cambridge Consultants before moving to Solatron-Schlumberger, returned to Cambridge to fill the new position of director of engineering.

Searle headed across the Atlantic to the Boston office to launch the QL and the flat -screen television in the States, as well as what must have been a Sir Clive product, an FM wristwatch radio, which was exhibited at the Las Vegas Consumer Electronics Show in January. Sir Clive told us that, although the company had tooled up production of this modern marvel, it didn’t go ahead with it. Either it fell foul of the financial straits we are currently describing, or saner product strategies prevailed. Whatever the reason, one can only be grateful. Only Sir Clive’s obsessiveness could revive a 20-year-old dream and think the world was waiting for it - technological infantilism as it might be termed, or a ‘brainstorm’ as the Guardian (19 December 1985) put it. Presumably it was to be launched in the States because the Americans wouldn’t recall the matchbox radio and ‘Transrista’ strap of Radionics days, and might find it ‘innovative’. Whatever the reasons, Searle was absolved from the unenviable task of marketing this particular novelty item. Putting a brave face on it, Searle talked to QL User about his ‘important strategic move’ to the States:

In sheer numbers, we could be successful with much lower numbers than Atari. We’ll have a very low-overhead operation, and of course the company doesn’t stand or fall by how we do in America ... We have a big commitment to the US market; the very fact that I’m going shows that. (QL User, June 1985.)

Well, maybe. The institutional shareholders asked for, and got, a meeting in March, only the second since they had bought the shares. As the Observer (21 April 1985) commented:

With only 10 per cent of the shares they have little means of influencing the founder, Sir Clive Sinclair, who controls the rest. Indeed the great inventor has shown little interest in their views.

That, as our readers are by now aware, he has never shown much regard for anyone’s views was presumably cold comfort. Not only would the attitude and confidence of the institutions affect any share placement for Sinclair Research, but the more businesslike of Sir Clive’s associates must have prevailed on him to pay some attention in this case, especially since Robb Wilmot, now part-time head of ICL, had recently joined the board as a non-executive director to assist in raising the £50m finance for a wafer-scale chip company (of which more later).

The institutions were informed that unaudited figures for the nine months to December showed a turnover of £89m generating profits of £7.9m, but with stocks totalling a massive £34m Even taking the figures at face value (given subsequent results, it seems likely that no allowance was made for either returns or marking down the value|of Spectrum machines at this point) it was not comforting news. The shares, if you could find a buyer, were marked down to £10, from their purchase price of £34.

The lack of confidence had validity. There were obvious, if loose, analogies with the Radionics problems. Speedy growth and large profits in a boom period had not been capitalized on by firm management. Instead of a commitment to spreading the product base as widely as possible into peripherals and software, increasing efficiency and quality, and progressing steadily by sound marketing, Sir Clive’s compulsions had won out again. There was a miniature television on the market again, and it was making as little impact as the first. There was even another massive American Express order for the televisions supposed to be in the offing, as reported by Sir Clive in April. Even the ageing Spectrum, supported by a software base rather than intrinsic virtues, was under threat as a money-spinner. The QL could be seen as a Black Watch equivalent - innovative, ill-executed and too late to the market. The stock levels were massive, cash flow negative, quality control low, and borrowing high. When asked why problems would seem to have appeared in Sinclair Research similar to those of Radionics, Derek Holley replied:

Well, because he ended up with the same people he worked with here [at Radionics], quite honestly. When you look at the set-up before the more recent sort-out, they were all people who worked here, all people that were of the same ilk, and all people who were responsible, in a small way, for what happened [with Radionics] in the first place. So you were just moving the problem from one place to another. (Interview, 13 November 1985.)

We will reach the ‘sort-out’ in due course. Despite Uncle Clive appearing in his long scarf on television leaping over rival machines, attempts to persuade the French to use the Spectrum in schools, and a plethora of optimistic PR, the emergence of the facts that the overdraft was £5m, and that Thorn-EMI and Timex (owed some £10m between them) had agreed to extend two months’ credit made apparent that some drastic action was required.

Sinclair Research finally announced in May that ‘following a series of Press reports’ it was ‘seeking to raise £10m to £15m from industrial or other sources, in order to fund long-term growth and restructuring plans’, and would seek a new chief executive to replace Sir Clive. Nobody leapt forward to hand over the cash, quite understandably. Research under Sir Clive’s leadership had managed to strap itself into an untenable high-stocks, high-debt situation while keeping its position as the main supplier to a fairly volatile but large market.

Timex, for one, lost patience and decided to cut some losses. It offered 65,000 Spectrums, at a large discount, to Zeta Marketing for disposal overseas at a price around £16 less than Sinclair’s export trade prices. Thorn-EMI remained more sanguine, or perhaps it didn’t have the Spectrums to sell. It rejected any options to take equity, but was prepared to be flexible in planning debt renegotiation.

Once again, Sir Clive was at the head of a company that, as the Guardian had it when reporting the fact that the Bank of England, no less, was to be involved in the search for a saviour:

... is regarded as far too visible and too important a symbol of the country’s new industries to be allowed to fail or be rushed into receivership. (8 June 1985.)

Shades of Radionics again! This time, however, a rescue would have to be forthcoming from adventurous venture capitalists, since the NEB had been dismembered. Why the Bank of England should bother with a fairly minor company’s problems is explained in the next paragraph:

Informed sources also say that the Prime Minister, whose government knighted Sir Clive for his services to British technology two years ago, is taking a close interest in the company’s fate, as are ‘a number of other important bodies’, including the Department of Trade and Industry, (ibid.)

The Emperor of British entrepreneurialism was in danger of being found naked again, so the loyal subscribers to the myth rallied round to:

explore ways of continuing the lines of bank credit beyond purely commercial limits, to stand in the last resort between the company and receivership, and to see whether the loans can be restructured, rather than repaid, or converted into equity, so that the company can continue trading, (ibid.)

What price market forces when the fate of a favourite entrepreneur is at stake? Sir Clive’s adeptness at provoking a reputation for invention and innovation was standing him in good stead. As Norman Hewett commented about a previous incarnation of the phenomenon:

There is the fact that there is a groundswell in the UK that Sinclair is a pioneering, innovative British company, and they come out with some bright new things, and they sometimes have ‘problems’ with them, and they don’t always work as they should at the time, but it’s a British firm, and we must bear with them, and not be too critical. (Interview, 16 October 1985.)

That this notion, accurately delineated by someone who suffered its effects, is dubious at best is a theme we have been concerned to put over. However, the myth produced its own White Knight in the robust and patriotic form of Robert Maxwell. In a ‘World Exclusive’ the Mirror (17 June 1985) trumpeted ‘Maxwell Saves Sinclair’. The ‘dramatic £12m rescue bid’ was put together after a long talk, and Mr Maxwell said:

I was glad to have been able to help in the survival of Sinclair Research, one of Britain’s great national assets. I look forward to working with Sir Clive, a man of brilliant inventive genius.

The actual deal, as ensconced in the heads of agreement, effectively placed this great British asset under the ultimate control of the Lichtenstein holding company that owns Pergamon Press, a subsidiary of which was Hollis Bros & ESA. Hollis would take a majority control for a nominal price, and then subscribe the majority of the new shares, offered on the basis of three £1 shares for each existing share. This would raise around £12m, giving Sir Clive around 8 per cent, leaving 17 per cent of the shares to be subscribed elsewhere, preferentially to the existing institutional shareholders. Research had been devalued to £16m in one fell swoop.

Sir Clive was to become ‘life president’, cease to be a director and instead become a consultant to the company for an undisclosed fee. Maxwell would become the non-executive chairman, and a new MD would be appointed. Everyone seemed happy about the deal. The Sinclair line was:

I am not the sort of person to run an established business. I am good during the early up-rush, then it needs other hands. I am very glad to find Bob Maxwell. I have known Bob Maxwell for a long, long time, fifteen years in fact, and he is the ideal guy to run a big business, but not just an ordinary sort of business. I do not mind a bit. I do not feel hurt by not being in control. I am not moved by avarice... I am not management type; I am an inventor. I am awful at managing established businesses. (Quoted in The Times, 18 June 1985.)

Even Downing Street was pleased:

The Government has been aware that these talks have been going on and welcomes any move to put the Sinclair business on a firm footing (Daily Mirror, 17 June 1985.)

Despite this apparent accord there were inconsistencies. In the negotiations, Sir Clive had been playing down some of the research that had been going on, especially the wafer-scale project, as he was not sharing the pleasure Maxwell found in the prospect of the two patriots working together. He was going to leave, and he wanted some of the research and development to go with him. In the event the wafer-scale project, which Sir Clive would have liked to utilize as his lifeboat from this particular sinking ship, had to be brought in as a potential earner in order to get Maxwell to confirm the deal, according to the head of the project, Malcolm Wilkinson. The same day the rescue deal was announced, so also was the success of the wafer-scale team in producing working 500K memory chips on a single wafer.