Sinclair and the 'Sunrise' Technology: The Deconstruction of a Myth (32 page)

The first Amstrad micro - essentially aimed at up-market hobbyists - soon proved itself worthy of Sugar’s sales maxim. By the end of 1985, the company had intelligently developed its range, and the success of the Amstrad PCW8256 computer, cleverly marketed as a dedicated wordprocessor, consolidated the company’s position in the increasingly professional microcomputer market. In the spring of 1985, Amstrad shares could be had for 74p apiece; a year later, the price had soared to £4.77. The company’s growth was a wonder to the City, whitch by this time had written off microcomputers and microcomputer companies as the loss leaders of the 1980s. In the first six months of its financial year ending 31 December 1985, Amstrad was reporting that it had tripled its half-yearly profits to £27.5m By now the company was valued at around £521m and Alan Sugar was a very rich man. In spite of having sold off millions of shares, Sugar still owned a personal stake in Amstrad worth a cool £263m

Amstrad computers had not merely paid their way, but had the cash to expand with a vengeance. In the current context, the most important aspect of Amstrad’s computer development was the international distribution network whose expansion efficiently cushioned the company from the potentially fatal fluctuations of national markets. In addition, Amstrad’s decision to sell cheap, simple but attractive business machines, as well as the initial hobbyist products, ensured that the company wasn’t relying solely on the Christmas computer market to generate sales.

The press conference at which the Amstrad-Sinclair deal was announced was jointly chaired by Alan Sugar and Sir Clive, although circumstances dictated that it was the former who took charge of the proceedings. Most of the national press reports of the event make reference to Sir Clive’s ‘brave face’ under humiliating circumstances. However, while at times he was clearly unsettled by what he would have regarded as a public proclamation of failure, he was obviously relieved that a particularly frustrating era had finally drawn to a close. As he told a television reporter, ‘We should have done it a damned sight earlier.’ Apart from the financial considerations, Sir Clive finally conceded that he’d lost all interest in the current Sinclair Research range.

The Amstrad-Sinclair deal cost Sugar’s company £5m in cash and on the face of it was a sensible option for both parties. On the Amstrad side, the company stated in its press release that it had bought ‘worldwide rights to sell and manufacture all existing and future Sinclair computers and computer products, together with the Sinclair brandname’. It also acquired ‘intellectual property rights’ in the existing products. Sugar summed up his immediate plans for the Sinclair machines:

[Sinclair] recently turned down an offer from an unnamed investor for a 30 per cent stake [in Sinclair Research] which would have enabled him to stay in the home-computer business because he was much more interested in pursuing new developments. (Financial Times, 8 April 1986.)

We’re really going to do a very good job on the overseas and export markets, which we’ve already done with our own computers. We have agents throughout the world, we have subsidiaries throughout the world. We have a ready outlet for the product, and we will establish it very firmly in the European and South East Asian markets. (Newsnight, BBC2, 7 April 1986.)

At the stroke of a pen, Sugar was able to swallow the competition and dominate the home market (although at the time the deal had yet to be cleared by the Office of Fair Trading) while at the same time profiting from the substantial export demand for Sinclair products that Research had never been in a position efficiently to exploit. Interestingly, it was Dixons who, by suggesting the deal to Sugar, had once again saved Sinclair from being overwhelmed by his creditors. With the acquisition of the Sinclair products, Amstrad could now claim 60 per cent of the UK home-computer market (40 per cent Sinclair, 20 per cent Amstrad products).

With this significant expansion of the product range (which now embraced virtually every section of the home-computer market), Sugar added that little bit extra to his salesman’s clout on the international market - just as Amstrad was preparing to wargame its assault on the States. As far as the UK was concerned, Sugar made it clear that he was essentially looking at the Sinclair machines as low-cost entertainment items, for Christmas. He announced that he would be scrapping the QL altogether, and planned to ‘simplify’ the Spectrums, with modifications designed to make the machines easier to use.

The only negative moment in the proceedings came when it was discovered that following the announcement of the deal with Sinclair, the value of Amstrad shares had fallen by 14p. (It was impossible, though, to make realistic assessments of cause and effect with the stock market rocked by unstable oil prices.) All in all, the financial world seemed to think that Sugar had bought himself a bargain. A spokesman for Simon and Coates, the stockbrokers, offered the following projection:

From our calculations, [the Amstrad-Sinclair deal] should be worth £35-40m in sales to Amstrad over the next year. [Sugar] should look to make between £5.5m and £6.5m in profit. So it’s going to more than pay for itself in the next year. (Channel 4 News, 7 April 1986.)

From Sir Clive’s point of view, the Amstrad offer effectively put a floundering enterprise out of its misery, while avoiding the conclusive humiliation of liquidation:

We pioneered the market. Now we’ve handed it over to the people who are experts in international marketing. It gets us out of a business we were not doing very well in, and allows us to continue in interests we do well in. We chose the Amstrad deal because it was a better deal. We sold off the traditional business. (Quoted in the Guardian, 8 April 1986.)

Clive announced that with the conclusion of the Amstrad deal Sinclair Research was able to settle with all its creditors and continue to develop its current projects. Although a number of conflicting figures have been bandied about, the consensus suggests that at the conclusion of the agreement, Sinclair’s liabilities stood at £15m (£8m to the banks, £7m to other creditors). Surprisingly, Amstrad placed no constraints on Sinclair’s development of new microcomputer products, although reports indicated that Research would be obliged to offer the company first option on distribution. Sinclair has since denied this, saying that it applies only to products incorporating the technology and intellectual property of the existing machines - so that he has a free hand on any brand-new micro. It is certain, however, that he is prohibited from using the Sinclair brandname on any computer product.

Sir Clive indicated that the deal would mean redundancies in the marketing and distribution departments of Sinclair Research, but implied that the remainder of the company would, he hoped, be unaffected. In the event, more than 90 per cent of the managerial and technical staff found themselves out of a job within a few months. Looking at the overall effects of the deal, it seems likely that the manufacture of Sinclair products will ultimately be moved out of the UK, with resultant job losses at Timex, AB Electronics and Thorn. Most of Amstrad’s manufacturing is based in South Korea, and Sugar seems far from convinced that any UK company would able to compete with his current subcontractors in terms of either price or quality. In the course of the press conference, Sugar described the current standard of Sinclair products as ‘atrocious’ (Guardian, 7 April 1986), and suggested that the company’s UK subcontractors were at least partially responsible for the unreliability of the machines (Financial Times, 7 April 1986).

As to remaining stocks of Sinclair products, Sugar explained that he would buy up all remaining Sinclair products, and market the goods through Amstrad’s distribution. He also agreed to pay for existing orders of computers, which were expected to run out by July 1986. All in all, on top of the initial £5m, Sugar agreed to pay out an additional £11m to Sinclair Research and its subcontractors.

In outlining his decision to throw in the towel, Sir Clive confessed that his company lacked the expertise to market and distribute effectively in a developed home-computer market:

We got to the point really where the home-computer business became flat, from a technical point of view, and we always recognized at Sinclair Research when we established it that when it gets to that point we ought to sell out. We don’t have the expertise that Alan has - and may be other companies have - in mass marketing worldwide. There’s no room nowadays for a company that can’t work on a world basis - as I’m sure Alan’s business does - and that takes a great deal of expertise which, frankly, we don’t possess. (Channel 4 News, 7 April 1986.)

Although the events of 1984-6 cast doubts on Sinclair’s claim that he had planned such a withdrawal from the outset, there’s no disputing his assessment that towards the end Sinclair Research was out of its depth in the home-computer market. Falling back on his standard response to such situations, Sir Clive was anxious to present the universally acceptable image of the simple inventor who still hasn’t quite got the hang of business matters. Once again there was much talk about a return to the lab, that mythical environment in Sir Clive has consistently claimed he feels most at home. Sinclair’s telecommunication and wafer-scale projects required significant investment if they were to make it to the market. Two new companies were to be formed to run the projects, and the same month that the Amstrad deal was announced, Sir Clive said he was well on the way to finalizing a brace of financial packages aimed at realizing his ambitions for the future (and providing working capital for the present). The first product planned by the Winchester-based telecom team was a low-cost Cellnet-style telephone, with production cautiously planned for the middle to end of 1987. If all goes well, it seems that Sir Clive’s mentor, Fred Olsen, will bring in Timex to join forces with the Sinclair Research offshoot. The former watch manufacturer is rumoured to be buying up to 75 per cent holding in the ambitious but potentially very profitable enterprise. It seems likely that in addition to providing backing for the project’s development, Timex will also undertake at least a percentage of the product’s manufacture.

Sir Clive’s second financial package appears to have been finalized by the time the Amstrad deal was announced. Following months of negotiation, shortly after Christmas 1985 Barclays agreed to back the wafer-scale development in the form of non-interest-bearing equity stock and a bank loan. The wafer project had long been close to Sinclair’s heart, and the deal with Barclays must have come as a great relief, since for a while it looked as if Research would be forced to give up controlling interest in the project in order to come up with the necessary backing. Anamartic Ltd (the name is one of Clive’s neo-classicist coinings - it means ‘without fault’) was launched on 7 July with ‘a memory device for business computers at final prototype stage and scheduled for introduction in early 1987’. With Clive taking a low-profile stance as a non-executive director, it announced it was seeking £6m to bring the product to market.

As far as Sinclair himself was concerned, the immediate effect of all these deals was finally to liberate him from the mire of debts that had plagued him for so long. By the beginning of April 1986, Sir Clive was in a position to reimburse Sinclair Research’s major creditors and announce with understandable relief that ‘the organization was free of borrowings’ for the first time for years. Although for obvious reasons, it was the Amstrad deal that hit the headlines, time may well prove the wafer and telecom projects to be far more significant landmarks in Sir Clive’s erratic career. Certainly these are the products that will determine whether there is a future for all or any of the Sinclair companies, although Sir Clive himself has indicated that he is unlikely to play any part in running the enterprises.

While the objectives of the cellular phone project are presumably self-evident, Research’s work on wafer-scale integration is less easily grasped (which is one of the reasons the company found it so difficult to raise the necessary backing). Given that if the researchers get it right, their work is certain to revolutionize the international microelectronics industry, it seems worthwhile devoting the remainder of this chapter to an explanation of what a wafer is and why it’s so important.

Wafer-scale technology came into Sinclair’s life on 3 July 1983, when Ivor Catt responded to the advert in the Observer in which Sir Clive announced that he was seeking personnel for his revolutionary MetaLab. In terms of the new centre’s stated objectives, Catt was made to measure. A maverick computer theorist with too much integrity and experience to be tethered to the short-term commercial objectives of an intensely conservative industry, Catt was anathema to the multinationals. For twenty years he had developed the theoretical foundations for a revolution in the semiconductor industry, and for twenty years his ideas had been rejected as unworkable. When Sinclair made it clear that he was interested in Catt’s proposals, the disillusioned engineer saw his chance to show the computing mafia the error of its ways.

By the time Catt had made his bid for the MetaLab, an abortive attempt at wafer-scale integration had become almost a rite of passage for the multinationals of the industry. Everyone who was anyone had had a stab at it. Both TI and ITT had floundered in spectacular style, but it was Gene Amdahl’s bid for the super-computer-via-wafer-scale that proved to be the kiss of death for research as far as investors were concerned. Before going into detail about the Amdahl disaster, let’s race through a schematic overview of what the technology is all about.

Ivor Carr first applied his mind to the problem of wafer-scale integration when he identified a significant wastage in the semiconductor manufacturing process:

I noticed that the silicon wafer was a hundredth of the cost of the total system so why not use that cheap commodity to build the system on the wafer instead of sawing it up to form separate circuits (Infomatics, August 1984.)