I was looking into the possibility of producing an IBM-compatible computer, something my people in Brentwood, France and Spain had been urging me to do. The real personal computer market was about to explode and we could see from the USA that it was the IBM format that was gaining momentum as the ultimate business tool. I asked Bill Poel and Roland Perry to get some IBM computers so we could take a look at what was inside these things. I wanted to see how they justified a sales price of over £2,000 for the main system unit alone – not including the monitor!
It didn’t come as too much of a surprise to Bob Watkins and myself that when we opened the cabinet, we just saw some PCBs with a load of chips. Even Bill and Roland, hovering over our shoulders, found it hard to justify that the computer should cost more to produce than a standard piece of hi‑fi or audio equipment.
I think that the Amstrad way was a tremendous learning curve for them. When someone is cocooned in a particular industry, such as computers, with no other point of reference, such as to low-priced consumer electronics, it is understandable how they can believe the hype that there’s some mystique in computer technology. External snipers talked about Amstrad buying cheap components to make computers, but this was rubbish. There’s no such thing as cheap plastic, a cheap D‑RAM or a cheap floppy disk drive – they cost what they cost.
After a little discussion with Bob Watkins and a quick back-of-a-fag-packet calculation, I said that we had to target our first IBM-compatible computer – with monitor – at £399 plus VAT. The ‘plus VAT’ was a good way of achieving my magic price point while underlining the fact that it was going to be a business computer (as retail prices for consumer electronics products already included VAT). Had there been any aggro from the advertising standards people, my argument would have been that the £399 plus VAT pricing was justifiable, as I was claiming this was a business computer. The important thing was that I made the ‘plus VAT’ clear in the advert.
It’s strange how I was already starting to think about the target price and VAT issues when all we’d really done was take an IBM PC to pieces in the lab. But to my mind, and Bob’s, it was a done deal – this was what we were going to do. The question now was: how were we going to make them?
We called a meeting with Roland Perry, Bill Poel and Mark Jones to discuss the way forward and discovered that in order to get to the target price, we would have to make three custom gate-array chips. On top of this, Bill insisted that we needed something called a ‘mouse’. Bob and I didn’t know what this was at the time – that’s how early-days it was. The specification was defined and I pressed the button to go ahead.
The plan was to again offer an all-in-one unit with one power cord to fire the whole lot up. We could incorporate the power supply for the whole system into the monitor. We decided to have two types of monitor: a monochrome ‘paper-white’ version and a colour version offering a palette of sixteen colours. This was highly unusual at the time, as all IBM computers offered just four shades of grey monochrome. Toshiba developed our three custom chips and we were able to assemble some samples of the Amstrad PC1512 – code-named ‘AERO’.
Now, there’s an argument about where we got this code-name from. I always spelled it AERO and have suggested that it came from a discussion where I said, ‘If we make this computer and get it out there for £399, it’ll fly off the shelves, so we should call it AERO.’ Others spelled it AIRO standing for Amstrad’s IBM Rip-Off. The debate still goes on amongst some of my old colleagues as to which one was right.
Now that we had a clear road map of the hardware, we needed to supply the computer with some software for the DOS (disk operating system). Up till then we had been dealing with the company Digital Research whose version of DOS (called DR‑DOS), Bill and Roland explained to me, was exactly the same as Microsoft’s MSDOS. At the time, all I knew about Microsoft was that they had dabbled in a games computer and had some kind of operating system which they hadn’t been successful with.
I wasn’t interested in Microsoft at all and certainly had no intention whatsoever of paying them a high royalty per box for every piece of MSDOS software I shifted. Up till then we’d been paying tiny royalties to people like Digital Research for packaging some of their software, while in other cases we were buying the licence outright. Companies like Locomotive Software, who wrote LocoScript, were paid a moderate royalty on every item we sold. Therefore, we took the decision to ship DR‑DOS with our computer.
One of the things I regret, on reflection, was not adhering to certain industry standards. As an example, the only mouse that was available on the market at the time was manufactured by the company Alps in Japan for Microsoft. The cost of this mouse was approximately $25, a ridiculous amount of money and certainly not acceptable as far as Amstrad was concerned.
I commissioned Vitus Luk in our Hong Kong office to develop the Amstrad mouse from scratch and, to his credit, he did a superb job. Where we made our mistake was the plug we chose at the end of the cable to connect it to the computer – it was non‑industry standard and therefore made the mouse an odd-ball item. Similarly, the physical format of our PC was different to the IBM. In hindsight, it would have been better to have followed the same format. I was to find this out later, when the corporate market became interested in our products. They would always want the industry standard format for everything.
The motivation for us to do it our way was, of course, true Amstrad cost-saving. The plug and socket used on the Microsoft mouse cost $2, whereas that used on the Amstrad mouse cost 20 cents, though they did exactly the same thing. The expression ‘penny-wise, pound-foolish’ comes to mind, and I’m the first to admit that this was a classic example.
As soon as we had working samples of the computer, we called a meeting with Schneider’s people, Marion’s people in France and Dominguez’s people in Spain and disclosed what we were doing. There was an atmosphere of excitement that I can’t put into words. We were in a dynamic, growing market and I’d just come up with another world-beating product. Credit to Schneider, Marion and Dominguez, the feeling was one of camaraderie. There was no arguing over price or jockeying for the first orders or anything like that – it was just a celebratory feeling.
At that meeting, we decided on a launch date for the PC1512: 2 September 1986. Nick Hewer arranged the PR for the launch at the Queen Elizabeth Conference Centre, Westminster and about 1,200 people turned up – it was absolute mayhem. You can't really keep things a secret in business and rumours had been flying around the marketplace that Amstrad was going to launch a PC compatible, but nobody knew what the price was going to be.
With the usual fanfare and video screens and presenters, the launch took place, with the French, Spanish and German visitors wearing headphones connected to a translator. Having shown that the average PC cost £2,000 at the time, we eventually announced our price of £399 and there was a gasp of amazement from the audience. The Q&A session afterwards went on for about an hour, with journalists firing one question after another.
There was an annexe area where we had about fifty of these computers on display, and the only way I can describe the scene is to say that it was like the Saturday before Christmas in Oxford Street. You could not move. All the staff we had there to advise people about the computers were completely drained by the end of the day.
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Then came the sniping. IBM salesmen were running around telling customers that our product was rubbish. Mind you, what would you do if you were an IBM salesman trying to flog computers for £2,000 when ours were £399? The computer magazines had endorsed our computer from a compatibility point of view, explaining clearly to the trade and the public that everything the IBM did, the Amstrad did. So what was the best argument these IBM salesmen could come up with? ‘There’s no fan in the Amstrad – it will overheat and if it overheats, it will conk out. Therefore it’s unreliable.’ It was a complete load of cobblers, but it does go to show how the whole market can change its opinion about a product based on a rumour spread by a competitor.
As I explained earlier, the power supply for the whole system was actually in the monitor. The reason IBM computers had a fan inside them was that their power supply was in the base unit and therefore needed a fan to cool it down so that the sensitive microprocessor circuits wouldn’t get hot. In our computer, there was nothing inside the base unit that got hot, so it didn’t need a fan.
Despite this, the BBC put out a statement saying that they wouldn’t buy these Amstrads because they had no fan. Understandably, I went berserk. I got hold of our corporate lawyer, David Hyams, and asked him to deal with the BBC and a few others. Within a week, the BBC were forced to make a public apology. The managing director of IBM UK, Tony Cleaver, called me to say that this rumour was not a corporate position they were taking; it had been put around unofficially by some of their sales staff. He started rattling off the IBM employees’ manual guidelines stating what measures were going to be taken against these individuals, but I wasn’t interested at all. The damage had been done. People were still saying, ‘Don’t buy the Amstrad because it hasn’t got a fan.’
Believe it or not, I immediately asked the factory to fit a fan in the base unit of the PC1512. The fan did absolutely naff all – it was cooling a cool area – but we could now say that the Amstrad PC1512 had a fan.
I am a marketing man – I give people what they want. It seemed an obvious solution to me. As I said to the Financial Times, ‘If they want a fan, I’ll give them a bloody fan. If they want a computer with pink spots on, I’ll give them a computer with pink spots on. I’m not here to argue.’ That statement made a lot of people at Amstrad laugh and as I walked around the engineering floor, I could see everybody had stuck pink spots all over their computers. Stanley Kalms called, laughing (unusual for him, the miserable sod) and saying, ‘Now, now, young Alan, we’re very proud of you here at Dixons, but you know you really shouldn’t talk to the Financial Times in that way.’
Adding the fan stuffed IBM and the BBC.
The original Amstrad PC1512 was sold at £399 with a paper-white monitor and a floppy disk drive. The twin floppy disk drive with paper-white monitor was an extra £100 and the twin floppy model with colour monitor was £649. To our amazement, the biggest seller was the dearest machine. Clearly we had moved into a marketplace where businesses were buying this product. It was the dawn of office automation, when the computer rapidly became a must-have, one-per-desk item.
Then there was the advertising campaign. I came up with the strapline ‘Compatible with You Know Who. Priced as only We Know How.’ The advertising agency we used at the time tried to change a couple of words, so they could claim that the brilliant strapline was theirs. I said to Malcolm Miller, ‘Tell them to forget it and use my strapline without changing it. Tell them they’ll still get their fee and can still tell the world it was their idea.’
Imagine my surprise a month or so later when I visited the Comdex Computer Show in Atlanta, Georgia and saw that some American monkey manufacturer had copied our strapline and plastered it all over their stand. Malcolm and I contacted the exhibition organisers to explain to them that this guy was using our strapline on his stand without our permission. He’d nicked it from us. This was typical of Americans – they feel it’s their divine right to take something they see in the colonies and use it without any repercussions. Well, they hadn’t yet come across me.
Amstrad was becoming the biggest personal computer supplier in Europe, but these Yanks claimed they’d never heard of us. My complaint to the organiser was met with derision, as if to say, ‘Who are you?’ Nevertheless, we kicked up a fuss and told them we’d get an injunction not only to shut down the stand, but also to close their show. This got their attention and in the end the manufacturer was forced to take down their signs.
The strapline was used by Dominguez in Spain and Marion in France. Of course, Schneider was unable to use it, due to the goody-goody law in Germany that made sure that IBM’s feelings weren’t hurt.
So great was the impact we’d made in the market, I was contacted again by Tony Cleaver, the managing director of IBM UK, who told me that we needed to enter into a licence agreement with them over certain patents they held. Most certainly, some of the techniques used in our design did infringe IBM patents, so we needed to sort this out to avoid any legal problems. The royalties offered were very fair and we duly entered into an agreement for worldwide sales.
My mind went back to 1963. There I was at sixteen, failing IBM’s aptitude test and here I was twenty-three years later, signing a licence agreement with them. Within three months, I’d taken 27 per cent of the total European market away from them. Mr Gates was right to want to be in our box.
