Showing surprising determination to make it as a major player in the mass personal computer market that has proved such a bed of nails for the company, Amstrad Plc, Brentwood, Essex announced yesterday that it was to buy the number two UK direct marketing personal computer manufacturer Viglen Ltd for #30m upfront and up to another #30m on an earn-out basis. Amstrad chairman Alan Sugar ackowledged that purchase of the privately-held Alperton, London company represented the start of a new direction for Amstrad in which it intends to leapfrog retailers and go direct to customers. Amstrad would be moving away strongly from its tradition of selling a narrow range of products to a broad customer base. Viglen, he said, had an opposite strategy to Amstrad, listening closely to customers’ specifications – it sells to local government, education authorities, water boards, regional authorities and banks – and delivering to their requirement. Out of a daily production of around 300 I don’t think you’ll find 10 computers that are the same, he said. Amstrad will be keeping the brand name and the management. Insisting that the move was not targeted at retailers, Sugar declared The company can’t go on at the moment selling merchandise at its cost price. The retailers have their own problems. It’s not as if they’re making a fortune and we’re not, he said. Amstrad computers are reasonably well specced but we give away 30% margin somewhere in the middle before it ends up in the hands of customers. Viglen, founded way back in 1975, has 180 employees and in the year to March it made pre-tax profits of #9m on sales of #72m (CI No 2,410). The company will have three strands of development: it will expand production to hold customers currently being turned away because of delivery times; it will diversify and widen the range of items it sells to include facsimile machines and telephone equipment, and will investigate opportunities outside the UK. The exact amount to be paid from the #30m earn-out will depend on the level of pre-tax profit Viglen reports above #4.5m in each of the next three years; Viglen’s owners are its five senior managers.
