Amstrad plans direct sales of computers

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The Independent Online
ALAN Sugar's consumer electronics group, Amstrad, yesterday announced a move into direct sales in an effort to boost flagging margins in its computer businesses.

But the stock market was left unmoved by the proposed acquisition for pounds 60m of Viglen, the manufacturer of customised personal computers, focusing instead on a fifth profits warning in two years.

The shares closed 0.25p higher at 31.75p after Amstrad warned that current trading was at the lower end of expectations. Analysts expect no more than break- even in the year to June.

Mr Sugar said the acquisition of Viglen, for an initial pounds 30m, represented the start of a new direction for Amstrad in which it would concentrate on selling computers direct to end-users rather than through retail outlets where price competition had slashed margins.

The move puzzled some analysts who had expected Amstrad to withdraw from the competitive personal computer market altogether. Last year the company acquired Dancall, a Danish manufacturer of mobile telephones.

In addition to its consumer electronics business, Amstrad owns 66 per cent of Betacom, which makes telecommunications equipment. All four divisions will operate autonomously under the new corporate structure.

Mr Sugar said the move to direct selling was the only way he could see of taking the company forward after shareholders rejected his offer 18 months ago to buy the two-thirds of the company's shares he did not already own at 30p a share.

The proposed buyout caused a furore in 1992 after dissident shareholders accused Mr Sugar of trying to buy the company on the cheap.

Viglen made profits before directors' pay and exceptional items last year of pounds 9m. A second payment of pounds 30m to the company's five shareholders depends on those profits being matched in each of the next three years.

The five, who will all continue working for the company under Amstrad's ownership, also have a profit-sharing arrangement whereby they will keep between 20 and 50 per cent of any profits above pounds 9m.

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