The latest instance of his foresight came with the extraordinary reversal of fortunes in the Viglen share price. After being split out from Amstrad and listed as a separate company on 1 August, Viglen shares collapsed. A furious Mr Sugar refused to sell down his 35 per cent stake in the business as he had intended, declaring that Viglen was severely undervalued even at the issue price of 89.5p. The stock market took no notice, and the shares had hit a low of 57.5p by late September. No sooner had they reached this nadir than the company popped up with an announcement it would be selling computers branded with the Microsoft logo. The shares have shot back up to 86p, and could climb higher.
The announcement was startling as it will be the first time Microsoft has ever put its name on a computer: it should be exactly the boost needed for Viglen to expand consumer sales.
To re-cap, Viglen is the personal computer arm of the old Amstrad, spun off by Mr Sugar in the break-up of his old vehicle, after it had suffered years of problems and profit warnings.
Viglen came to the stock market as a clean business, with none of the problems associated with the old Amstrad. The Microsoft news is a timely opportunity to reassess prospects at Viglen, and ask if Mr Sugar's thesis has a strong foundation in fact or whether it may be no more than badly dented amour propre.
Viglen has had sales of pounds 105.9m in the year to 30 June 1996, which produced pounds 10.45m of operating profits.
A quarter of its sales are to education, principally higher education, including the likes of Oxford University, but also schools and colleges in general. Surely it is no coincidence that the tie-up with Microsoft was announced shortly before Bill Gates is due to drop in on Tony Blair in Downing Street later this week to discuss how more computers can be brought into Britain's classrooms.
You can be sure that Viglen will be strongly positioned to gain from this alliance between the industry and government.
Sales at the group have been relatively flat, and unit costs of PCs have been falling in general. Against that, however, is a board which has been incentivised to grow sales. The shares trade at 13 times earnings for 1997, if you accept earnings could reach 5.9p this year. On that basis, the shares are not expensive, and if the relationship with Microsoft blossoms, it will undoubtedly lead to better things. The shares are a buy, on the premise that management can exploit the Microsoft alliance to the hilt.