Smaller Companies: Microsoft deal stirs up Sugar

It must be hard if, like Alan Sugar, you have a reputation of being able to say: "I told you so." Of course, Mr Sugar's suffering is cushioned by his substantial private fortune, writes Richard Phillips.

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.

News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
Sport
footballStriker has moved on loan for the remainder of the season
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
New Articles
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
News
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
i100
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
ebooksAn unforgettable anthology of contemporary reportage
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
booksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering