The dismantling of the Amstrad empire will net Mr Sugar more than pounds 100m and return more than pounds 200m in cash to shareholders. It will also ends the Essex entrepreneur's often turbulent relationship with the City since he floated Amstrad in 1980.
Under the complex restructuring unveiled yesterday, Mr Sugar is proposing to return pounds 200m to shareholders in the form of loan notes and exchange Amstrad shares for shares in two subsidiary companies Viglen Technology, which sells Amstrad PCs by direct mail, and Betacom, a quoted consumer electronics company which markets the Amstrad, Sinclair, Fidelity and Betacom brands.
In addition, Amstrad plans to distribute to shareholders the proceeds of damages awards against two US suppliers of computer disks. The award against one of the companies, Seagate Technologies, should exceed pounds 100m including interest payments.
The dramatic break up of the Amstrad follows Mr Sugar's failure to merge the business last year with Psion, the hand-held computer group, and his earlier abortive attempt in 1992 to take Amstrad private.
According to some estimates the break-up and distribution of assets could be worth 360p per share against yesterday's closing price of 277p, up 13.5p. That would value Amstrad at pounds 425m compared with a market capitalisation of pounds 1.2bn in 1988 and leave Mr Sugar with a stake worth about pounds 145m.
However, much will depend on the value put on Viglen when it is floated as a separate company. There were suggestions yesterday that it could be worth as much as 115p a share although Robert Harris, an analyst with ABN Amro Hoare Govett put Viglen's value at 65p a share. The company made a pounds 10.5m profit last year on sales of pounds 106m.
Mr Sugar, Amstrad's biggest shareholder with a 34 per cent stake, refused to say what he would do with his proceeds from the break-up. But he stressed that although the Amstrad name was disappearing as a quoted company it would continue as a powerful brand.
Mr Sugar will remain chairman of Betacom and will devote his energies to building up the business. But he will have no executive role at Viglen while Amstrad will be reduced to acting as a vehicle to pursue the litigation in the US.
"My focus will now be on Betacom which is where Amstrad was as a company 10 years ago," Mr Sugar said. "In years to come a suitable epitaph would be for Betacom to prove as sexy a business as Amstrad."
Analysts generally welcomed the break-up plan unveiled by Mr Sugar. Michael Styles of Credit Lyonnais Laing said: "It makes sense. There may be a little more to go on the share price - it depends what you think Viglen is worth."
Mr Sugar formed Amstrad - Alan Michael Sugar Trading - in 1968 and built its profits up to pounds 1m by mass marketing hi-fi equipment manufactured in the Far East at discount prices. It floated in 1980 and quickly went into the computer business, first with games computers, then with word processors and then with a low-cost industry standard personal computer which revolutionised the PC market.
Amstrad hit a peak in 1988 as its profits reached pounds 160m and the market capitalisation of the company hit pounds 1.2bn. It went on to sign a deal with Rupert Murdoch's Sky to manufacture and market its satellite dishes in 1989.
The downturn in the company's fortunes coincided with its attempts to break into the business PC market with a machine using disk drives supplied by two US manufacturers.
Amstrad was last month awarded pounds 57.6m in damages against one of the companies - Seagate Technologies and is pursuing a similar claim against Western Digitalk, which is due to reach court in Orange Country, California later this year.
The pounds 200m loan note convertible into cash is worth 163p a share and represents the bulk of Amstrad's cash pile, which has just been inflated by the pounds 92m sale of the cellular telephone business Dancall to Bosch of Germany.
Amstrad's 70 per cent holding in Betacom is worth a further 25p a share and assuming the Seagate damages award reaches pounds 100m, it is worth a further 55p-58p per share.
Although Amstrad will cease to exist as a quoted company a spokesman said: "It doesn't matter a damn to the consumer who now owns the brand, it will continue to be a powerful name in the high street."
As well as personal computers, Amstrad also markets hi-fi equipment, televisions, cordless phones, faxes and answering machines. None of its later consumer electronics products have had the same impact, however, as the IBM clone of a PC that Amstrad pioneered in the 1980s.