Sugar makes an exit, but what's Psion's game?

Comment

Alan Sugar is one of only a handful of entrepreneurs in Britain who can genuinely claim to have transformed an industry. His IBM clone revolutionised the personal computer business. For a number of years at least, it also made investors in Amstrad a great deal of money. But since then, Mr Sugar has done little of note in consumer electronics. He never found anything of significance to replace the Amstrad PC and though he attempted, unsuccessfully, to take the company private once more, it is plain that essentially he long ago lost interest in his creation. These days he concentrates his energies on the brave new world of digitally packaged football. Flogging Tottenham Hotspur is likely to prove a great deal more profitable than flogging electronic boxes, he figures.

Mr Sugar is probably right to want to get out. He lacks the necessary skills to compete in today's ever more hi-tech and complex markets. Amstrad makes no money from the consumer electronics Mr Sugar understands, and Psion's erudite but commercial David Potter is much more likely to make a good fist of the mobile phone and computer operations that would be Amstrad's only future.

So this is a good deal for Alan Sugar. Amstrad's other shareholders who cold-shouldered the 150p a share Mr Sugar offered four years ago have been vindicated to an extent but it is a close-run thing. Factor in a bit of inflation and most shareholders would have been better off taking the money in 1992 and reinvesting it.

Even less clear-cut is what sort of a deal Psion is striking. One of the market's biggest success stories over the past four years, the shares rose 20-fold between their 23p low in 1992 and their peak last month of 468p. Their 25p fall yesterday to 350p underlined investors' worries that this is a massive deal for a relatively small company, even if part of it is simply a disguised rights issue to use Psion's highly rated paper to get hold of Amstrad's pounds 85m of cash.

Psion has been successful because it has focused on technology it understands and because it grew organically, expanding fast but nurturing its staff within its own research-based culture. It is by no means given that the phone and PC shifters from Brentwood will fit in to this rather highbrow world.

David Potter is not a man to shy away from taking risks when he has to, however, and you can bet your life he has weighed up the pros and cons with scientific precision. It was no nerdy boffin who made a killing on shares in the 1970s to provide the seedcorn for Psion. Backing Psion if it acquires Amstrad becomes a bet on Mr Potter's vision of the future where computing and telecommunications fuse in a technological revolution that will have the Luddites shuddering. All of us wired up, on the move and frantically communicating in a welter of e-mail, downloading databases and wireless fax transmissions. Well, maybe. With a pounds 230m share issue to get past shareholders, this is by no means a done deal.

Some DIY questions are answered

Until their profits warning earlier this year, Wickes and its handsomely paid chairman, Henry Sweetbaum, were the DIY partnership that could do no wrong, darlings of the City in a largely unloved and difficult business. Every now and then, of course, the question would re-emerge; if nobody else can make money out of DIY, how on earth does Mr Sweetbaum manage it? Each time the question was asked, it was explained away. Wickes is not really DIY at all, you understand. It is more of a builder's merchant, where the margins are thicker. And, anyway, the business uses state of the art stock control and IT systems, Mr Sweetbaum insisted. That's how we make money where others fail, he would claim.

Shame to say, most of us bought it. Now it transpires that there was a bit more to it than that. When a company refers to "serious accounting problems" it generally means something a touch more worrying than a spot of the creative stuff. Profits for 1995 and in prior years were overstated, that much is certain. By how much we do not yet know. The accountants are still trying to work that out. It is hard to see how Mr Sweetbaum, one of that exclusive club of executives earning more than pounds 1m a year, can avoid falling on his sword.

More than half his salary last year was bonus. He believes in incentivising his employees with performance-related pay too, and thought this part of the Wickes success story. The problem is that bonus-related pay also provides a powerful motive for cooking the books.

How the board and the auditors, Arthur Andersen, could have allowed this go unnoticed is anyone's guess. What appears to have been going on is a relatively common little scam. There's even been an instance of it in DIY before. It happened at Texas too. So much for all the Cadbury rules and structures put in place to halt the creative accounting practices of the past. They don't seem to have done much good in this case.

Nor did they stop an undignified scramble for the exit among City professionals as they caught wind of the problems. A very substantial quantity of stock was sold before Wickes made its announcement and the shares were suspended. As usual, the big boys got out, leaving the little fellow to face the worse, trapped in the stock and unable to sell. A shabby little episode all round.

Tunnel sweetener must be worth considering

The idea might seem rather hard to take on board right now but in 57 years time when Eurotunnel's concession to operate the Channel Tunnel runs out, British and French taxpayers will inherit a licence to print money, not just by the bucketful but by the trainload. By 2052, Eurotunnel's pounds 8bn debt nightmare will be a very dim memory, the loans will have long been repaid and the tunnel will be the closest thing you will see to a pure profit machine.

In those circumstances, what government in its right mind would short- change the taxpayers of tomorrow by granting Eurotunnel shareholders of today a 30-40 year extension to their concession? France's would because right now it is more alarmed at the prospect of 500,000 enraged investors rampaging through the streets of Paris in protest than the wrath of future taxpayers. Britain, on the other hand, seems determined to defend the next generation's cash cow to the last.

The Government's motives are obviously reasonable enough. But if an extension to the concession is the sweetener that secures the debt refinancing Eurotunnel needs to survive, it seems a price worth considering. For it is government which is in part to blame for Eurotunnel's present pickle by inflating the cost of the tunnel, failing to build supporting rail infrastructure on time and giving the ferries a duty-free extension. If an appeal to its sense of moral duty fails, the British Government might care to reflect on what sort of advertisement it would be for its much- vaunted Private Finance Initiative if Eurotunnel is ultimately buried at sea.

Suggested Topics
PROMOTED VIDEO
Life and Style
Could you tell the difference between this and an organic alternative?
food + drink

Culinary experts in The Netherlands thought it was 'fresh' and 'tasty'

Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Arts and Entertainment
JK Rowling will not be releasing a 'romance' novel anytime soon
books
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to US
Life and Style
tech

Of all the computers Apple has ever made there’s only one that Steve Jobs had to sell his car to finance

News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidates on the verge of tears as they were ejected from the boardroom
News
One of the 'princesses' in the video
videoYouTube reinstates sweary video after takedown for 'violating terms'
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
Arts and Entertainment
film

Marvel has released first teaser trailer week early after it leaked online

Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
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

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?