Amstrad wins pounds 57m damages against US supplier

Michael Harrison
Friday 09 May 1997 23:02

Amstrad, the electronics company founded by Alan Sugar, was yesterday awarded damages in the High Court of pounds 57.5m against the world's biggest manufacturer of computer disk drives

The award against Seagate Technology of California could ultimately reach nearly pounds 100m once interest is included - equal to nearly a third of Amstrad's turnover and 40 per cent of its market capitalisation.

The court accepted Amstrad's claim that faulty disk drives supplied by Seagate had wrecked its attempt to enter the business computer market and destroyed its reputation as a serious supplier.

David Gold of lawyers Herbert Smith, who represented Amstrad during the long-running legal action, said the ruling had completely vindicated Mr Sugar, adding: "Not suprisingly, he is a very happy man this afternoon.

An Amstrad spokesman added that the award would go some way towards repaying its shareholders. Amstrad's cash mountain already stands at pounds 132m and could reach nearly pounds 232m depending on the amount of interest added to the award.

However, Seagate immediately announced that it would appeal against the ruling. Its chairman, Al Shugart, said: "We were shocked an appalled at the court's decision."

The High Court ruling is likely to strengthen Amstrad's case in a similar claim it is bringing against Western Digital Corporation, another California- based supplier of disk drives. The action is due to be heard in California later this year.

Amstrad began its case against Seagate in 1992 although the claim dates back to 1989. It was finally heard in the High Court between April and July last year.

The case centred around disk drives supplied by Seagate for the Amstrad 2386 - the machine with which Mr Sugar planned to conquer the business PC market in the way he had with cheap PCs aimed at consumers.

Mr Gold said that the fault lay in the way the disk drives recorded data which could not subsequently be found. "The disks did not work properly for a long time and no one knew why.

But because the machines were out in the market place the reputation of Amstrad was being destroyed and it never got back into the market.

Seagate employs 87,000 people and has a market value of $12.5bn. It made an after-tax profit of $213m on sales of $8.5bn in the year ended last July.

Amstrad, by contrast, made a pounds 15m loss on tunbrover of pounds 330m in the year to the end of June, 1996.

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