PS Consultants - ideas & solutions

Amstrad launches a blockbuster product, and the City halves the Amstrad share price
June 2000

Amstrad Chairman Alan Sugar has long been at loggerheads with the financial scribes of the City, and the recent launch of the e-mailer ‘phone hasn’t done anything much to change his demeanour. At the product launch, Sugar was candid and told the audience that he was going to flog the £79.99 rrp feature phone at what amounts to a £50 per unit loss, and sell a million. So since the scribes looked at the very tempting proposition and all thought to themselves “I’ll have one of those” them more they worried about the fact that Amstrad was going lose £50m over the next 24 months rolling the product out.

The Amstrad e-mailer phone is indeed a no-brainer. It’s a CLI phone with delightful LCD display, capable of sending faxes, provided with a digital answering system, capable of attaching voice messages to email. And blessed with an email system that’s so easy to use, that a politician could hack it, let alone your dear old mum.

And thrown into the bundle is pocket organiser capable of storing 700 names and addresses, synchronised with the phone's own local memory. Best of all, the CLI scheme means that your phone will be told when you have an email message to collect from the server – although if you really enjoy dialling in every “x” minutes to make BT’s day and look in an empty mailbox, then you can if you really want.

Yes, there are a number of obvious techno opportunities that are not implemented (in this version) and so the techno scribblers were duly unimpressed. But those who were present at the launch of the Amstrad PCW 8256 some 13 years earlier, a product that sold over 3m units (at a profit, it must be said), remembered some of the very same hacks carping that the PCW wasn’t an IBM PC, and similarly wrote it all off as hopelessly passé.

Yes the Amstrad emailer phone is not a colour TFT web surfing ecommerce terminal. In the same way that a Fiesta is not a Jaguar XJR. The point is that the e-mailer costs £79.99. And if you have ever fought with your sophisticated home PC when something nasty has just occurred and prevented your email from working at a critical moment (something nasty like Windows DUN, for example), then £80 for this simple emergency backup is a no brainer. The fact that it provides all the other features is a bonus.

So how does Amstrad plan to make a profit from selling at a loss..? Do you think that flashy WAP phone in your pocket actually costs Orange/Cellnet etc. less than the price you paid..? Of course it doesn’t, and the Amstrad model is the same: service charges. There is a 12p charge on each visit to the server

But in the Amstrad case, you will not be paying the entire cost in hidden charges, since the e-mailer phone cleverly invents a wholly new medium for direct advertising - direct to the home, and with a mechanism that allows “one touch” direct response to the advertisers’ call centres.

Here’s the bit the City scribes seem to be having trouble believing: with one million units in the field delivering just one commercial a day, by charging advertisers like EasyJet, DirectLine and the Reader’s Digest just half the cost of a direct mail shot (say 25p). Then Amstrad and its partners in this crime, BT, will be trousering around £90m a year. With 4 adverts a day, that’s £360m with almost no direct costs.

And by then your Amstrad emailer may well be costing you £9.99…. and the contentious 12p per visit charge will be long forgotten. Some of us believe that we are going to watch the PCW story unfold, all over again, and even bigger and more interesting.