Sugar's cut-price e-mail comeback leaves City cold

Alan Sugar really hoped that it would all turn out right yesterday. He even made a rare appearance on Radio 4's Today programme, sounding uncomfortable answering questions about his Amstrad company's new product.

Why? Because if Amstrad were a pop group, people would go about asking each other "What was the name of their last hit?" Alan Michael Sugar badly wants Amstrad (the name stands for AMS Trading, set up in 1968 when he was 21) to recapture the halcyon days of the 1980s.

Then, it seemed to dominate the consumer electronics market, making BSkyB's satellite receivers, PCs that sold by the thousand, and a range of hi-fi and video systems which though never pretty (and sometimes not too reliable) had made the gruff, bearded Sugar into a household name and a media icon as the rough diamond who kept sparkling. The stock market loved him too: his company was worth £1.2bn at its peak in 1988. This, for a man whose first electrical product (in 1970) was the £17.70 Amstrad 8000 amplifier which he later described as "the biggest load of rubbish I've ever seen in my life" and the 1976 EX range of radio tuners with a meter to indicate the sound quality - which always showed as perfect, no matter what it really was.

The trouble is that lately when the Amstrad button has been pressed, it has showed up anything but perfect. An Amstrad satellite receiver was quickly rendered obsolete because it only allowed access to 16 channels. And having sold 350,000, the £399 all-in-one wordprocessors were left behind as consumers went for PC-compatible machines instead. After failing to merge with the handheld computer maker Psion in 1996, in 1997 he spun off the company's most effective side, the computer maker Viglen, leaving Amstrad to focus on consumer electronics. Since then it has not come remotely close to hitting the big time.

So it mattered to Amstrad that people should notice the introduction of a product that he promised would "bring e-mail to the mass market for the first time" and "become the all-in-one communications centre in the home".

Days ahead of the launch, City journalists had pronounced that it would be "the most important mass-market electronic product since [Amstrad] kick-started Britain's personal computer market 15 years ago... a revolutionary electronic device for surfing the Web." But as it turned out, it was none of those things. For £80 you get the "em@iler", a fixed (rather than mobile) phone that will send and receive e-mail and faxes. There is no subscription charge for the e-mail service - but you will have to submit to adverts beamed to the phone's small screen which you will not be able to turn off.

Attractive? Perhaps not when compared to BT's Easicom 1000, launched last March. It costs £80. It sends and received e-mail. You can also use its small screen to browse the Web - which you can't with the Amstrad em@iler.

BT claims to have sold 80,000 in the past year and another 220,000 in the next 12 months. And you won't get ads. Furthermore, these days one would not expect to have to pay for internet access, since there are hundreds of subscription-free internet service providers.

But forget all that; what did the City think? Unfortunately, the City hated it. "I can't get excited about it," a market-maker in Amstrad shares said after the initial stock-market announcement. Amstrad's stock promptly lost one-sixth of its value, ending the day at 505p, after months when it had gradually risen.

So does this mean the end for one of the barrow-boy legends of consumer electronics? Has Alan Sugar lost his magic touch? When it comes to the internet, Mr Sugar has always seemed cautious in an area where one must be a risk-taker. A year ago he wrote in a newspaper column that the internet revolution "could all go pear-shaped" - which could still come true, but is not the ideal stance from which to develop market-winning products. The development cycle for new internet consumer products is now measured in weeks rather than months or years.

Mr Sugar remains confident. Millions of British homes do not have a computer or modem. He hopes to sell a million, and thinks that with enough advertising it could succeed. "If we run 20 ads a month and if we're able to charge somebody 15p (per user) then we are in the money." But if nobody buys the phones, then the money will stay resolutely away. The quality button may say that it is perfect. But underneath, the truth may be rather different.