Media File: 1982
Sinclair in the News

Fortune
March 8, 1982

Clive Sinclair's Little Computer That Could

By MYRON MAGNET

Apple, Commodore, and Radio Shack are household names, and with 25,000 to 50,000 personal computers a month rolling off their assembly lines, they securely belong to the industry's big leagues. Yet for the moment the world's top producer of tiny computers is neither Commodore, Radio Shack, nor Apple, but rather a slightly astonished English company headquartered in a jumble of tiny rooms and vertiginous staircases across from gothic King's College, Cambridge. It's owned by a shy, baldish 41-year-old named Clive Sinclair, famous until now as an electronics wizard who kept getting his entrepreneurial wires crossed.

Like the Hula-Hoop, Sinclair's micro marvel, dubbed the ZX81, was an instant and overwhelming success. "One day everything was quiet - things were bubbling away in the labs - and the next day everything exploded," recalls one of Sinclair's 30-odd employees. "It's been a mad rush ever since." The secret of the ZX81's success is price. At $149.95, the wedge-shaped machine - which needs to commandeer your TV for display and your cassette recorder to drive the tapes that store its programs and information - costs half as much as the next-cheapest computer on the market, Commodore's VIC 20. Slightly smaller than an open paperback of The Fountainhead and looking, in its little black plastic case, as if it earnestly hopes to be a computer when it grows up, the ZX81 is also a lot less machine. It lacks color graphics; instead of movable keys it has a membrane keyboard like the irritating control panel on some bank cash machines; and its built-in programmable memory will hold only 1,024 characters (called 1K in the trade), though a $100 add-on module will expand that to 16,384 (16K). By comparison, the VIC 20 has a 5K memory, expandable to 32K.

Unlike the Commodore machine, the ZX81 can't be used as a primitive word processor, nor can it play games in color or get stock quotes, wire-service information, and electronic mail by telephone. Though neither machine is in a class with an Apple or an Osborne (see the preceding article), the ZX81 has even less than the VIC 20's marginal business usefulness - putting aside the bingo-parlor proprietor in England who uses it to produce the game's random numbers and compute his patrons' winnings.

But for teaching owners how computers work and how to program them in Basic, the most commonly used computer language, the ZX81 is ingenious. However masterful the engineering, what's most brilliant about the machine is the marketing idea: if the price is low enough people will rush out to buy a rudimentary computer, thrilled to learn enough programming to plot a graph, play a game, balance a checkbook, catalogue a wine cellar, and amaze their kids or - in almost as many cases - their parents. "There would be lots of engineering groups capable of designing a $200 computer, but they never thought of doing it," says Nigel Searle, head of Sinclair's newly formed computer division. "The Sinclair phenomenon," Searle adds, with a vividness beyond logic, "is to enter those races that are worth winning but that no one else even knew were going on."

Since the machine's introduction a year ago, production has mushroomed to over 50,000 in each of the last three months, and supply can't keep pace with demand. John Rowland, market-development manager of W.H. Smith, a giant news agent and stationery chain that is Sinclair's British retail outlet, reports selling 5,000 a week during the Christmas season. "The only advertising I've done this year," he says, "is to produce a card saying, 'ZX81 Temporarily Out of Stock.'"

So popular has the machine proved that it's spawned over 150 new businesses, from manufacturers of add-on hardware to publishers of fan magazines and software. Owners' clubs proliferate; conferences of enthusiasts draw overcapacity crowds. Having sold 250,000 machines in the first ten months, the company estimates the total market for them at upwards of 2.25 million. Mitsui began marketing the machine in Japan in October, aiming to sell 70,000 in the first two years. Americans, who've bought over 50,000 since the little computers were launched by mail order in October, are now buying them at the brisk rate of 15,000 a month. "Joking slightly," says financial controller Judith Hooper evenly, "our aim is for everybody to have one."

Shrinking calculators

This isn't Sinclair's first golden moment. Ten years ago, he burst on the market with the $185 Sinclair Executive, the original truly pocket-size electronic calculator, about a tenth the size of any competitor's and sleek enough for enshrinement in the Museum of Modern Art's design collection. The Executive engendered such stylish progeny as a $5,240 solid-gold calculator and, more practical, a line of low-cost programmable calculators. Sinclair's company luxuriated, with annual sales swelling from $1.9 million to $13.7 million in three years. But in the same period, pretax profits, after rising from $240,000 to $716,000, declined to $99,000. Thereafter the company suffered ever-increasing losses.

Whether all machines can be psychoanalyzed is doubtful, but Sinclair's have complex and distinct enough personalities to be put on the couch, figuratively speaking. They say a lot not just about the inventiveness of the mind that created them but also about its motivating principles. The workings of the Executive calculator are a prime case in point. The main trick to shrinking calculators a decade ago was getting their power needs so low that small batteries could run them. Sinclair's strategy - he was one of this method's pioneers - was to let the machine continually switch off and on so fast that the microchip doesn't lose the information entered on it and the display doesn't seem to flicker, though its tiny numbers are in fact blinking wildly. The machine's governing principle, in other words, is to teeter audaciously on the brink of failure.

Such a principle rules Sinclair, too, making him a breathtaking risk-taker. "If he's got a fear of anything, it's probably a fear of security," judges Searle. "He sees a secure and predictable existence as boring, and he takes enough risks to ensure that the outcome isn't predictable." As an engineer, notes Peter Bonfield, marketing chief of ICL, Britain's largest computer manufacturer, "he thrives on doing things the pundits say can't be done." As an entrepreneur, he's always been a daredevil. "Most people would put a contingency sum aside," says James Westwood, Sinclair's chief engineer, "but he always goes in with both feet."

The flirtation with failure, the bullfighter-like drive to come close to the horns, has deep roots in Sinclair's experience. His engineer father, deciding after the war to diversify his machine-tool business by manufacturing little tractors, lost his money and his company when Sinclair was 12. "I was very much aware of what was happening," Sinclair recalls - as how could he not have been? For it profoundly changed everybody's attitude toward his uppermiddle-class but no longer well-to-do family. It affected his life over and over. The top "public" (what Americans call private) school his mother had set her heart on for him became too expensive, so she kept shifting him from one lesser institution to another. "It was never the right school," she recalls, "because it wasn't what I really wanted." By the time graduation put a stop to the odyssey, Sinclair had attended 13 schools and had become, as he says in his reserved way, "more insular."

The self-congratulators

Temporarily declassed and never in one place long enough to establish himself, Sinclair was forced into the role of outsider. He took his fate in hand in a time-honored way by freely choosing what was thrust upon him, putting himself more sharply outside his class by declining to go on to university. Having already taught himself enough electronics at school to publish articles in hobbyists' magazines, he went to work as a lowly technical journalist for Practical Wireless, a name evoking a vanished England peopled by Leslie Howard and Greer Garson. In only a few months, he became editor of a series of electronics manuals, which characteristically he ended up writing himself.

University, no; Mensa, yes - and if what we join shows how we view ourselves, this paradoxical organization, to which Sinclair was then drawn and whose British chairman he now is, points to a certain bewilderment about the issue of success and failure. Mensa bills itself as "the international association of intelligent people" - a lofty I.Q. score is the prerequisite for membership - so there's some justice in the charge that it's "a forum for self-congratulation," as a business rival of Sinclair's puts it. But it's a forum in which the mutual congratulators are often insecure and lonely. "All the members to a small extent feel less than comfortable in daily life," says Nigel Searle, also a Mensa member. And Victor Serebriakoff, the club's international chairman and another old friend of Sinclair's, remarks that traditionally Mensa didn't think of itself as having "the rank and fashion of successful people" as its members. Indeed, adds Searle, a question often deemed appropriate to Mensa members is, "If you're so smart, how come you're not rich?"

Sinclair demonstrates a profound impulse to rehabilitate failure. The tendency, perhaps springing from concern with his father's failure, shows itself in disparate and unexpected ways. For example, he's unusually generous to people down on their luck. He also cares about technological rejects. At age 22, in his first business, he bought 1,000 advanced transistors that had failed to meet the specifications of the computers they'd been designed for, but which, Sinclair knew, would be uncommonly successful in less exacting applications. Two books and an article extolling their virtues boosted mail-order sales - the writer was Sinclair, who had already learned to generate the confidence-inspiring publicity he knows is crucial in direct mail marketing. Instead of being discarded, the transistors sold for up to seven times what he paid for them.

A mail-order radio-kit business followed. Sinclair obtained needed parts and advertising by coolly offering to pay cash he didn't have; suppliers, anxious not to seem greedy, showered him with credit. Fortunately, the kits sold, and the bills got paid. Fortunately, too, the radios worked: Sinclair, confident of his design, had never bothered to build a test model. His company, Sinclair Radionics, grew and flourished, branching into hi-fi kits and components, electronic instruments called multimeters, and the calculators that gave him such heady success. Meanwhile, he married Ann Trevor-Briscoe at 22, fathered three children, now self-possessed adolescents, and in 1967 moved his family and company from London to Cambridge, a mecca for small, high-tech electronics companies. A historic house and a Rolls-Royce evidenced that he was flourishing.

But not for long. Just seven years after the introduction of the Executive, Sinclair reenacted his father's fate and watched his company crumble. Eroding calculator prices and superior Japanese machines started the trouble; a swarm of problems with new products aggravated it. First was the Black Watch, a low-cost, plastic digital wristwatch, based on a daring Sinclair-designed chip to be produced by a complex, unproved technology. Alas, ITT had trouble making the chip; the watch came out a year late, its lead lost. Cold made it stop and static made it skip time. Triumph turned to recriminations, lawsuits, and a loss of $666,000 for Sinclair for the fiscal year that ended in April 1976.

Meanwhile, Sinclair was working on a pocket TV and a radical flat-picture tube, both gobbling revenue voraciously. With money pouring out faster than it was coming in, and London's financial community not clamoring to arrange new capital, Sinclair went to the government-funded National Enterprise Board, then new, heavy with cash, and willing to become a minority shareholder in his company. "If the NEB hadn't stepped in, the company would've gone to the wall," says David Southward, engineering head of Sinclair's flat-tube project, "and I think it would've taken Clive longer to rise from the ashes."

Even so, the marriage was notably unhappy. No sooner was it consummated in late 1976 than calculator prices plummeted more precipitously, requiring further infusions of capital. Next, the board's chairman, Sinclair's staunchest supporter, retired. A managing director, sent out to take over the day-to-day running of the company, "was in fact eaten by Clive," says a source close to the board. For his part, Sinclair says he was convinced that "the NEB had a view of me as a mad inventor who certainly couldn't run anything." Employees saw his sometimes volatile temper grow more stormily unpredictable.

Sales of the pocket TV, launched in early 1977, were unspectacular, and the NEB, having continued to pour in money, lost all faith that breakeven volume was anywhere in sight. When it was clear the board had decided to pull the plug on the TV business, the game was up. In the summer of 1979, Sinclair left with part of his research team and a £10,000 golden handshake. The NEB wrote the experience off for $17.3 million - its second-worst loss ever.

And at this point Sinclair became profoundly calm. His irascibility vanished; he was, according to his mother, "charm itself." Nigel Searle recalls him musing, "I really wonder whether I ought to be feeling as good as I do," and those who knew him were puzzled enough by his serenity to recall it afterward as noteworthy.

For this mood, no one explanation suffices. It was more than relief at a tormenting situation finally resolved. As aware as anyone else that success doesn't annul the chance of failure, he had tended to find achieved success disappointing. "When he gets to a peak, he finds it's a plain - and there's another peak," says his wife ruefully. "Having won, it dissipates into nothing." Failure is at least conclusive.

Of all the fates that can befall a man, Sinclair's was exactly the one his father had suffered. In its way, this fact may have contributed to his calm. If he sensed that his winning implied an indictment of his father's having lost, his calm after the disaster may have reflected relief at no longer seeming to stand as a symbol of reproach. And when he steadfastly protests that the NEB, not he, is responsible for sinking his company, it's perhaps not just himself but also his father he wants to excuse by insisting that business failure isn't necessarily one's own fault. His father now heads a company set up to export Sinclair products.

After the collapse, Sinclair felt free to rebuild his success with exhilarating speed and single-mindedness. Having prudently set up an electronics-kit company just before the NEB deal, he had a revenue-producing operation to walk into. He fell to work making a reality of his cheap-home-computer scheme, hoping a quick success would finance the flat-TV tube, his pet project.

The first computer, the $200 ZX80, was on the market in seven months, and the company sold 100,000 of them, generating pretax profits of $2.7 million on sales of $12.7 million in its first full year, which ended last March. Since then, the new improved model, the ZX81, has dominated the business; and because the cost of making it seems as impressively low as its selling price - about $35 is a fair guess, allows a company official - the nine months from April through December have rung up hefty profits of $13.3 million for the company on total revenues of $38 million. New company offices are going up. In addition, a stone house of Victorian solidity, with arched stone fireplaces echoing the coldly serene progression of arched stone doorways, has replaced the stately home Sinclair sold after the NEB debacle. The Rolls has given way to two Porsches, which Sinclair, his license suspended for tipsy driving, is itching to drive again - fast.

What started as an effort to raise cash is now, however unexpectedly, a major business, and Sinclair is in microcomputers to stay - for this time his company shows signs of staying power. "In a way," he says, "I owe a lot to the NEB inadvertently, because you know so much more the second time around; you can avoid the mistakes." The chief lesson he's learned is to keep his company as miniature as the machines he makes, part of whose attraction is the user's ability to control and dominate them. Before, he had a big assembly line with hundreds of workers, limiting his flexibility when the calculator price crunch came and requiring managerial skills he doesn't have. Now, he says, he's learned to "keep the organization small, because I'm not a great organizer of people, and so I find it best to subcontract everything that can be subcontracted." Thus his new principle, as Peter Bonfield sums it up, is to "innovate and get somebody else to do the metal bashin'."

He's found ideal metal bashers in Timex Corp., the huge Waterbury, Connecticut, outfit that runs the world's largest watch factory in Scotland. Experienced in subcontracting, the plant makes the ZX81 and turned out 40 million cameras for Polaroid. The Timex-Sinclair bond is growing even stronger. A brand-new licensing deal will give the giant watchmaker access to Sinclair's computer technology and the use of the Sinclair name on hardware and software that Timex will design, make, and market in North America. "I think that Timex will be making more money out of computers than watches within five years," prophesies Sinclair. "It'll be a $1-billion-a-year business for them and $50 million a year in royalties for us." Searle, more cautious, points out that the agreement includes minimum guarantees in case things work out less rosily.

The Norwegian Howard Hughes

Presumably, this deal represents a new strategy for Timex, too - though it's hard to know, since the privately held company is controlled by a 53-year-old Norwegian tycoon named Fred Olsen, so obsessively secretive that his countrymen consider him their own Howard Hughes. Timex fell behind technologically as watches became digital in the Seventies: unit sales stagnated, market share declined, and profits dwindled to virtually nothing by 1979. So Olsen has reason to diversify out of the mechanical-watch business that has long been Timex's mainspring.

Timex has not yet announced how it plans to implement its agreement with Sinclair, and FORTUNE's inquiries have met with the traditional "No comment." But Sinclair executives expect the company to have its first computer products on the market well before the next Christmas season. They expect these products to include a version of the ZX81, possibly along with a fancier model. According to Clive Sinclair, the deal calls for his company to withdraw gradually from the U.S. computer market as Timex phases in its products, and to get out completely when Timex sales hit 75,000 a month, which Sinclair thinks could occur in a year or so. The combination of Sinclair's technical inventiveness with Timex's manufacturing and marketing expertise makes for a potentially heavy contender in the market.

Meanwhile, the electronics wizard is still hatching new magic, with plans in the next couple of years to introduce a $100 cigarette-package-size flat-tube TV and more powerful and elaborate computers, boasting compact, built-in, flat-tube display screens, telephone connectors, and "micro-floppy" disk drives. In addition, an electric-car project is humming along, which, Sinclair says, "has turned out better than I ever dared to hope." After his current entrepreneurial success, he's taking aim at other fields, establishing a publishing company and a literary prize emphasizing social and political concerns, attending classes at Cambridge University in preparation for setting out his economic views in a book, and eyeing politics with an itch to take part. Many associates expect him sooner or later to stand for Parliament, representing politics one Sinclair executive describes as "Cromwellian," meaning authoritative, impatient, sweeping, and certain of one's own rectitude. Such ambitions should heighten the risk and unpredictability he craves.

[Picture 1] Normally mild-mannered Clive Sinclair, 41, busts loose in Las Vegas, where the Consumer Electronics Show was held in January. After surveying his $150 mini-microcomputer's emerging competitors - including under-$200 machines by Commodore and Panasonic not yet on the U.S. market - Sinclair concluded, "There's nothing here that either surprises or worries us. We have a very strong position."

[Picture 2] Economies of Scale: Clive Sinclair's miniatures include (counterclockwise from bottom left) the triumphant Executive calculator (1972), the ill-fated Black Watch (1975), the pricey Sovereign calculator (1977), the battery-powered Microvision TV (1977), the ZX81 computer, with its memory-expansion module and microprinter attached (1981), and an early mockup of the flat-screen TV, to be introduced in an even smaller format later this year.

[Picture 3] At the hub of his micro-empire, Sinclair overlooks King's College.