Keeping Acorn at an Arm's Length

"It's going to be hard work to build the company up," said Dr. Alex Reid of Acorn ten days ago, and nobody would want to argue with him.

Dr. Reid was talking to a group of journalists about the plans to reconstruct Acorn, but he began by looking back and pinpointing the leaks that caused Acorn to founder. There were three, he said; the US adventure that didn't come off, the Christmas stock that didn't sell, and the projects undertaken in 1984 that spread the company's resources too thin.

Still in the numbers racket, he went on to say that Acorn identified four key strengths and two 'danger areas' in planning the company's re-structuring. The strengths are in technology, the top end of home computers, scientific applications, and education. The danger areas are 'IBM PC land' and the bottom end of the home market.

So far, so good. It looks particularly promising that the strengths outnumber the danger areas. If Acorn succeeds in staying away from IBM PC land and the capricious games market, all should be well, and to the four-leafed clover of its own strengths it can now add Olivetti's marketing muscle.

But the reconstruction can't begin from a position of strength. Acorn's last financial results to December 30, 1984 showed a loss of £10.9 million. At the same time it owed its bankers and suppliers £47.7 million. Even after the rights issue at 8 pence a share, Acorn will owe its bankers £3.4 million.

The banks and the suppliers are being patient, giving Acorn a chance to develop its strengths and find an even keel again. But the company's future will depend on its being able to produce and sell products, and when he spoke about products Dr. Reid seemed to be offering little apart from more of the same.

He spoke about an improved version of the BBC "later in the year" as part of Acorn's plans for new products in 1985.

"On the Electron, we've made it a better bargain," he said. "It was always conceived as a modular machine with capacity for expansion." He was adamant on the Electron's future, and declared: "We have no intention whatsoever of withdrawing from the home computer market, nor does Olivetti. We intend to concentrate on good quality products with upwards extensions." For example, the Plus 3 microfloppy unit.

But Olivetti can't withdraw from the home market because it isn't in it. Dr. Reid later said that the Olivetti connection isn't expected to be too relevant to the consumer section of Acorn's business. So what's left except Acorn selling BBCs and Electrons in much the same way as before?

When the Electron came down to £129 several dealers told PCN that they felt it could sell very well at that price. One or two said that they couldn't make money on it, whether it sold or not. One sighed heavily and lamented: "I wish they'd dropped the place before Christmas and then spent £4.5 million advertising it."

If Olivetti starts to push the BBC machine into foreign education establishments there could be rich pickings ahead - but foreign governments tend to favour native suppliers, something that the BBC ought to be considering.

Meanwhile Acorn will have to change the way it sees the Electron. At the moment it seems to view the machine in isolation, a £129 micro in a category of its own. This may be quite true, but the facts of life are that other micros in the same price bracket will provide the comparisons as far as potential buyers are concerned and the results to date speak for themselves.

In this and other areas Acorn seems committed to create new markets when it talks about building on its strengths. For example, the home computer market from which it has no intention of withdrawing is not the high volume games business that is usually considered as home computing. Then there are forthcoming products like the Communicator and the video-disk unit; if you're first in the field you might make a killing, but there are risks involved too in breaking new ground.

At the moment Dr. Reid says the relationship with Olivetti is 'an arm's length' one. It will be interesting to see how much time passes before Olivetti decides to move closer and exert a little more control.