Examination of Witnesses (Questions 580-593)
12 JANUARY 2005
MR LESLIE
STRETCH AND
MR DAVID
BEAGLE
Q580 Chairman: All the assets are there,
are they not?
Mr Stretch: Yes, as far as we
are aware.
Q581 Chairman: The only thing that has
changed is the Government has stopped giving you any money to
it?
Mr Stretch: Yes, and the management
team of the UK e-University are not involved any more.
Q582 Chairman: This is what worries the
Committee: if it is so good, why did not John Beaumont and Anthony
Cleaver and you guys say, "We will do it on our own"?
That is the question I asked you, and no one seemed to answer
that.
Mr Stretch: As I think I answered
in an earlier question, the termination is only real when you
see it in black and white, and we were continuing to work, we
had our heads down working on the delivery of the system and the
changes to the system, the revision, and so on. The time-frame
that we had from the involvement of Robson Rhodes and the direction
that we thought the venture was then going to take was very short.
We did explore in an unfinished way, I feel, those options. You
are kind of asking me why am I not going to become an investment
banker and stump up £60 million.
Q583 Chairman: No. I am saying if you
were Lord Hanson, you are an entrepreneur, you would say, "Good,
there are assets there, the Government has gone away, all that
work has been done for free, we are going to take this over and
run it. What a wonderful opportunity", but we cannot see
evidence of people, you or other people, clamouring to do that.
Mr Stretch: There is a detail
why other people would not clamour, and that is that we own the
majority. Sun Microsystems UK Ltd owns the majority of the IPR.
That makes it very unappealing to anybody else to come forward,
because we own the intellectual property, and we put a high value
on that; so that would probably deter other companies from taking
it over in that sense that you mention; but in terms of us going
forward with some ideas that we have developed and are beginning
to develop quite seriously with HEFCE, that is another matter,
and we want to be able to do that.
Q584 Valerie Davey: Can I come back to
the content of what you are actually delivering and how involved
you either were or would be in that with the universities?
Mr Beagle: Mr Chairman, from the
beginning the ownership of the delivery of the content was with
the universities; so the direct relationship was between the e-University
and the individual university. People from Sun, however, did sit
on all those meetings and our role there was to basically say
what was possible so the universities would have an idea of how
they would deliver their content, and we, as the experts on how
the platform actually worked, would say, "Yes, you can do
that", or, "No, you cannot do that", or "You
could do that but that would require an awful lot of investment."
Q585 Valerie Davey: Was blended study
involved at that early stage?
Mr Beagle: Blended is the new
way of talking about e-Learning. It has always been blended; there
has always been an element of delivering on hard copy, or CD's,
or whatever, in any of the deliveries; so that was from the very
early stage. The intent was to be able to deliver a full UK university
experience to somebody sitting in Outer Mongolia who could not
get to anything else apart from a connection to the Internet.
That was the end dream goal, and that was what we were aiming
for. Obviously that is the dream goal, but then you come back
to what is the realistic goal, and a lot of that was using other
methods of delivery, being paper, that sort of thing.
Q586 Valerie Davey: But not in direct
contact at any stage with the student?
Mr Beagle: No. There were plans
to authorise people more local; so they were making relationships
with universities in the countries to act as local tutors. I am
not certain how far those negotiations went, but there were plans
to do that.
Q587 Mr Turner: The administrator was
appointed in March 2004, the plug was pulled on 18 June. Was that
precipitate?
Mr Stretch: It felt very intense
and rapid to us, but we had never been through that before; so
I have nothing to compare it with as precipitate or not, but it
felt very intense and very quick and I felt that some of the potential
discussions were inexhausted, that some of the options were non-exhausted,
and we had just begun to think in terms of the structure of the
university, the governance, the marketing and what the potential
really could be. That was a very difficult phase because we were
also still delivering revisions to the system.
Mr Beagle: Mr Chairman, I think
when Robson Rhodes were first involved they gave us as their remit
that they were there to restructure the e-University and to restructure
it as a going concern, and that is where all our efforts with
them were focused in the first couple of months of that period.
It was only right at the end that the option of closure suddenly
became much more the one that was being looked at. At that point
it did seem this was happening very quickly, but most of the effort
was put into trying to restructure it as a going concern with
a lower cost base.
Q588 Mr Turner: Do you think it was precipitate?
Mr Beagle: I echo what Leslie
says. I have not been through that process before. It did seem
quick at the time, but that might be the way these things go normally.
Q589 Chairman: When it all happened,
what sort of meetings did you hold? In those final days and couple
of weeks you must have had pretty high level meetings with whom?
Mr Stretch: We had a lot more
high level meetings than we had previously had. We had them with
John Beaumont initially and then with Bob Stubbs, who was Robson
Rhodes' representative, the administrator's representative, and
they were happening sometimes on a weekly sometimes on an almost
daily basis looking at different options; so it was quite intense.
Q590 Chairman: There was a holding company
chaired by Sir Brian Fender. What role did they play? Did you
meet Sir Brian and did the holding company have any—
Mr Stretch: I did not meet Sir
Brian.
Mr Beagle: We had one meeting
with Sir Brian and a lot of the HEFCE Board Members right at beginning
of that process where we were asked about our views of the platform
and how it could be used, but after that we were dealing with
Bob Stubbs.
Q591 Chairman: But you are a commercial
company. You were a strategic partner, as you said, Mr Stretch.
You changed halfway through to a service deliverer. You must have
had opinions. One thing that has astounded this Committee is that
quite shortly before HEFCE decided to pull the plug on this, when
there were a tiny number of students, the company decided to award
bonuses, in the case of the Chief Executive and the Chairman very
substantial bonuses. Does that surprise you? We are talking of
a 35% bonus on salary.
Mr Stretch: We were not in that
discussion, we were not making judgments on the governance of
the business, and there was some debate. There were various different
reports on the level of students using the system. We were not
involved in any of those discussions at all, and we would not
be involved, given our position, in judgments on the governance.
Had we gone back to an earlier point, if we were doing this now
a lot of different promises would change, and if we were going
to make the investment we would insist on seeing the Board and
would have taken a view, but looking back now it is hard to take
a view. At the time we were not privy to that, but we also were
not privy to the state of the bank account. We were not kept up
to speed until the very late discussions with Bob Stubbs on the
real financial position; so a lot of the time we would be guessing.
That could waste a lot of energy. We focused the energy on continuing
to work on the system and on the user experience.
Q592 Chairman: The Minister when he was
in front of us said you might give a substantial amount of money
back to the government, £14.5 million. Is there any likelihood
of that?
Mr Stretch: I presume the Minister
does now understand the true financial treatment I have laid out
here. I think if he looks at that he will understand that we have
faced substantial losses. They were all written out in previous
financial years for our company, thankfully, but they were unprecedented
in the 20-year history of Sun Microsystems UK Ltd and very painful.
Inflicting more pain on us is not something I want to look at.
I think what we need to look at here is what we do with HEFCE
and the intellectual property and the platform going forward.
In terms of giving money back to the Government, I think it is
important to understand that our entire software portfolio, or
most of our key software portfolio, including our desktop software,
is provided to the UK education sector free of charge, and that
is not a practice that is followed by any of our competitors.
That has substantial commercial value. I feel that we delivered
to the best of our ability on the obligations and I do not feel
that we are in a position to be handing money back.
Q593 Chairman: Mr Stretch, Mr Beagle,
I thank you for being so candid with the Committee. We have learnt
a lot from your evidence. Thank you indeed for this reasonably
long session.
Mr Stretch: Thank you.
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