Sir Alan Sugar does not like "prying" questions posed by The Independent on Sunday. Such as how, precisely, he plans to make a profit from his latest gadget, the "E3" videophone. Sir Alan, founder of the electronics company Amstrad, is not known for being the most approachable chairman in the world. He doesn't like "cynical journalists" who ask why people should buy one of his videophones when there are more advanced computers already on the market. "Listen," he says, "you people are too focused on taking the negative view. Forget it."

Sir Alan Sugar does not like "prying" questions posed by The Independent on Sunday. Such as how, precisely, he plans to make a profit from his latest gadget, the "E3" videophone. Sir Alan, founder of the electronics company Amstrad, is not known for being the most approachable chairman in the world. He doesn't like "cynical journalists" who ask why people should buy one of his videophones when there are more advanced computers already on the market. "Listen," he says, "you people are too focused on taking the negative view. Forget it."

But his mood last week when he unveiled the E3 to the public had probably not been helped by several embarrassing technical hitches during its demonstration to an assembled throng of journalists. Showing off the features of the E3, he had taken a picture of himself and added an audio clip saying, "You're fired" (a line from his upcoming BBC2 game show The Apprentice - modelled on Donald Trump's US series, - where he chooses one winning contestant from a group of wannabe entrepreneurs). But when he tried to send the message to the mobile phone of an employee, pictured on a screen on the stage behind Sir Alan, the camera trained on the target lurched downwards and then went blank.

"You know you should not work with animals or children? Well, we should add technology to that," he said to titters in the audience. Always quick with a quip, he added to the "MC" hosting the event: "It's not going well, is it?"

Sir Alan, who left school in Hackney in east London when he was 17, setting up Amstrad four years later, is not too bothered what the City - or journalists for that matter - think.

The E3 (so-called because it is the third version of the original "e-m@iler" launched four years ago) is a phone, video- phone, fax, emailer and games console all rolled into one. Plugging into a normal phone line, users can also send text messages and picture messages with audio clips using the video feature. It also provides limited internet access to news, sport and shopping sites. The E3 retails at £99, with the cost of using the services added on to customers' normal phone bills. Because the main feature - the videophone - can only be used between other E3 users and is not compatible with 3G mobiles, Amstrad will sell a pair for £179. However, the videophone cannot be used overseas ("So you can't see Granny in Australia when you chat," explains Sir Alan helpfully), while the "pay as you go" costs (15p per email session plus local call rate; 50p per video call plus the cost of the call; 5p per minute for internet use and 50p per text message sent) seem high.

Sir Alan rebuts the idea that the E3 is only for "retired Saga readers or brain-deads who couldn't operate a PC", saying that 60 per cent of the 380,000 registered e-m@iler users already had a computer. He admits that the product only has a shelf life of around two years before it will become outdated and refuses to be drawn on how many sets need to be sold to break even. But he says each E3 will pay for itself after three months' use because of the revenue it generates for Amstrad from its services and the advertising pop-up windows that appear on the screen.

But isn't he underestimating people's ability to use conventional computers that offer many more services than the E3? "This product has four years' history," he retorts. "I know the market very well. The product will sell in large quantities."

"It's a unique product," pipes in commercial director Simon Sugar (Sir Alan's son), in an attempt to lighten the mood.

Do you find it a challenge to prove your critics wrong then? "It's not a challenge," Sir Alan shoots back. "You prove yourself wrong." Now he is on a roll, and moving to his favourite subject: what's wrong with the City.

"I have seen the analysts and media bullshit. Sucking up to them and pushing up their share price. One thing you can't argue about is profits. Amstrad is making profits. Symbian [the mobile operating system concern] and other companies are not.

Where are companies like Autonomy [whose share price has gone from £40 at the peak of the dot-com boom to around £1.90 today] now?"

Sir Alan is certainly right about one thing: Amstrad is in the black.The group made a pre-tax profit of £7.1m for the six months to the end of December last year. And with Amstrad reporting full-year results this week, analysts are forecasting pre-tax profits of £14.8m on sales of £62m. As well as the e-m@ilers, it makes set-top boxes for Sky and its Sky Plus personal video recorder, and also sells hi-fis.

One City analyst, who did not want to be named, says: "This new product is more an evolution of technology than a revolution."

But Trevor Brignall, the director of business development at consultancy Cap- gemini, argues that the company does not need to reinvent the wheel to be successful. "Amstrad is not trying to be the leading edge in innovation but it is offering something that does not exist in the market.

"We are moving into a multidevice market. At the moment, there is no killer device which can combine PC, mobile and camera applications, for example, into one affordable and manageable device."