On the ropes, Apple’s China nemesis still dreams
BEIJING, Feb 27 — Yang Long-san, Apple’s nemesis in a battle over the iPad trademark in China, once strutted the expo halls with dreams of market dominance. His company, Proview, may now be in ruins and his most valuable asset a disputed trademark, but those dreams remain intact.
“My biggest wish is to resolve all these frustrating problems and put them behind me,” Yang said in a recent telephone interview. “If we can resolve all the problems we have now and I have a chance to make a comeback, I’d still want to overtake my old competitors.”
Much of that will depend on whether he wins a long-running dispute over ownership of the trademark in China — Apple’s second-biggest market by revenue. Although a recent decision by the Shanghai district court to reject Proview’s demands that Apple stop selling the iPad was a setback for Proview, the case is still to be heard in the higher court in the southern Chinese province of Guangdong Wednesday.
A decision against Apple there would set a precedent that would create an uphill battle in other cases in lower courts around China. Local media have said Proview is seeking up to 10 billion yuan (RM4.8 billion) in compensation.
Proview’s fortunes may currently be the polar opposite of Apple — one has creditors at the door and the other is the world’s most valuable listed company — but both illustrate how the fickle world of technology can make or break a company.
Yang and Proview rode the first wave, when every home and office desk had to have a computer, and a screen. For Apple, the last decade has seen it ride the crest of a new wave where the computer moved from a commoditized, clunky desktop to a fashionable mobile consumer device.
Proview may now be a shadow of a company, trying to convert its last major asset into cash, but it was not always so. “They definitely existed,” says IDC analyst Rhoda Alexander, who covered them for a while. “They were a significant manufacturer and a major player.”
Yang and the late Apple CEO Steve Jobs were born just a year apart — Jobs in 1955, Yang a year later. An engineer by training, Yang worked in the electronics industry before founding Proview in 1989 in Taipei. At that time, a Jobs-less Apple was struggling for direction: that year it released the bulky, overpriced Macintosh Portable to underwhelming reviews.
Yang, meanwhile, was building a strong brand in the cut-throat computer display business: within a decade of its founding, Proview had nearly four per cent of the older style CRT monitor market and 12 per cent of the newer, flat screen LCD market. This was the era of the desktop computer: in 1990, according to eTForecasts data, fewer than 22 million desktops were sold. By 2000, there were 98 million.
But Yang’s plans were bigger.
While Proview had become a respected, albeit second- or third-tier brand for computer monitors, he wanted more. Said one analyst who met him at a computer conference in the mid 1990s: “He was very suave, very bright, very international. He had an angle ... he knew everything about the world.”
In 1997, Proview International Holdings Ltd, the parent of units including Proview in Shenzhen and Taipei, became the first Taiwanese technology firm to list in Hong Kong; in 1999, it announced a deal with National Semiconductor to build an Internet-access device it called the iPAD (Internet Personal Access Device).
It was really a stripped-down PC, with a bulky CRT (cathode ray tube) monitor, a slow-ish chip and running a very basic version of Microsoft Windows. Yang told Reuters in a recent interview that Proview had dedicated significant resources to develop its iPAD, whose design could later be found in now-defunct Compaq’s iPAQ Internet Device.
Yang was also busy building market share in monitors. In April 2000, Proview cut a deal with two smaller monitor makers, MAG and CTX, to share resources. In 2003, Proview also announced a deal to build a range of display-oriented gadgets under the Motorola brand and, four years later, it teamed up with Taiwan electronics giant Tatung, which took a 16 per cent stake in Hong Kong-listed Proview.
By then, the global financial crisis had hit.
In June 2008, Proview reported its first loss and was grappling for salvation. The Tatung deal, it said, “will significantly enhance the Group’s performance in the coming years.” The next year, there was no mention of the Tatung tie-up.
In September 2009, its Brazilian subsidiary had filed for bankruptcy protection and Proview International was running into serious problems. Yang had in early 2008 transferred his around 30 per cent stake to his son, and by late 2009 was lending his own money to the company.
When a company sought to buy the group’s IPAD trademarks, lawyers sold them on December 23 for £35,000 pounds (RM175,500).
Two weeks later, Proview stock, which had been languishing at around HK$0.25, doubled in a few days on heavy volume. The company was forced by the Hong Kong Stock Exchange to say it was unaware of any reasons for the sudden interest.
On January 27, Apple announced the iPad.
A week later, with Proview shares still trading heavily, the company conceded the truth of a report by Beijing Daily that China rights to the IPAD trademark were owned by its Shenzhen subsidiary. It was now clear Proview had sold trademarks to Apple — but not all of them.
With strong interest in the iPad ahead of its April launch, Proview was now sitting on something infinitely more valuable than any of its assets.
Now Yang was being pulled in all directions. Much of Proview’s debts were short-term, he said later, and the company had been defaulting on payments as early as December 2008. The Shenzhen subsidiary — the group’s largest operation — was hardest hit, leading to the local government corralling the banks it owed money to support the company.
“Proview had a glorious past in Shenzhen and they wanted to see us survive the crisis,” said Yang. “But frankly, once the debt pile increased and suppliers got into trouble, the whole thing ballooned and that led to the factories closing down.”
By early 2010, the banks, too, were after whatever they could recover.
And creditors were not only going after his group’s assets in Shenzhen; a bankruptcy petition was filed against him personally in Hong Kong on March 4. Yang said creditors were only lending money to the company if he personally guaranteed the loans. “We needed them to continue to support Proview,” he said.
In March 2010, Proview warned of a “significant loss” for the six months to end-December 2009, which would be the last financial results announced. It then hired financial advisers to deal with creditors and come up with a restructuring plan, but the fate of the trademarks seemed to be the company’s focus.
Apple lawyers were firing off letters demanding Proview hand over the rest of the patents. By April, Proview was fending off reports that it was planning to auction the patents, dismissing one press article as “not accurate at all.”
In fact, it wasn’t as clear-cut as that. The only assurances it had given Apple were that it wouldn’t sell them before April 30, a date it then pushed back to May 30, according to Hong Kong court documents. These also showed Proview Shenzhen was quietly trying to transfer the trademarks to a subsidiary, Yoke Technology.
But time was running out. Legal proceedings by Chinese creditors to recover assets prompted the Hong Kong Stock Exchange to suspend trading in Proview shares on May 12.
Two days later, a Chinese court ordered Proview to sell off assets of another Chinese subsidiary, Ningbo Prowell. On May 20, Apple began legal action against Proview in Shenzhen.
The battle to save Proview International was lost.
By mid 2010, Yang had been forced to publicly concede that the bankruptcy proceedings against him were related to him loaning money to Proview; on August 2, he lost the case and resigned from the board of Proview, whose shares were suspended.
The company was effectively moribund: some HK$3.83 billion (RM1.49 billion) was overdue, while loans guaranteed by Yang himself amounted to HK$1.15 billion, according to company filings.
At its peak, Proview had employed 18,000 people and had offices across the world. Now, only a few hundred staff remained, mostly at the company’s Wuhan plant. Its Hong Kong headquarters is empty and its phone numbers no longer work. Only the factory in Wuhan continues to function. The plant in Shenzhen is a ghost town.
All activity centres on the trademark case.
Yang is quick to blame the financial crisis for his company’s downfall; many of his clients in the United States went bust, he said, or were in dire financial straits. He points to Circuit City, which filed for bankruptcy in November 2008. But analysts note many other companies rode the crisis.
Yang remains optimistic he can both win the case against Apple and rebuild his empire. But there are plenty of obstacles.
First, there’s his role: although still, through his son, the controlling shareholder of the group, Yang is a bankrupt in Hong Kong. A Hong Kong court has been critical of his role in the trademark dispute, saying he was an active participant in what the judge called a “conspiracy.”
Yang says that position as chairman of Proview Shenzhen is simply because “creditors in China didn’t want to deal with another person who is not familiar with the company.”
Beyond that, the relationship with Tatung, still a significant shareholder, seems to be on ice. Both Tatung directors resigned in 2011. Yang has engineered the removal of his successor, Elina Hui, as chairman because, he says, “she did many things against the company’s principles.”
Proview has filed a lawsuit against her. It was not possible to reach Hui for comment. The company, which has yet to file annual reports for 2010 and 2011, faces de-listing in June if it cannot submit viable proposals for resuming business.
Yang is undeterred, and convinced he can still take on his competitors. But he does acknowledge he would do it differently now. “Now that I think of it,” he says, “it was a mistake to just blindly focus on expanding. I should have gone after profitability instead.”
“I hope we can return to our glory days. I’m sure our shareholders are hoping for the same.” — Reuters