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Wednesday, 28 January 2009 20:10

ASUS fighting at the top may spawn new brand

By
The Pegatron Eee anyone? This week Taiwan "Business Today" magazine broke the news of titanic power struggles between Asustek chairman Johnny Shih and OEM breakaway boss Tung Tsu Hsien, strongly suggesting Hsien will establish his own brand.

This story broke in Taiwan in their “The Economist”-like business periodical, “Business Today.” This publication is printed in Chinese.

Fortunately, those savvy lads at TweakTown had the article translated. You can find their breaking news here , including both a scan of the original Chinese text as well as the translated English version.

TweakTown have performed a tremendous service to the interested tech community because it seems Business Today have no English edition, whether in print or online.

ASUS is a big name; they've long been producing quality PC components and are the manufacturers behind many a laptop and gadget released under the name of different, major, brands.

ASUS laptops were known for their power-packed value as well as a distinctive style. This includes a Lamborghini-influenced laptop with leather trim, which I myself proudly owned.

ASUS are also the people behind the Eee netbook – the original subnotebook that spawned the current crazy fad. In a world where most were thinking beefier specs were the way to go, ASUS dared to come up with something so ridiculous – a Celeron-based, 512Mb, 7” super-portable – that was a surprising runaway success.

So, when I read that ASUS execs were fighting and there's a real possibility of a splinter group setting up shop I certainly paid attention.

Johnny Shih and Tung Tsu Hsien are the two founders of ASUS. It is Hsien who is largely credited for building up the ASUS brand to be a strong name in the marketplace. Yet, he was unexpectedly forced off the ASUS board. He was relegated into the position of Chairman of Pegatron – Asustek's breakaway OEM division who are tasked with competing with the likes of Foxconn and others.

Observers remark that interactions between the two men were noticeably poor during the media event which announced the creation of Pegatron and named its chairman.

It appears tensions had been brewing for a long time. Way back in 1997 Shih planned to enter the notebook market but was opposed by the then sales director. So, Shih appointed a long-time family friend, Jonathan Tseng to do it. Tseng and Shih were schoolmates and Tseng married Shih's sister so there is a long and close relationship evident. Today Tseng is the Vice-President of Asustek.

During a shareholder meeting Shih was questioned why he had arranged the appointment of such a close relative. It is rumoured Hsien was the agitator behind the question.

Please read on ...


Tseng came to ASUS with a distinct management style. He set regulations and key performance indicators for sales and marketing. He reviewed board papers. He was right on the ball when it came to monitoring and managing financial performance.

Hsien, by contrast, still acted in the fashion of a contemplative company founder rather than the owner or director of a big business.

At the time ASUS announced their plan to separate the branded and OEM portions of the business the board included Shih, Hsien, Tseng and other directors who were managers that had been promoted by Shih.

Business Today's writer believes that Hsien did not wish to leave the branded arm of ASUS, but had little influence over the board, resulting in him moving to the OEM business – now called Pegatron.

Despite possibly not having the right management style for a numbers-focused hard-nosed board, Hsien, it turned out, was pretty popular with the workforce. He'd looked after staff and was personable. Consequently, many influential staff from ASUS' Research and Design and industrial design teams followed Hsien to Pegatron. Shih consequently donated 800,000 of his own ASUS shares to 14 senior managers to prevent any further defections.

In September 2008 an ASUS director leaked a rumour to the media that ASUS would release Pegatron stock and form an alliance with Foxconn. The reason given was allegedly to test the market.

This strategy was not discussed with Hsien who angrily declared he would not release stocks and that he did not want a competitor to become a shareholder.

The rift between Shih and Hsien grew over this matter, with both parties angered by the other's meddling in their manner of conducting business. To many senior staff the relationship between the two men was long dead and buried.

Although ASUS and Pegatron are still linked, the Business Today author is of the opinion there is a mounting power struggle between the two ex-partners, with Hsien still harbouring ambitions of being in charge of a major brand.

The author believes Pegatron are testing the market by taking on design contracts and assessing how well these are received. It is likely, he believes, Pegatron will seek to launch its own products – competing with ASUS and even competing with Pegatron's own customers, the companies who pay them to implement their own designs.

With ASUS having reported a massive loss – its first ever quarterly loss – of NT$3,000,000,000 in Q4 2008, Shih had best keep one eye on the balance sheet and another on his former friend.

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David M Williams

David has been computing since 1984 where he instantly gravitated to the family Commodore 64. He completed a Bachelor of Computer Science degree from 1990 to 1992, commencing full-time employment as a systems analyst at the end of that year. David subsequently worked as a UNIX Systems Manager, Asia-Pacific technical specialist for an international software company, Business Analyst, IT Manager, and other roles. David has been the Chief Information Officer for national public companies since 2007, delivering IT knowledge and business acumen, seeking to transform the industries within which he works. David is also involved in the user group community, the Australian Computer Society technical advisory boards, and education.

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