About ST Jinglun "transformation" and the plight of Revelation

Abstract: Transformation is the company's use of resources, adjusting the industrial strategic positioning, new growth points, or get rid of financial difficulties of major strategic behavior Wuhan Jinglun Electronics Corp. began trying to market at the beginning from the transformation, but the restructuring results worse, 2008,2009 net profit is negative for two consecutive years, eventually ST. from its financial statements, analyzes the reasons for their trouble, focusing on their equity to set problems for the company's transformation to provide reference.

Keywords: stock settings, transformation strategy, * ST Jinglun

1 Case Background
Jinglun Electronics Co., Ltd. (hereinafter referred to as "Company" or "the Company" formerly known as Wuhan Jinglun Electronics Co., Ltd., established in December 14, 1994, the State Torch Plan Key High-tech enterprise, established with registered capital of 300 In 1998 ten thousand yuan on May 28 by the resolution of the shareholders, $ 47 million in retained earnings into capital, the company registered capital increased to $ 50 million. 2000 March 29, the company limited liability company by the overall change Co., Ltd., after the change of the total share capital of 9,202.23 million May 23, 2006, Company shareholders of record on the flow of registered holders of A shares for every 10 shares outstanding receive 4.3 shares of the company total of all non-tradable shares to tradable shareholders, the implementation of 26,660,000 shares of the total price of the company founder shareholders Zhang, Cao, Luo, Cai, Liu shares held and percentage shareholding is as follows.

June 11, 2007, 2007, the company held the first meeting of shareholders, the company name changed to "Jinglun Electronics Corporation." As of December 31, 2010, the company registered capital of 24,604.46 million.

Jinglun lucrative electronics market before 2001, the main business income of 295 million, an increase of more than 50%, net profit of 83.513 million. Listed on the main business income of 363 million that year, net profit of 82.497 million, down 1.23% after the listing, become the first-to-market placement to placement of the secondary market stock holders of listed companies in full, but also China's first all natural persons as promoters of listed companies. Nevertheless, if the industry as the growing public malaise, Jinglun e had to try to transition .2010 April 19, the company that in 2008, 2009 consecutive negative net profit, the stock since April 20 and more "* ST Jinglun." Sets the number of rings in a fine London Electronics, why fall into such a state? 2 Jinglun electronic transition
May 2002 Jinglun electronic distribution of the stock market, according to its prospectus, the company net profit of 83.513 million yuan in 2001 all from the public communication terminals and management systems, to market to raise funds of about 477 million yuan, mainly for public telecommunications terminal equipment projects and public multimedia projects. Prospectus also said it would pay 50 million yuan and foreign senior scientists, engineers, Dr. Xu Xingyi other five individuals in the Shanghai Zhangjiang Hi-Tech Park to set up a joint venture limited liability company, established in late 2002 on 海鲍麦克斯 Electronics Technology Co., Ltd. The fine before the establishment of a subsidiary of London has estimated its 2003 e-sales income of 8,000 yuan, net profit of 6.34 million yuan, sales income 164 million yuan in 2004, net profit of 20 million yuan, this is fine since the first London listed electronics pen investments.

The end of 2002, Jinglun Electronics has invested 10 million yuan and Yu Renrong other three individuals jointly set up in Shenzhen, Shenzhen fine Kam Business Machines Co., Ltd., mainly engaged in the business of electronic components, electronic equipment, and related R & D, sales and technical advice. 2004 4 months, invested 6.6 million yuan and Caiyuan Hong (founder shareholder of the other 41 individuals set up joint venture in Wuhan Jinglun Software Co., Ltd. October 22, 2005, Jinglun Electronics announced its entry into automated teller machines and second-generation residents ID card reading equipment industry projects, and fiscal cash registers in 2006 are expected to achieve 288 million yuan of sales revenue and net profit of 30.55 million yuan, the second generation ID card reading equipment to achieve 94 million yuan of sales income and 14.21 million The net profit of .2006 per year, the company began to plan transition to consumer electronics, car navigation systems select the GPS, and as an important step in the transformation of the company In 2007, the company turned to civilian control products and consumer goods In 2009, refined London E and try to design, IT services transformation. how these investments, as follows:

Taken together, six or seven years, although the investment project lantern-style changes, change is constant loss of performance has been declining and .2003, the company's main business income of 363 million, compared with the expected decrease third, reduced to 257 million in 2004, until the end of 2008, sales of its communications products have only a few thousand yuan. dropping lower and lower main business income, net profit is also a reduction in the natural reduction, net profit since listing changes shown in Table 3:
3 * ST Jinglun transformation dilemma Analysis
Funding from December 1994 to 3 million yuan registered with total assets of 870 million yuan, with a short e-fine London eight years has created a stunning "Jinglun myth", its success is due to the threshold and high-tech talent pursuit, however, when the sun sets in this industry segment, the 477 million carries the essence of London to raise funds invest in several electronic Why missed? reason, from the inside and outside the two factors to analyze.

3.1 External factors - the decline of public terminals
IPO in 2002 on the occasion, Jinglun electronic prospectus and in its interpretation of the media that the public communications industry prospects. In fact, before 2000, public communication terminal industry is indeed attracted a lot of capital investment, increased competition in the industry after , industry gross margin decreased, the rapid Development of mobile communications, fixed-line telephone industry crisis is already emergent, since 2001 there has been withdrawal of money from this industry. Jinglun electronics industry does not appear to predict good prospects of carrying huge amounts of funds raised contrarian And on.

Tel meter is used for an attended public telephone equipment, is the first in the country to get universal access to public telephone equipment, its main feature is a small investment, business Development easy. IC card is a kind of integrated circuit chips phone cards, prepaid balance on the chip, you can roam across the country from 1996 to 2002, the IC card public telephone installed base of more than 1.3 million, issued phone IC card over 500 million, with sales of more than 200 billion, which greatly facilitates the life of the masses, with good economic and social benefits, so Jinglun electronic telephone billing and IC card market with great success, average gross margin of 50% or more, but , the rapid Development of mobile communications will soon put an end to the high gain electronic Jinglun .2001 capacity of China's mobile switch added 107 million (including CDMA, up 78.1% over the previous year, additional 59.552 million mobile subscribers, annual growth rate up 69.8% to a total of 145,222,000. then the public phone users and mobile phone subscribers growing gap between (see Table 4, the domestic telecommunications industry, more and more fierce market competition, falling prices and profits are being squeezed .

Characteristics of the communications industry is one of the biggest hot spot conversion is fast, the industry attrition rate is very high. Development of mobile communication much faster than people's predictions and imagination, it reflects the people's individual pursuit, the more free, more convenient, more innovative means of communication of the yearning, the existing public communication can not do this If you do not change the current mode of operation of public communications, mobile communications comparable to the implementation of new products, new services, new experience, it still does not change the situation increasingly sluggish, and even eliminated by the market.

3.2 Internal factors
(1 repeatedly failed transformation, blind investment, offering money squandered.

On 海鲍麦克斯 Electronics Co., Ltd. is Jinglun a wholly owned subsidiary of electronics, October 28, 2002 in Shanghai Zhangjiang Hi-Tech Park was incorporated into the approved high-tech enterprise focused on developing an electronic electric sewing machine control system, a certain amount of core Technology and intellectual property, but the poor market performance, The main reason, the sewing machine industry, accounting for a large depression factor sewing machine is a durable asset, the market for its quality is not very high requirements. Baomaikesi Development of the industrial sewing machine servo controller series is the core component of high-end industrial sewing machines, clothing industry, upstream, but the market needs of the majority of Technology low, low cost, low-margin products, Bao Maike Sri Lanka can not effectively meet the market demand, so its performance has been unsatisfactory. Shenzhen fine Kam Business Machines Co., Ltd. registered in November 4, 2002, mainly engaged in the business of electronic components, electronic equipment, and related R & D, sales and technical advice which amount of accumulated losses of the company 17.64 million yuan, mainly because of its in the IT category, although the parent company of the communications industry with complementary strengths, but that is private enterprise under the subsidiary capital, Technology, personnel and management have many defects Moreover, a large IT industry's R & D investment, the core technical requirements for high precision Kam Shenzhen can not launch attractive products, they can not compete with those IT giants Wuhan Jinglun Software Co., Ltd. was established and has been dedicated to the public if the industry research and exploration, and the parent company responsible for sales of related products, as mentioned earlier, the declining public telephone industry, the traditional communications electronics products in the market demand has shrunk dramatically, mobile communications to flourish eventually led Jinglun software performance in general , no one concerned about the fate of Jinglun profits and losses of a subsidiary of electronic key as follows:
Overall, Jinglun electronics since listing began while trying to transition, but because the main business market demand continued to slump, new business start slow market, the transition process of the transformation of the arduous nature of the product and the difficulty of lack of knowledge, transformation products of reserves, sales of team-building and market development plan prepared. More importantly, there is no clear strategy, feasibility analysis of investment did not do before, and no serious analysis of the characteristics of various industries as well as the correlation with the main industry, can not find the direction of development for the company, with more of the investment project a speculative state of mind, success will be good, successful company in transition, on the need to continue to practice on the grounds shirk, so blind investment can not stand the test of the market when a project uncertainty, the risk is large, with desperate, eager to hand, is more clear than other prospects do when called upon to rule the same time, the market economy, one of the most important principles of Technology and product development according to market demand, Jinglun electronic transformation is doomed from the market demand will not go very far .

Links to free download http://www.hi138.com (2 best corporate governance structure specious.

Consecutively won the best governance structure of listed companies Jinglun electronics, operating performance has plummeted, the company chairman and general manager Zhang Xueyang Forbes list for two consecutive years the worst CEO list, Jinglun whether electronic corporate governance not imagine the perfect?
Jinglun electronic set can be described as the classic original stake. Issued before the listing, Zhang Xueyang the largest shareholder, Caoruo Xin, Cai Yuanhong, Luo Jianfeng tied for the second-largest shareholder, holding 19.05%, respectively, Liu Tao from 12.35% stake. Market and the split share structure reform, the five promoter shareholders together holding 74.8%, is still in absolute control of position, and still no major change in ownership percentage, the relative balance of shareholders equity, there is a clear mutual restraint function Because there is one-third of all the shareholders of significant events that can not reject the premise, most Zhangxue Yang and equity shareholders of the exercise of any of a veto on major issues, in addition to Liu Qi Tao, the sum of any two shareholders can exercise veto , and through major events, the largest shareholder will need at least two second-largest shareholder support from corporate governance perspective, this is a strong democratic atmosphere, can fully reflect the modern corporate governance principles of equity set samples, which also is Jinglun Electronics has won the best governance structure of listed companies, the reason.

However, the company is divided into two camps five promoter shareholders - led by Zhang Xueyang three "technical school" and the future success of the project have considerable say in the "pro-market." market economy environment, absolute "pro-market" and "technical school" of the dispute should not have, and have a good governance structure of the company, if such conflicts often occur, camp mutual reconciliation and independent directors should play a mediator role, a timely lesson, reduce losses to the company investment mistakes, but the fact that the "technical school" always vote winner with the weak equity, based on this, in essence, the company's actual governance structure has undergone major changes, that is a promoter shareholder in sense, into two, technology is just to send one combined market shares were more than twice the point that the technology to send one to just over two-thirds of the shares of the company to achieve the advantages of making the absolute right to speak, see Table 6, while the absolute right to speak of the emergence of corporate governance is the biggest drawback.

In the two camps of two public dispute, pro-market arguments have a certain
Convincing. Baomaikesi listed at the beginning to discuss investment and other subsidiaries, the Luo Jianfeng accused no formal feasibility study, project a lack of scientific proof. Major restructuring in 2005, Liu Tao has since proposed to control costs, prudent investment reasons are very full, chairman and general manager of its requirements are grouped under the basic rules for listed companies in line, but still won Zhangxue Yang Cao, Cai firm two support Luo Jianfeng and Zhang Xueyang is affinity (according to the annual report a description of the association of shareholders, but this did not prevent irrational investment behavior of their Luo's public opposition, and Zhang, Cao, Cai was able to long in the three major decision-making despite strong opposition from nearly a third of the shareholders remain the same, its unusual degree of unity. Do Cao, Cai and Zhang Xueyang to voting rights they have a private agreement? fact, in the decision-making, Zhang Xueyang very arbitrary, not listening to others opinion, not entirely because of Cao and Cai and Zhang Xueyang common philosophy and stand together, but they are more emotional factors into account, quietly use their equity to support Zhangxue Yang, especially since Zhangxue Yang and Luo Jianfeng Liu Tao rise to immediately, Cao and Cai has a very strong cast in favor of emotional meaning, so Zhang Xueyang achieved "dominance." In fact, not external shareholders of circulation, Luo Jianfeng and Liu Tao from the close vote of two third of total holdings, If the two opposition is justified, can collect to other shareholders the right to vote in circulation, has lost no opportunity is not "technical school" proposal, but the result is that, in addition to oral argument, two people did not make this a real "harm feelings "of the move.

Liu Tao since 2007 the couple first began selling shares, shareholders began to founder reduction, as specified in Table 7. As of June 2010, Zhang Xueyang still stick to their own shares, Liu Tao from the successful reduction of all equity, Luo Jianfeng half cash, Cao Ruoxin fade completely from the company's board of directors, founder shareholders gradually leave, Zhang Xueyang's largest shareholder is also becoming clear.

In addition to internal equity settings, Jinglun electronics in the board of directors remuneration, within the company building the same problems, although sluggish performance of the company, its industrial park off South Complex is stepping up preparation, the main structure of the cap in 2005, the company said it was using its own capital of 150 million yuan, total investment 195 million yuan. In addition, the annual report, its chairman and general manager Zhang Xueyang salary of 318,000 yuan from 2007 up to 346,500 yuan in 2008, its deputy general manager Liao Shengxing of salaries of 244,000 yuan from 2007 up to 26.81 million yuan in 2008 and these are reflected Jinglun electronic problems in corporate governance.

(3 years no dividends, no investment return.

Jinglun electronic listing just really sought after by investors, the stock initially ideal, but with the decline in operating performance, stock prices dropped lower and lower, then, for Jinglun electronic investors, return to their in there? Calendar year following the implementation of its dividend distribution scheme for simple analysis.

From Table 8 can be clearly seen, the company is only listed at the beginning of 2002, the implementation of the over for every 10 shares of $ 4 dividend, after seven consecutive years without a dividend payout, even in the undistributed profits up (1.34 billion in 2004, nor the dividends. Subsequently, the undistributed profits year after year to be swallowed losses this country the majority of listed companies with dividend distribution policy, as many stock dividends, share capital and more, do not assign much less cash dividends of listed companies do not allocate the phenomenon is not conducive to investor confidence and the Board in fulfilling its fiduciary duty to shareholders, listed companies is not conducive to the norms, stable operation.

4 * ST Jinglun transformation of the plight of inspiration
Enterprise restructuring is long-term business direction, business model and their corresponding organization, the integrity of resource allocation changes, the enterprise re-shape the competitive advantage and enhance social values, out of financial difficulties of the process affect the transformation of many factors, in terms of Jinglun mainly in response to drastic changes in the industry on the domestic market, however, Jinglun electronic transition can be said alone but executives stressed that the vision, no clear development strategy, there is no deeply rooted among their strategies to stay live talent, coupled with the fool's governance structure, eventually leading to being "ST" situation from which we can get companies in transition should note the following:
First, we must develop a clear strategy, and the concept of transformation. Concept of the decision of thinking, decided way, the concept of transformation is the prerequisite and basis for business transformation in huge changes in business process, the need for strong senior management involvement, the clear communicated to the lower target of transformation, and transformation of high-level executives and decision-making leadership team on a regular basis and discuss and implement the restructuring intentions must also questioned its feasibility, always concerned about the market conditions. Jinglun Electronics has a great staff part of the background are the technicians, engaged in technical work, on the one hand make people form a meticulous excellence of good habits, but on the other hand easy to make people complacent, mechanically mindset, poor voice their opinions. shows the transition biggest obstacle is how to change the ideas of employees.

Secondly, the management company to carry out the transformation. Stage of development with the company management to adapt to achieve precise management from extensive management to shift from the big, start small, pay more attention to the process, attention to detail, to improve the accuracy of decision-making and guide the work and science, give full play to the modern the superiority of the company as whole is a natural person Jinglun electronics, "dominance" of the harm is obvious, how to avoid corporate decision-making
Third, we must attach importance to personal transformation. Business transformation is actually a collection of employee personal transformation, regardless of how every employee to make a choice, will directly affect the progress of the transformation of even the success of transformation. Got in trouble, how to retain good talent to make a comeback is the key to the success of business transformation. Jinglun electronic transformation more just to stay on the surface, the chairman Zhang Xueyang its own way, most employees do not understand the internal, passive participation, enthusiasm is not high, the efficiency of R & D low, a lot of good employees leave, so companies should pay attention to every employee transition, personal transformation, so as to condense the company as a whole, to help the company out of the woods, its former glory.

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