The Cry of History: Huawei and Harbor 2006

This is an article published by Yin Sheng (WeChat public account: Yin Sheng Values) in China Entrepreneur magazine in 2006. It tells the life-and-death battle between Huawei and the harbor founded by the "renegade general" Li Yinan. It is really a knife soldier passing by, a landslide and tsunami, which is lamentable.

Relive this history today. We may feel the complexity of the real world, the coldness of the mall, and the strangeness of human nature. Ordinary people always invisibly fall into black and white judgments when they encounter things, but in reality, there is almost no black and white distinction. Some friends say that heroes must be tragic. In this soil of reality, those who make meritorious achievements will be bound by it.

The following is the main text. Because it was too long, I blackened and thickened important joints and made them easy to catch.

——

He is a rebellious genius who fled from Huawei's high profile, he has received the strongest support from the world's most powerful venture capital at the beginning of his business, he once desperately went to war with his old owner and was therefore more violently counterattacked, he was once close to the listing and close to the sale, but in the end, the harbor he created for six years was still like a meteor across the sky of Chinese commerce, and finally he was pocketed by the old owner.

Yinan Li/Zhengfei Ren, Gangwan/Huawei, together they performed the most dramatic scene in the history of China's high-tech entrepreneurship to date. In the past month, China Entrepreneur has visited more than a dozen key people from all sides, including Huawei, Harbor and Venture Capital, to explore the truth of the fate of Harbor's failure. Everyone gave their own answers: the founder's innate character flaws, the rush to make a quick start, the untimely industry trend, the ruthless strangulation of the old owners, the short-sighted blindness of overseas funds, and so on.

The "defectors" of large companies, forming "devil's agreements" with overseas funds, exploded in a short period of time, quickly became direct competitors with their old owners and eventually shook the hegemony of their old owners – a business phenomenon that has repeatedly played out in China in recent years. The most famous example is Mengniu/Niu Gensheng challenging Yili/Zheng Junhuai. The difference is that Niu Gensheng and Mengniu succeeded, while Li Yinan and Gangwan failed. Where do cattle roots spawn? Where did Li Yinan lose? Does the outcome of the harbor mean the end of this "defector + overseas fund successfully challenging the old owner" business model in China (at least in China's high-tech industry)?

Just as Intel to Fairchild and SAP to IBM, an emerging company standing on the shoulders of large enterprises, perhaps should learn to find their own "blue ocean", rather than struggling in a muddy "red sea".

Hopefully, tragedies like Harbor's will not be repeated.

June 25th, another weekend. Li Yinan, president of Harbor Networks, came to his office on the second floor of the Harbor Tower as usual. It was a relaxing weekend, there was no more particularly urgent work to deal with today (the company stopped most of its business as early as the end of May), and more importantly, he no longer had to face the angry or disappointed or sad faces of his employees.

In the past 20 days, his heart has been quite restless, as he said in a letter to all employees 20 days ago: "[I] have failed to live up to everyone's expectations of me, and I feel deeply remorseful about this." It was also in this letter that he unveiled an agreement that the board of directors had just signed with Huawei, announcing that the company had sold its main assets (routers, Ethernet switches, optical networks, assets for integrated access, personnel, business, and all intellectual property related to the business) to Huawei, the "sworn enemy" who had "chased and blocked" the company in the past 3 to 4 years.

When he left the harbor network five years ago from huawei's executive vice president position, Li Yinan painted an exciting picture to his followers: turning a dime into a dollar in three years. He doesn't do magic, but he knows what has a magic effect, and that's the stock market and the wealth that comes with it. His successful experience at Huawei made him deeply touched by this, because he himself is the beneficiary of Huawei's "magic". After graduating from college, he joined Huawei, achieved the position of vice president at the age of 27, and soon had the legend of Huawei's president Ren Zhengfei's hot successor, attractive options, internal stocks and flexible job upward space - it is with this "magic" effect that Huawei attracts the best communications talents from all over the country, thus laying the foundation for the status of an international mainstream communications equipment manufacturer.

Now, he intends to go beyond Huawei's "magic" to create a grander cause - otherwise, why would he have to leave Huawei (whether from an active or passive point of view)? He got 10 million yuan worth of equipment through equity dividends and settlements when Huawei left, and imagine if Huawei is a listed company, what kind of a sum should it be? So his "magic" law roughly becomes: more career space, more attractive option incentives, more inflammatory goals (listing) - the logic behind it can probably be distilled into attracting the best talent through this law, and in the communications industry, there is technology and market with talent, which in turn promotes the appreciation of the stock market, thus forming a virtuous circle.

The formula was cleverly designed (and almost one step away from being realized), if it didn't take into account some of the important factors he overlooked. With this formula, hundreds of his more than 1,000 employees could become millionaires and even multimillionaires in the future (almost all of them have stocks or options, ranging from tens of thousands to millions). But now all dreams have come to naught.

The Harbor Tower, the building that once carried the glory and dreams of him and more than 1,000 Harbor people, will likely change its name and surname in the future — at least not to those of them anymore. In 2004, he also planned to build the second phase of the remaining land, and now the first phase of the project only uses half of the 60,000 square meters of land.

Next, he should decide a question that everyone is concerned about: whether to return to Huawei or not?

The rise of "Little Huawei"

"They're pretty smart, they're experienced, they're very knowledgeable about the market, and they're technically stronger. We also see a lot of telecommunications startups in China, and if there is still a chance, it is their team. ”

——Evaluation of an overseas fund manager in an investment harbor.

In April 2000, at Shenzhen Wuzhou Hotel, Huawei President Ren Zhengfei led dozens of core executives to a grand farewell party. A Huawei person who participated in the send-off at that time is still vividly remembering the scene at that time. In the lobby of the hotel, the employees of Huawei's international department sang "Majestic, high-spirited, across the Yalu River" to carry out the mobilization meeting before going to the international market, and in the conference room on the other side, it was the scene of the farewell conference, and the whole atmosphere was very touching.

The farewell party was just for one person, Li Yinan, who was Huawei's executive vice president before leaving his post, and one of the most influential people recognized within Huawei.

Li Yinan, who is 27 years old and is in the high position of Huawei's vice president in charge of research and development, is a rare technical genius, even in today's world where things are not human, the Huawei person still thinks that "he is too strong in technology, especially sensitive to the combination of technology and the market." Huawei President Ren Zhengfei has obviously realized this for a long time, and he has lamented more than once: this boy is too powerful, the problem is too profound, if he wants to make a personal investment, he must invest in Li Yinan. When Li Yinan was at Huawei, he almost regarded him as his son.

Of course, there is another reason for such a high-profile farewell to a person: to show support for intrapreneurship. Around 2000, in order to compress the needs of management and build a strong channel for Huawei's long-overdue data communication products (because it has been based on the operator market in the past, Huawei is very unfamiliar with the channel market), a group of people were encouraged to go out and become Huawei's data product agents.

Why did Li Yinan run away? This remains a mystery to this day. But to be sure, he had already decided to leave as early as the end of 1999. Li Yuzhuo, former vice president of Huawei and now general manager of Beijing Hekang Yisheng Technology Co., Ltd., still clearly remembers the situation when he went to bid farewell to Li Yinan, who had just resigned at that time: "He said to me, 'Go away, let's go, go early and be early'!" I didn't understand it at the time, but now it seems that he may have been sure to leave. "In addition, there are also rumors that he left because the adjustment of his position at that time was not smooth.

Ren Zhengfei certainly did not think that this "son" who he had high hopes to help Huawei be the big data market, at the moment, he may be thinking of two other things: financing and digging people.

Li Yinan, who joined Huawei in 1993, knows too well the reasons for Huawei's rapid rise. Huawei, which started with 24,000 yuan in 1987, has reached sales of 22 billion yuan and a net profit of 2.9 billion yuan by 2000. Huawei's "miracle" is nothing more than four reasons: one is to seize the great opportunity of switch replacement; the second is to invest heavily in the development of products with leading levels; the third is to attract the best communication graduates in the country and make them always maintain a strong fighting spirit; and the fourth point, that is, a series of incentive measures centered on employee stock ownership. But at this time, Huawei's mature system has greatly reduced the marginal effect of incentives.

He wants to copy the Huawei myth, first of all, there is no shortage of time, a huge broadband data communication market is taking shape. At the same time, recruiting mature technology R&D personnel can provide a low-cost solution for product and talent strategy. In addition, opportunity is not difficult for startups, only funding is an issue. Attracting venture capital and going public is clearly the way to go.

The weight of the three words "Li Yinan" in Huawei is really not light. Soon, in 2001, hundreds of core backbones of Huawei's R&D and marketing system joined the harbor. Among them are Peng Song, former vice president of Huawei's domestic marketing, and Lu Xin, former general manager of Huawei's data communications department, which he established. At the end of 2003, Huang Yaoxu, who was also a Huawei department, also led the Juntian Technology he founded to defect to Li Yinan. Later, the harbor from the organizational structure, organizational culture, working methods, and even work and rest time are no different from Huawei, the name "little Huawei" came from this.

According to Huawei's pressure principle (concentrating superior resources to do one thing in a certain period of time), initially, Harbor also formulated a strategy of "leading the broadband market locally" for itself, and the result was that it was successful, and soon formed a good reputation in new broadband products and new applications. In November 2001, Harbor was the first in China to launch a rack-mounted Ethernet backbone switch; in January 2002, Harbor was the first in China to launch an ADSL/VDSL hybrid plug-in high-capacity rackmount IPDSLAM system; in May 2003, Harbor was the first in China to launch a T-bit core router that supports OC192 interfaces. Harbor even claims that "the most widely used and mainstream products in the construction of these broadband networks are 12-18 months ahead of major domestic competitors", including Huawei, of course. The market also recognizes its products. According to an employee of the Guangdong area of The Harbor, the first product was "simply crazy" in the market, including a project in Ningbo Netcom that won the bid of 30 million yuan.

At the same time, venture capital institutions have expressed their favor for Li Yinan and his harbor from the beginning. In May 2001, AVCON, an internationally renowned venture capital firm, and Hong Kong-based Loong Kechuang Investing invested a total of US$19 million (of which WARBURG PINCUS was US$16 million) in the nascent Harbour Company.

A fund manager who was in charge of the case at the time said in an interview with China Entrepreneur that they valued the technical background and market performance of Li Yinan and his team. "When I came into contact with them, his products had already been sold to Hutchison Huangpu, and Netcom International began to adopt them. They are quite smart, experienced, very familiar with this market, and technically strong. We also see a lot of telecommunications startups in China, and if there is still a chance, it is their team. ”

Indeed, its advantages in some respects were revealed very early. "Its rapid product development capabilities and rapid product penetration capabilities are very strong, and it has seized good opportunities in the past 5 to 6 years, including broadband intervention, high-speed Ethernet exchange, etc., and product launches are also relatively fast." Zhang Ying, vice president of Analysys International, commented.

Five years later, in May 2006, when Ren Zhengfei shook hands with Li Yinan at the headquarters of Huawei 3COM in Hangzhou, he also recognized Gangwan's ability in this regard in his speech. "Although we are only part of the lawsuit with you about intellectual property rights, many of your ideas, such as the idea of multi-service transmission to develop transmission products, ether switches also have a lot of self-developed things, this is still to be affirmed, I hope to join Huawei."

But what Li Yinan did not expect at the time was that it was these former Huawei employees and the products they developed that were used by Huawei to create an intellectual property lawsuit at the critical moments of his subsequent two listings and negotiations with Siemens, thus disrupting his overall deployment.

The above-mentioned Huawei person said in an interview with China Entrepreneur, "We have more than 1,000 people, we have been doing things for two or three years, and he has made things for three or fifty people for a year. He (Harbor) entered the telecom operation market, and the bidding price was low, mainly because he did not need to develop, and many technologies and even codes were stolen from Huawei. ”

In fact, Li Yinan has been making a bet with himself that Huawei may not have time to take care of the harbor because of the challenges he faces (in 2001 Ren Zhengfei published "Huawei's Winter", in 2002 Huawei's history for the first time in the history of negative growth); for the harbor, Huawei's suppression is inevitable, with Li Yinan's intelligence and understanding of Ren Zhengfei, he cannot not expect it, but he only needs a time difference - Huawei from the realization of his threat to the final response time, as long as this time is long enough, It will be able to make the harbor grow rapidly and complete the listing, and then it will be difficult for Huawei to fight again.

Although Huawei quickly increased its efforts in the data market and began to exchange fire with the harbor, the harbor still achieved quite good results. In 2003, its annual contract sales reached 1 billion yuan. According to CCID Consultants, by 2003, in the field of broadband IP products, the market share of Harbor had reached about 7-8%, while Huawei was only 10-15% in the same period. Almost at the same time, it has also stepped up its breakthroughs in markets other than telecommunications, such as enterprise networks, and by 2004 its sales ratio in the telecommunications market and other industry markets had been halved.

Venture capitalists are also continuing to increase their weight. In May 2002, Warburg Pincus and Dragon Science & Technology Venture Capital invested another US$37 million and US$5 million in Harbor, respectively, and also provided $35 million in bank loan guarantees for Harbor. In March 2004, WAR HOLDINGs, together with TVG Investments and Temasek Holdings, injected US$37 million into Harbour.

Everything seemed to be going smoothly.

An opponent who has been cornered

"If Harbor is ultimately successful, either going public or selling to foreign investors at a high price, it will have a huge demonstration effect on Huawei people." You must know that Huawei has many old employees, and they all have enough capital and technology to start a business. A Huawei person explained, "This is obviously shaking the foundation of Huawei!" ”

From 2001 to 2002, it was a watershed moment in Huawei's history. From the perspective of sales, Huawei's sales reached a record 25.5 billion yuan in 2001, which seems to have nothing to do with the cold snap of the global IT industry. But Ren Zhengfei published his famous article "Huawei's Winter" that year. In 2002, Huawei experienced the first negative growth in history, with a turnover of 3.5 billion yuan less than in 2001. However, these are only superficial, and Huawei is also experiencing the most serious challenges in history within the company.

Five years later, when Ren Zhengfei shook hands with Li Yinan again at Huawei's 3COM headquarters in Hangzhou, he described the situation this way: "From 2001 to 2002, Huawei was in internal and external difficulties and on the verge of collapse. When you leave, Huawei is very weak and facing a lot of pressure. Many people, including those inside, have followed your example in driving the division of the company and stealing technology and trade secrets. At that time, Huawei was filled with a crooked atmosphere, shouting the slogan of 'the early days of capital were dirty', and in droves of risk speculation, they jointly stole the company's technical secrets and trade secrets. ”

It is understood that there are more than 3,000 employees from Huawei, and a large proportion of them have chosen to start a business, most of them also use Huawei's technology to simulate Huawei's operation. Among them, the harbor is the largest.

Ren Zhengfei is a person with a strong sense of crisis, extremely sensitive to potential opportunities and dangers, and acting fiercely and accurately. Li Yuzhuo, who once served as vice president of Huawei, has a deep understanding of this: "He can often think of danger in peace."

For example, in 2001, when most people were still cheering for China's IT industry to thrive in the international IT cold, Ren Zhengfei had already popularized "Huawei's Winter" in the company, and had already sold its high-quality asset Huawei Electric for 6 billion yuan in cash as a "cotton jacket" for the winter. While other companies were still slimming down and throttling for the winter, he had begun to gamble on 3G and act to seize the opportunity of winter. While the global economy, including IT, is booming, he is already seeing the coming winter. Li Yuzhuo still remembers that when he went to Shenzhen to meet Ren Zhengfei in 2005, Ren Zhengfei saw him and said: "Don't do it, many small and medium-sized enterprises will die, and the ice age has arrived." ”

In fact, Li Yinan seems to be unsuspecting about this, and the method of digging people in the harbor is becoming more and more bold. For example, Harbor will first privately buy the core backbone of Huawei's market and R&D department, and then these people will not leave Huawei, but specifically avoid projects in related research and development fields or related markets for the needs of Harbor. It is said that it even bribed an employee of Huawei's Beijing Research Institute to use the company's resources for research and development, and then Gangwan and it jointly established a joint venture.

Huaping Venture Capital has also expressed concern about Li Yinan's strategy of copying Huawei from employees to systems to operations to customers, but still believes that it is not a big deal. "Its product line is very similar to Huawei's, but it is quite balanced in all aspects, such as operators, enterprise networks and overseas, as for competition, everywhere is inevitable." The fund manager interviewed said.

But they all miscalculated. Ren Zhengfei was angry when he learned that Li Yinan, who had once regarded himself as his own and had sworn to help Huawei develop a data market a year ago and strictly abide by the prohibitions of the same industry, had actually shaken Huawei's foundation.

Ren Zhengfei immediately issued a "must kill order" against the harbor. In 2002, Huawei officially withdrew the agency right of the harbor and sent heavy troops to increase its market development efforts. In 2003, a joint venture was established with 3COM to specialize in the low-end data market. In 2004, Huawei's joint venture with 3COM was already working well, and the lawsuit with Cisco had come to an end, and the famous Huawei "Hong Kong Office" was established at this time.

There are two basic principles of "hitting the port": one is to let the harbor have a turnover and make no money, and the other is to never let the port be listed. To this end, Huawei has issued a dead order for the internal: if the office loses the order to ZTE and Cisco, it does not matter, the loss of the single to the harbor will be punished; for customers they are a big project to send in vain, already using the harbor equipment, Huawei buy back, also buy one get one free, scrap the harbor bid; also carry out the "anti-digging" campaign, the harbor access network product line R & D personnel were Huawei a pot end. It is said that Huawei's "hit the port" fund for this purpose is as high as 400 million yuan a year, and in the same year, the receivables of the harbor are as high as 400 million yuan.

Soon, the harbor felt that the market was difficult to do. "Before 2005, Harbor did have technical advantages in terms of exchange, access, high-end routing and other products, and as a new company, it gave people a strong sense of vitality, especially in 2003, everyone was full of passion, and many of the solutions and views we put forward often made customers refreshed." But by 2005, Harbor R&D could not keep up with the development of the market, many new features could not be fulfilled, after the market declined, many promises to users began to fail to be fulfilled, which is a vicious circle. Mr. Xu, who used to work as the head of the local office, recalls that he is now a director of the business unit of harbor enterprise network.

By 2005, Harbor's domestic market performance had stalled. This year, the port's public post-recognition revenue was 125 million US dollars, but only 83 million US dollars in China, unchanged from the previous year. What is more serious is that this year, there was even a situation in which all domestic telecom operators collectively withdrew DSLAM products from Harbor, becoming only ZTE, Huawei and Shanghai Bell Alcatel as the main suppliers, and this product was one of the main profitable products of Harbor at that time. At the same time, Harbor has mainly been able to pick up some small orders missed by Huawei employees, and later even a few hundred yuan of small orders Huawei did not let go.

In order to fundamentally get rid of the predicament, Harbor has always hoped for one way out, that is, listing. "If the listing is successful, the possibility of Huawei's acquisition is worth considering, in which case, the strength of the harbor will be greatly enhanced, because the communication equipment industry is a high-input industry." And it should sell for a decent price, just like ZTE. Wang Guoping, manager and senior analyst of the industry analysis department of China Galaxy Securities, said.

However, "resolutely not letting go public" is one of the two basic principles of Huawei's "hong Kong".

In August 2004, at a critical juncture when Harbor launched its first impact on overseas IPOs, Goldman Sachs, the investment bank in charge of underwriting at the time, received an email from an "anonymous person" claiming that Harbor was suspected of creating false sales figures. Suspecting that some of the sales data in the e-mail came from within the company, the audit committee of Harbor hired a well-known independent investigation company in the United States to conduct a comprehensive investigation of the company at the end of August of that year, but found no evidence of leakage of sales data from within the company. EY also re-examined the sales contract of the harbor and did not find any fraud in the contract.

About two years later, a first-person post on the communications industry's famous website "Communicator Home" began to circulate, with the headline "HW GW Information Security Story, Written in the Days Not Far from Holding Hands!" From October 2003 to July 2004, a Huawei employee (the "I" in the text) was ordered to break into the harbor's internal information system and take the information. Although it is not known whether it is true or not, it shows the concentration of gunpowder between the two companies during this period.

The big picture is beginning to become more and more unfavorable to the harbor, and the biggest impact is undoubtedly the inflection point of intellectual property protection has emerged.

At the end of 2004, China's Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases of Infringement of Intellectual Property Rights came into effect, which significantly lowered the "threshold" for criminal sanctions for intellectual property crimes. In May 2005, three of Li Yinan's former colleagues at Huawei were sentenced to two to three years in prison by the Shenzhen Intermediate People's Court in Guangdong Province for infringing on the intellectual property rights of the original owner Huawei, known as the "Huke case." According to an unnamed person, it is difficult to say clearly that Harbor was able to launch new products in such a fast time and recruit so many Huawei employees. The impact of this series of events on companies trying to work with Harbor will be enormous.

In September 2005, just as Harbor Launched its second public launch, the Legal Department of Harbor Network received a letter from a lawyer from Huawei, saying that it would file a lawsuit against Harbor Network for infringing its intellectual property rights. Huawei's strategy is undoubtedly right. According to a fund manager who handled the Harbor Project, China Entrepreneur told China Entrepreneur that after the Enron incident in the United States, the government department has been quite cautious in dealing with listing matters, simply "preferring to let a thousand good companies miss rather than let a bad company mix in." In the process of Applying for Listing twice in Harbor, the U.S. Securities and Exchange Commission received a large number of anonymous letters, "Once you receive such a letter, the whole process is dragged down, and in many cases you can only stop it."

The manager also revealed that the US Securities and Exchange Commission has never said that the harbor is not OK, and the second application has been passed until the end of 2005, but the investigation of the CSRC and other departments has been inconclusive, and the original information of each key person in the harbor and other people related to the listing must be sent to their relevant departments for verification one by one. "It's hard to have a concrete result without two or three years." At this time, "the capital chain of the harbor has been on the verge of breaking, and venture capital funds cannot be provided forever." The fund manager said.

But for the harbor at the end of 2005, there was no way out except to cooperate with other equipment manufacturers, including the sale of assets. Previously, Harbor already had OEM cooperation with Siemens, and Siemens had the intention of re-entering the data communication market at this time, after he had sold this part of the asset to JUNIPTER. On December 23, 2005, Siemens formally signed an acquisition agreement with Gangwan to purchase Gangwan's main products for US$110 million, and the Harbor Network, which sold its core assets and technologies, has been changed to Siemens OEM business.

But the agreement was never formally enforced. It is said that it is mainly because of Huawei's influence. Huawei has established a joint venture with Siemens to engage in TD-SCDMA research and development of Dingqiao Communications, and has also signed cooperation agreements in other fields, and its importance to Siemens is not comparable to that of the harbor. In addition, the issue of intellectual property rights has always been a question that no one dares to neglect. It is said that since the second half of last year, Siemens obviously feels that Huawei's enthusiasm for cooperation is cooling down day by day, so Thomas Ganswindt, CEO of Siemens Communications Group, who has not been in office for a long time, has been in a hurry to find Huawei President Ren Zhengfei to communicate, and it is also said that Ren Zhengfei personally wrote him a letter. The final result is conceivable. However, this may not be the whole reason why Siemens eventually abandoned Harbor, because it had just recently passed an agreement with Nokia to merge its communications equipment division, and it was likely that this negotiation had already begun when it signed an agreement with Harbor.

At this point, almost all the gates of survival have been closed to Li Yinan and his harbor.

Genius is partiality

"The time and place are favorable, and we lack people." A senior manager of The Harbor was bitter in an interview with China Entrepreneur.

"Success is also Xiao He defeat is also Xiao He", the fund manager used such a word to describe Li Yinan. And one harbor employee used the phrase "genius is partial talent". The two people's evaluations are so similar. In their eyes, Li Yinan is a technical genius, but not a competent business leader; the technical genius makes people admire him for following him and obeying him, so that venture capital institutions initially choose him, and incompetent leaders take the harbor to death.

Li Yinan's old colleague and friend Li Yuzhuo agreed with this evaluation. "I'm not afraid that Huawei will suppress it, but I'm worried that he doesn't have the experience and ability to run a business." He believes that Li Yinan is not ready to fully lead a company (especially a company that intends to go public), because although Li Yinan has achieved a senior position at Huawei, he has basically never left technology, and there is almost no opportunity to think about problems from the height of an entrepreneur, while a good leader in technology and a good leader in a company are obviously different, the former requires a leader's forward-looking vision and technical smell, while the latter is a more comprehensive role.

Li Yinan's mantra is "I don't care about the specific things of the enterprise, 'who is who is who', I handed it over to you!" "Typical Ren Zhengfei extensive management style. But in the view of Mr. Xu of the Harbor Enterprise Network Department, "I think the extensive management model is suitable for extensive people, extensive people are often very charismatic, as leaders, they reward and punish clearly, fair and just, as far as possible to consider the interests of brothers, in this case, the extensive model will make everyone passionate, making many impossible possible." I feel that Ren is such a person of character. And Harbor doesn't have people with such character. So, here, the extensive becomes a kind of loophole-filled net, and everyone wants to fish in muddy waters. ”

In 2004, when the company was extremely difficult and rumors were flying, Li Yinan never stood up and took a stand. In this year, there was an information theft incident on the eve of the listing of the harbor, and then the rumors about the falsification of the harbor also arose, and an article on the Internet called "My Wandering Days in the Harbor" was a detailed description of the various things in the harbor. The hearts of the people in the whole harbor are fluctuating, and a large number of core employees are lost. "At this time, both internal and external were anxious to hear an authoritative voice, and this voice was obviously only he could give under the circumstances."

At the same time, the vacuum of authority led to the factional struggles below. Harbor has 4 vice presidents, Tang Pengfei is the CTO, but the main task is overseas market and strategic cooperation, Peng Song is responsible for the domestic operator market, Lu Xin is responsible for the domestic enterprise network market, and Huang Yaoxu is responsible for the internal management of the company. However, according to insiders in the harbor, none of these people can make up for Li Yinan's shortcomings in management and leadership, and the result is that no one will obey anyone. As a result, "some people think they should be leaders and thus engage in political games with others." It is said that the directors of Gangwan's 28 offices across the country experience a major shock every year, and the most prominent one was in 2004, in order to consolidate their respective forces before going public, the result was that the office directors were replaced and the staff was replaced.

"The company has never formed a core value, nor has it a clear sense of direction, the speculative atmosphere is very strong, and it cannot withstand a little twist and turn." A harbor research and development personnel helplessly told reporters. When Harbor's first listing failed in 2004, the fragility of this speculative culture quickly emerged: a large number of backbones left one after another, said to exceed hundreds of people, including vice president Wang Bin, who is said to be one of the most capable people in the development of harbor projects, and later went to Huawei 3COM, and is now the company's vice president of marketing, even executive vice president Peng Song (also the company's nominal number two person, this jun accumulated a large number of operator relationships when he was at Huawei, and he called a large number of old subordinates after he arrived at The Harbor At its peak, it was said that almost all the directors of the Harbor Office were his concubines), and at this time, he also had a retreat, but was left behind by Li Yinan.

Venture capitalists clearly see this. In the routine board meeting, Hua Pingping criticized the most is internal control. "But Li is more stubborn, very personal, basically did not listen to it, even if he listened, he also executed, but there is always a long distance from our expectations." The fund manager said. In his view, if the company grasps internal control early, it may be able to reduce or even avoid subsequent information leakage incidents and cause a fatal blow to the listing.

During this period, investors also considered finding a helper for Li Yinan to share part of his work. Wu Mingdong, the CFO and "IPO expert" who came to Harbor in early 2004, was introduced by investors and recommended some professional managers from multinational companies such as Cisco. But "Li is the spiritual leader, many people come out with him, hug a group, and it is not easy for a person to be accepted when he comes into the market." As a result, Wu also left the company at the end of the year, and half a year later he successfully listed focus media operations. Warburg Pincus, known for its involvement in the investment company's operational decisions, did not use its majority shareholder power this time.

However, Li Yuzhuo has also proposed another solution - reconciliation. When he met Li Yinan about 1 year ago, he said whether to let him go to Ren Zhengfei for Li Yinan, admit a mistake, discuss a solution, and fight for a respite, but Li Yinan refused. "No matter what you do, it's only a few hundred million, and you're only a billion, and compared with Huawei's tens of billions, you're shaking a tree." In his opinion, if Li Yinan really confessed his mistake, Ren Zhengfei would not necessarily have to beat him to death with a stick.

For Li Yuzhuo's suggestion, a vice president of the harbor immediately said that "ordinary people absolutely cannot do it." But he believes that competition is similar to war, and war may be a continuation of politics, but the final competition in war is strength. "There is still a gap in strength, and the difference is too far. You have to be smart and clever to get rid of this knot to some extent, not to go through it. Maybe in this regard, you are aware of it earlier, avoid it earlier, including in some business, similar to suggestions, resolve some contradictions, do more work, it may be better. ”

On June 6, after the company and Huawei officially announced the news of the acquisition, Li Yinan wrote a letter to all employees, and in credit, he apologized to the employees with an apologetic feeling: "Due to the lack of knowledge and ability of the management, especially myself, there are many deficiencies in the formulation of the company's strategy and internal management, missing the opportunity of enterprise development, failing to live up to everyone's expectations of me, and I also feel deeply remorseful for this." ”

The fund has done its part

"At that time, if it wasn't for the purpose of going public, we just made this company, and the practice may be different, and the result will be different." If venture capital had not been introduced at that time, wouldn't it have been possible? It may also be possible, but not so fast. The winner of the prince and the loser of the Kou! A harbor executive reflected on this.

When Ren Zhengfei spoke with Li Yinan and others in Hangzhou on May 10, one of the main issues was that Huawei hit The Harbor, not because of the Harbor itself, but because of the venture capital institutions (which he called funds).

"The real starters are Western funds that, after failing miserably in the U.S. IT bubble, turn to China to hollow out Huawei and steal the intangible wealth it has accumulated to get out of their predicament." ...... We feel the power of the fund with a huge threat, and if we give up competition there is only one way to die. If the fund does this and wins a comprehensive victory in China, then it will be a disaster for China's high technology, and it will affect Huawei alone. Therefore, laissez-faire is a tragedy for a mismanaged company like ours, and we have no way back, only to fight the fund resolutely. ”

Fund managers interviewed anonymously apparently disagreed. In an interview, he said that this is just an excuse for Huawei, "It is not that we encourage Li Yinan to come out, nor do shareholders persuade him to dig people, when we invested in it, Harbor already had its own products, and sold to large operators such as Netcom and Hutchison Whampoa." ”

The truth is that venture capital funds have indeed spared no effort in supporting the harbor over the past 5 years. According to statistics, from 2001 to 2004, a total of 98 million US dollars of investment and hundreds of millions of yuan of guaranteed loans were obtained from AVCON, Longke and other institutions in three times. It is understood that at present, in addition to Li Yinan holding about 24% of the equity of Harbor Network, employee shareholding also accounts for about 25%, and the remaining 51% of the equity is in the hands of venture capital.

According to reports, in order to quickly raise funds, Li Yinan signed a "VAM agreement" when accepting Warburg Pincus's capital injection, and once The Harbor is unable to achieve sustained sales growth, then the investor will get more equity. Therefore, it must force itself to grow unconventionally. This may explain why Harbor risked Huawei's suppression and entered the operator field, while going hand in hand in multiple fields such as optical networks and NGN, blindly expanding, and sprinting to the market (according to Mr. Xu of the Sales Department of Harbor Enterprise Network, if Harbor delays the first listing in 2005, it may be a completely different result, because after the rapid growth in 2003, Harbor continues to adjust accordingly in terms of management and other aspects).

It is understood that the investment cycle of Warburg Pincus Venture Capital is generally four to seven years, WARBURG PINCUS originally planned to exit at a high level after harbour listing on the NASDAQ last year, according to this calculation, its exit time in harbor should be from 2005 to 2007. This means that the harbor must be listed as soon as possible to help it cash out.

In fact, in the second half of 2004, Harbor had the opportunity to list in Hong Kong, and the underwriters identified goldman Sachs and Credit Suisse As the first Boston, with a price of about HK$5 per share. But Li Yinan may think that this price does not reflect the true value of the harbor and give up this opportunity. In fact, according to the fund manager, Harbor did not take listing in Hong Kong as a real strategy from the beginning, "the price of listing in Hong Kong will definitely be lower, but it will be relatively easier." "And when the NASDAQ listing was blocked later, it was too late to consider the Hong Kong listing."

"If we seize these two opportunities, it is entirely possible to get rid of this passive situation in the middle of dealing with Huawei." A harbour executive was clearly disappointed with the result. Wang Guoping, manager of the industry analysis department of China Galaxy Securities and senior analyst, also agrees with this analysis, believing that if the listing of The Harbor is successful, the chances of Huawei's success in suppressing it will be smaller.

Around the time of the setback in 2004, Harbor investors advised Mr. Lee to try walking on two legs: on the one hand, he continued to seek a listing, and on the other hand, he sought to consolidate from other large communications equipment companies.

In a sense, this is true. In the view of the fund manager interviewed by "China Entrepreneur", the international telecommunications industry at that time has generally warmed up, operators are beginning to integrate, and the integration of equipment manufacturers is inevitable, it is more difficult for companies of such a scale as Harbor to survive, in addition, due to the impact of low-cost manufacturers such as ZTE Huawei, international equipment giants are hoping to seek partners in China to improve their competitiveness, and Harbor naturally becomes a very competitive object in it. In fact, at that time, there were already rumors that UT was going to acquire Harbor (since then, Nortel Network, JUNIPTER, Motorola and other companies have also been rumored to be interested in Harbor).

However, the investor's proposal was rejected by Li Yinan. "His mood is still relatively high, and he still wants to go public." The manager said, "Warburg Pincus and all the investors still have a lot of respect for him and his team, so they don't care much." "Only in the end, the listing has been basically hopeless, and the capital side does not intend to continue to invest, the funds are close to drying up, the harbor retreated to the second, considering the cooperation with Siemens."

In the view of one of the biggest strategic mistakes in the history of the harbor, a senior manager of the harbor believes that "we have had opportunities in this area all the time, but we did not seize it, and finally accepted this most unlikely result (being acquired by Huawei)." ”

Most of the Harbor employees interviewed determined that it must have been Huaping Venture Capital That sold Harbor to Huawei. It is reported that according to the previous agreement, once the listing of the harbor fails, Li Yinan and other management teams will lose control of the harbor network. In the view of a mid-level manager in the harbor, "We should have had a chance, not to surrender now." It is reported that Gangwan's revenue recognition last year reached $125 million, and there was another 40 million yuan per month before Huawei's acquisition, and if you sell one or two product lines and concentrate on the enterprise network, you can also achieve the top three in China.

But none of that matters. Now, Longke Venture Capital has abolished its office in Beijing, and the office phone originally located in Beijing's COFCO Plaza has been invalidated. The two companies' earliest responsible for the harbor project have also left their respective companies - former Warburg Pincue's Zu Wencui has joined Carlyle, and Longke's Shao Jun has also joined another venture capital firm, Detong. In an interview with China Entrepreneur at the end of last year, Sun Qiang, managing director of Warburg Pincus Asia, said that Warburg Pincus's investment in Harbor was like a failure at AsiaInfo. Think about it, once upon a time, both Warburg Pincus and Loong Ke Chuang Investment once introduced the harbor project as their own signature projects, and according to the plan at that time, the market value of the port after the listing was at least MORE than 10 billion US dollars.

However, as a major investor, Warburg Pincus's losses may not be too large. According to a senior harbor executive, Warburg Pincus signed a priority clause with harbor at the outset, through which it will receive preferential compensation for the invested capital, whether in the bankruptcy or sale of the company. It is reported that the Harbor Building located in the Zhongguancun Software Park will soon change its surname to Huaping.

"At that time, if it wasn't for the purpose of going public, we just made this company, and the practice may be different, and the result will be different." If venture capital had not been introduced at that time, wouldn't it have been possible? It may also be possible to do it, not so fast. The winner of the prince and the loser of the Kou! The harbor executive reflected on this.

Finally

"Previously, Huawei did not determine that Li Yinan was the successor. Now huawei has passed the era of individual heroism, and the era of relying on the ability of one person to support the development of the company has passed. The Huawei person analyzed li Yinan's prospects after returning to Huawei.

On the last day of May, Mr. Gui, the head of the marketing department of the harbor, was planning to go on a business trip when he suddenly received a call from the company's leader telling him that he did not have to do business. He told the news to his subordinate employees, one of whom had stomach bleeding because he had drunk with customers the other day, and was still in a hospital bed, and when he heard the news, he immediately cried bitterly. Immediately, all market aspects of the harbor were stopped. About a week later, Huawei announced an acquisition agreement with Harbor.

At this time, Li Yinan realized the real situation of the company, "In the field of communications, which is a very competitive industry, our company is facing particularly great pressure and challenges, and the company must adjust according to the situation in a timely manner to maximize the responsibility of the company's customers, employees and shareholders."

"My first feeling at the time was that this was an innings between Huawei and Harbor." A Mr. Yuan from Guangdong, a port, described how he felt when he heard the news. But a Huawei employee's feelings after hearing the news were completely different: "This ending is very good, just like playing Go is a very beautiful ending, the beginning of everyone does not understand, after closing the customs, finally understand that the decision to attack the harbor was right." It's a win-win situation, it's a normal business practice. ”

Zhang Ying, vice president of Analysys International, praised Huawei's strategy: "Huawei's methods are extremely clever, and many people's thoughts are eliminated. From the product point of view, if it is not collected, others will be very passive, it is defensive. If combined with the Huke case, it is really too clever, UTStarcom spent so much money, bought negative assets, and also caused a very bad image of the company. Through these two cases, no one will jump out easily. ”

Of course, most of the employees of Harbor believe that Harbor can continue to operate, or find new buyers, and how not to sell to Huawei. But facts are facts. A high-level harbor executive revealed the right thing: "When you sell Siemens, Huawei destroys it for you, and then sells it to whom, he will also destroy it, forcing you to have no way." Transformation, no money can not talk about transformation. You can't do things with the idea of putting the company to death completely, and in the end everyone runs out of money, and I don't think that's the best outcome. In the eyes of most people, it is possible to sell the harbor to anyone, but it will not be Huawei. But in Huawei's view, this final winner is none other than it. ”

In the eyes of this senior, from all aspects, this is a good choice. For example, from a business point of view, this is also a choice, emotionally speaking, although it is a pity, but if the company finally received from Huawei's hands, everyone also feels that it is a better ending, in addition, there are so many employees in the whole harbor, especially the vast majority of intermediate employees If this is the end, it is only a small enterprise to a larger enterprise. For investors, striving for less losses is also a better ending.

But the conflict between Huawei and Harbor employees has been widespread from the beginning, after all, it was once a real knife that really grabbed the people killed on the battlefield, not to mention that Huawei has more or less put a "betrayer" hat on The Harbor, and it is not a matter of a moment or three to take it off. It is reported that there was once a Huawei manager in the harbor staff when speaking, accidentally did not turn the role, the harbor employees present as prisoners of war, the result caused a lot of repercussions, and finally Huawei sent an apology email in the name of Deng Biao, president of the company's network product line, the matter can be regarded as a preliminary understanding.

This may just be the beginning. Huawei has made it clear that the heroes of "hitting Hong Kong" will be reused, and many of them will become the bosses of the "absorbed" personnel in the harbor.

At the same time, Huawei people interviewed by China Entrepreneur also expressed one thing of affirmation: "The people who come from the harbor will be merged into various departments." Huawei will make proper arrangements. "It can be expected that the remaining assets of the harbor will inevitably be sold or renamed." At present, Harbor still has the DSLAM product line department (which has been collectively withdrawn by various operators last year) and the after-sales department.

But the price of the transaction has always been a suspense, and all parties involved have tried to keep their mouths shut. Although rumors say it is 1.7 billion yuan, it seems that it may even be lower than Siemens' bid, which was $110 million, or equivalent. Because Huawei's chairman Sun Yafang said clearly at the cadre briefing after the signing of the agreement: "There can be no price, nor can it be too expensive." Because there is no cost, completely zero payment is not conducive to the solution of the problem, the two sides can not reach an agreement; the payment is too high, we cannot accept it, because we have to judge from the long-term historical lens of Huawei's long-term stable development (whether it is high or low) in the next few decades. ”

However, this "betrayer" who has only existed for 6 years and is incompatible with Huawei has also changed Huawei a lot.

"Thank you for your existence, the rapid growth of Huawei 3COM has a lot to do with this, and we still have doubts about where the enterprise network will go." "In the past five years, without you leaving the company, we still can't find so many serious problems in the company." Ren Zhengfei did not deny this. It is said that it is precisely under the stimulation of this series of events that Huawei has begun to adopt a new cadre appointment system and implement a one-vote veto system to ensure long-term peace and stability.