Too much ambition
Speaking on Sept. 6, Lu said that his ambition should be blamed for the company's problems. He was referring to a decision to expand into the US, Germany, Japan and South Korea over a short period, and a failure to see that the market was becoming flooded with cheap Chinese competitors. Chinese makers have staged brutal price wars, eroding the huge profits of Taiwanese companies.
"My high self-esteem and arrogance were behind the biggest mistake of my life," Lu said.
The market for optical storage media products such as recordable compact discs (CD-Rs) and recordable DVDs (DVD-Rs) is very competitive and highly cyclical. Prices of DVD-Rs, which generate higher gross margins than CD-Rs, face pressure as manufacturers are continuing to expand capacity.
Similarly, Lu made another mistake by acquiring Mediacopy on the presumption that the US firm would help secure orders from Metro-Goldwyn-Mayer. The dream vanished after MGM decided not to extend its cooperation with Mediacopy earlier this year.
Infodisc invested heavily to stop the bleeding at Mediacopy, using the proceeds from selling convertible bonds to invest NT$6.7 billion in the company during the 2002-2003 period. Despite this, the subsidiary's market value was less than NT$350 million, according to a company filing to the TSE on Sept. 6.
When Infodisc was at its peak, Lu said the best thing he'd ever done was to make his company a success without a penny from his father.
Now, however, it seems he will need to draw on greater wisdom and courage to regain this success.
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