Essay About Lester Electronics And Avral Electronics

Lester Electronics
Lester Electronics
Bernard Lester of Lester Electronics, Inc. (LEI) should prevent the merge of Shang-wa and Transnational Electronics Corporation at all costs. Shang-wa has been an exclusive supplier of capacitors to LEI for the past 35 years. Both companies started off small and have grown profitable in business together over the years. Both businesses have now escalated to the point where they are major players within their industry. Currently Lester Electronics is being pursued by Avral Electronics, a European based company, at the same time that Shang-wa is being heavily considered for purchase by Transnational Electronics.

It has already been determined that if Lester Electronics does not take some action in preventing the Shang-wa / Transnational merger, LEI stands to lose 43% of its revenues over a period of 5 years. Bernard Lester has charged Anne Lorale, CFO of Lester Electronics, with going over the term proposals of both the LEI / Avral and Shang-wa / TEC mergers, to determine LEI’s best option. Avral and TEC are considering acquiring their respective companies in order to expand their global business.

Google, looking to expand its video sector, purchased YouTube, a popular online video website, for $1.65 billion. Google seeks to be able to compete with companies like Newscorp, Microsoft and Yahoo by owning a major video and social networking venue. Avral Electronics is like Google, in that they seek to acquire a growing and profitable company in order to expand its distribution business to the U.S. through Lester Electronics. Google was being criticized for not expanding and “relying too much on advertising tied to keyword searches” (La Monica, 2006, para. 6). Thus, they made moves comparable to the major players within their industry. According to Google’s CEO, Eric Smidt “This is just the beginning of an internet video revolution”, (La Monica, 2007, para. 13).

This seems to be strictly a competitive and comparable media growth move on behalf of Google. “In a statement, Google said YouTube will operate as an independent unit of Google… and will retain the YouTube name” (La Monica, 2006, para. 8). Google makes nearly all of its money on advertisements, which is probably another major reason for purchasing YouTube. Google has no interest in running YouTube and they admittedly don’t know much about this type of media outlet. They basically purchased it to get more advertising dollars with all of the exposure that YouTube receives.

Since Google has acquired YouTube there’s been a $1 billion lawsuit filed in March 2007 by Viacom, charging that Google and YouTube has over 150,000 video clips owned by Viacom and they have some serious copyright infringement issues with them. In expanding its empire, Google has unfortunately inherited a huge and unprecedented issue with online video streaming and copyright violations. This event is fairly recent, so the outcome of this situation is still pending.

Avral Electronics is comparable to Google and YouTube is comparable to Lester Electronics in this scenario. Avral is an extremely healthy company, financially speaking, pursuing expansion of its distribution business to the U.S. Avral wants to venture into unfamiliar territory, like Google. However, if Avral acquires Lester Electronics, LEI would most likely be restructured and merge its operations with Avral’s, and would not be kept as an independent operative separate from its owner, like YouTube.

LEI should protect its interests by putting forth a joint venture with Shang-wa Electronics. If Lester does not make a move, Shang-wa could be either bought or outright taken over by Transnational Electronics Corp. John Lin, CEO of Shang-wa, has expressed concerns about being taken over, considering TEC has a reputation for doing just that. “You (Bernard Lester) and I both know that TEC is large enough to go from ‘asking’ to takeover rather quickly; did you see what they did to Turnaround Tech two months ago? If TEC decides it wants Shang-wa, I have nothing in place to prevent (them) from taking it” (University