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By Kevin Keane, IAPHC CEO Cloak and Dagger; It's a Sticky Business Pin Yen Yang, age 70, and his daughter Hwei Chen Yang, age 39, were arrested by FBI agents on September 4, 1997 at Hopkins International Airport in Cleveland. They were traveling to New York to attend the U.S. Open tennis championship. According to news reports, several hours earlier, closed circuit television recorded Pin Yen Yang taking out a small pocket knife and cutting off a portion of the cover page marked 'confidential' and 'Property of Avery Dennison Corp' from documents he had just been given at the Westlake Holiday Inn. Both defendants were charged with mail and wire fraud, conspiracy to steal trade secrets, money laundering and receipt of stolen goods from the Avery Dennison Corporation facility in Concord, Ohio. P.Y. Yang is the president of Four Pillars Enterprise Company, Ltd., of Taiwan, a firm with more than 900 employees and annual revenues of more than $150 million. Four Pillars manufactures and sells pressure sensitive products, primarily in Taiwan, Malaysia, Singapore, the Peoples Republic of China and the United States. His daughter is an officer of the company involved in R & D. Avery Dennison, based in Pasadena, California manufactures a wide variety of pressure sensitive products ranging from postage stamps to mailing labels. According to published reports, Ten Hong Lee, an Avery Dennison researcher at Avery's manufacturing facility in Concord, Ohio confessed to giving Four Pillars 'highly sensitive and valuable proprietary manufacturing information and research data' in a scheme dating back to 1989 and had been paid $150,000 US by Four Pillars as a 'consultant.' The Cleveland Plain Dealer reported on October 12, 1997, that in an earlier FBI sting operation, Ten Hong Lee attended a meeting at Avery Dennison in January, 1997, where he and others were told of a binder containing confidential information on Avery's plans for the Far East market. Closed circuit TV showed Lee gaining access to the file drawer where the binder was kept on 3 separate occasions, once he wore gloves and then removed the binder from the office. Confronted by FBI agents in March, 1997, Lee admitted that he had been providing confidential information to Four Pillars. Thereafter, Lee pleaded guilty to wire fraud, and turned over to the FBI a 'trove' of Avery Dennison documents, and cooperated with the FBI in an undercover capacity ultimately leading to the arrest of the Yang's on September 4, 1997. Federal prosecutors estimate that the research and development costs expended by Avery Dennison to develop the information obtained by defendants could exceed $60 million. The case is scheduled for trial on March 18, 1999. Industry Week reported in its November 2, 1998 edition that the FBI is currently investigating 800 cases much like the one against the Yangs which have been brought under the US Economic Espionage Act which was signed into law in 1996. As the graphic arts industry becomes ever more dependent on technological innovations being driven by the global digital revolution, protection of a company's trade secrets from economic espionage will become ever more important as well. Pulp Friction? On 10 February, Weyerhaeuser Company announced it would be cutting prices on pulp by 3 percent. According to Bloomberg's news service, Weyerhaeuser blames a worldwide glut of pulp for the price cut. "Prices for pulp fell about 13 percent last year, causing some producers to temporarily or permanently shut pulp-making machines. Still, inventories in North America and Scandinavia remain high, at about 1.59 million tons at the end of December. Inventories need to decline as much as an additional 400,000 tons before producers can start to think about price increase ..." according to Bloomberg. This was not considered good news in Wellington, New Zealand, where pulp makers Cart Holt Harvey Ltd. (owned by International Paper) and Fletcher Challenge Ltd. were hoping for a rebound in pulp prices. The Canadian Pulp and Paper Association weighed in with its own assessment of the current glut of pulp on 15 February when it said that Canadian inventories rose 11.3 percent in January. On a positive note however, Canadian pulp shipments to Japan and other Asian and African markets were up substantially in January. The Long Arm of Consolidation Old friend, Woody Ryder sent us an item from the Long Island Business News (February 12-18, 1999 edition): "In a transaction estimated at $100 million, Integrated Graphics has acquired the assets of seven graphics, printing and digital output service facilities throughout the United States, including three on Long Island." As the result of the merger, Cedar Graphics, JFB & Sons Lithographer and Tam Communications will become part of Integrated Graphics. Cedar Graphics has 250 employees, is the third largest printing firm on Long Island and has been an entrant in the International Gallery of Superb Printing for the past two years. Integrated Graphics also bought Empire Graphics, based in Manhattan, as well as Houston based Emmott-Walker and International Color Services in Phoenix. Quite clearly, this consolidation trend is becoming trendy. Meanwhile, on 8 February, Cunningham Graphics International based in Jersey City, New Jersey, announced record results for the fiscal year ending December 31, 1998. During the year, Cunningham acquired Roda Print and the in-house shop at BZW (both based in London, England) as well as the in plants at McGraw Hill and Schroeder & Company in New York. This year, as was reported in Tuesday Morning News (TMN) of 1-19-99, Cunningham has acquired Workable Company Ltd based in Hong Kong. A unique aspect of Cunningham's consolidation strategy is its desire to identify 'tuck-in' candidates for acquisition. By this, the firm means to find businesses selling complementary product lines and services, to tuck in with its own offerings. Cunningham closed on a 150,000 square foot plant facility in Jersey City on 3 February. Not a firm to be left out of the consolidation craze, on 11 February, R. R. Donnelley and Sons Company said it has agreed to buy Standard Register's Communicolor direct mail business. Communicolor has 550 employees in plants located in Eudora, Kansas and Newark, Ohio, and specializes in long run personalized printing, by which it means run lengths of 25,000 to 10 million pieces. Donnelley already has short run personalized printing capabilities, so this is its own version of 'tuck-in' growth. TMN readers will recall in last week's issue, we reported that Standard Register seems to be targeting the distribute and print market. Real World On Demand One of the recent entries in the International Gallery of Superb Printing is a brochure for Xerox Corporation's Documents Direct initiative. We quote: "New Horizons Computer Learning Centers is the largest and fastest-growing personal computer training company in the world. Until Documents Direct, the company ran its own print shop .. producing and shipping courseware to 170 franchisees in 26 countries. Documents Direct has provided New Horizons with a more effective and efficient alternative. Today, instead of shipping courseware, New Horizons sends documents electronically to Xerox Document Technology Centres for on-demand production and delivery. Before: In-house print shop produced and distributed courseware. Due to constant changes in courseware, large inventories of materials were frequently discarded. The Documents Direct Solution: Courseware sent electronically to Xerox Document Technology Centres. Materials printed on demand and delivered 3-7 days faster than before .. increasing the satisfaction of franchise managers. Updates now made simply -- and stored electronically. On-demand production has eliminated the need to discard outdated materials." On the river called Digital Denial, some folks still cling to fragments of the way things used to be. Others are building new flotation devices to take advantage of the new opportunities. Industry Tidbits On 10 February Xerox Corporation announced that base prices for digital copiers and printers in the 20 to 65 copy a minute range will increase on 1 April by 5 percent. As we have been reporting in TMN, Xerox now sells more digital copiers than analog units. Dave Albrecht of the Mid-Hudson Club sends along news that GretagMacbeth acquired LOGO Kommunikations und Drucktechnik GmbH based in Steinfurt, Westalia/Germany. LOGO makes color management application software, as well as OEM products for color calibration and profiling, and workflows for integrating International Color Consortium profiles into production environments. Its signature product is ProfileMaker Professional. Ron Anderson, president of GretagMacbeth said: "As the digital imaging market continues to evolve, software will play an extremely important role in providing color management solutions that are much more seamless and transparent." Corel Corporation was rumoured to be a takeover target for Adobe Systems last week, as reported in the Globe and Mail, Canada's business newspaper. Corel representatives denied the report, however, on 11 February, Corel said it had implemented a so-called 'poison pill' shareholder rights program that could be implemented to slow down any potential takeover attempt. Platform Computing of Toronto announced on 11 February that it has struck a deal with Silicon Graphics making Platform Computing's LSF software the workload management solution for Silicon Graphics hardware platforms. The current issue of Forbes magazine noted in its "Streetwalker" column that Big Flower Holdings could be poised for share price improvement. Big Flower gets 65 percent of its sales from newspaper inserts according to the item. Its biggest competitor is Quebecor Printing, Inc. Speaking of Quebecor, on 15 February, Quebecor, Inc. announced in Montreal that Pierre Karl Peladeau had been named president and CEO succeeding his late father who had founded the firm in 1950. The junior Peladeau is an attorney and has been Chief Operating Officer of Quebecor Printing, Inc. He has been running Quebecor's rapidly expanding European operation, and also played a key role in Quebecor's recent successful acquisition of Sun Media Corporation, which gives the firm control of approximately 25 percent of Canada's daily newspaper circulation. On 15 February Apple Computer announced a new release of its Java Virtual Machine which is said to be 5 times faster than previous releases of Java for the Macintosh. On 16 February, Adobe Systems announced the release of Acrobat 4.0. The new version is feature rich, among other things, using Acrobat 4.0 one can capture individual Web pages or entire Web sites into fully formatted PDF files. On 16 February, Dainippon Ink & Chemical Inc., the largest ink manufacturer in Japan announced it is entering into a joint venture with the Japanese unit of Eastman Kodak Company to process photographs into printing templates. This news was a pre-release in anticipation of a joint news conference set for 23 February. Dainippon and Kodak Japan will transfer their existing 'prepress' businesses into the new company. Dainippon spokesman Kaoru Sakai noted that the two companies already have set up a joint venture in the United States --Kodak Polychrome Graphics.
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