27 June 2000
The Edge Group, a highly lauded computer empire built by failed Internet entrepreneur Mr Jen-Tse (Johnson) Wang, was teetering on oblivion two years ago even though it was pulling in almost $400 million in annual sales.
Edge, which is likely to be put into liquidation next week, earned a profit of only $1.3 million from revenue of $389.5 million in the 1997-98 financial year, according to a preliminary report issued last night by its voluntary administrator, Armstrong Wily & Co.
In 1999 Edge was Australia's biggest personal computer assembly business, shipping 10,000 units per month under a variety of brand names, most notably KTX.
In June last year Mr Wang was described as ``Australia's most successful computing entrepreneur". In a national newspaper he was described as a quiet achiever who ``focused not on building a high profile but on the distribution channel to quietly make the bucks at the bottom line".
In fact, when this article was published, Edge had taken a steep dive into the red. Its stunning drop in revenue remains baffling, even taking into account a continuing fall in margins across the PC industry.
Revenue slumped 45 per cent to $213.6 million in 1998-99 and the companies made a loss of about $3 million.
Armstrong's report shows the Edge Group was at that time already unable to pay its debts.
In May an unnamed creditor had cut its relationship with Edge, after unsuccessfully trying to recover $4 million in debt. Three months later Microsoft Australia launched legal action against Edge, seeking $12.9 million. (Edge's books show a liability of $10.5 million, believed to be unpaid licensing fees for Microsoft software.)
At this time Edge was owed about $37 million from its related companies, most of which were based overseas, but it was unable to obtain these funds. Edge had up to 40 related companies around the world most of which have now ceased trading but their accounts have not yet been recovered.
Desperate for money, Mr Wang was preparing to spin off Edge's three-year-old Internet service provider, eisa. Eisa, which also subsequently collapsed, successfully raised $57 million.
Mr Wang beseeched the eisa board to invest in Edge Group, according to an eisa insider. But the board refused to make a significant investment. Mr Wang placed the Australian operation into voluntary administration two weeks ago and subsequently left the country.
Edge's Australian operations have only $2.4 million in realisable assets, compared to $36.5 million in debt, which Mr Wang and another director, Ms Siu Ho Delphia Lai may be personally liable for.
The two directors also owe $2.9 million in loans from two of the Edge companies. Both are believed to be overseas, making recovery of any debts difficult.
``I believe the director, Jen-Tse Wang, is not in Australia and I doubt that he will return," said Armstrong partner Mr Allan Topp in the report.
As of last night, Mr Wang's lawyer, Mr Alex Law of AJ Law & Co, had not received any instructions from Mr Wang.
Mr Law declined to reveal Mr Wang's whereabouts.
``Liquidation is the only option you've got," Mr Topp said last night. ``There are probably not too many collapses like this in Australia in the recent past."
Edge's creditors will meet on July 4.
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