WEIBO TALK: Momo Fingers NetEase; Xiaomi’s Copycat Defense

Xiaomi dogged by copycat scandal

Two scandals in China’s tech world were hot topics in the microblogging realm this past week, drawing heated discussion on allegations of copycatting and other unethical business behavior at smartphone sensation Xiaomi and newly listed social networking app maker Momo (Nasdaq: MOMO). The debate reflected the wide range of views on the many dubious business practices like intellectual property theft and violation of business contracts that are a regular feature in China’s corporate business landscape.

In less controversial chatter, computing giant Lenovo (HKEx: 992) was also tooting its own horn loud and clear as it celebrated the 10th anniversary of its landmark purchase of IBM’s (NYSE: IBM) PC business. As a long-time China tech writer it was hard for me to believe that historic deal is already a decade in the past, and it certainly kicked off a drive that would propel Lenovo to become the world’s biggest PC brand.

Let’s start with Momo, which has been all over the tech headlines after a surprise attack on the company by online game giant NetEase (Nasdaq: NTES) on the eve of its New York IPO. NetEase accused its former employee Tang Yan of stealing company resources and violating a non-compete clause in his employment contract when he left in 2009 to set up his then-new firm, Momo.

No criminal charges were ever apparently filed in the case. NetEase pointed out that Tang was briefly detained by police at the time, though it’s also implied the detention was for other actions unrelated to the Momo case. The revelations rippled throughout the Chinese media, and forced Momo to issue a clarifying statement just as it was getting ready to make its $200 million IPO in New York.

A highly provocative photo that nicely summed up Tang’s sentiment on the matter came in a microblog repost from Arthur Duan, a vice president at online classified ad site (NYSE: WUBA). That photo shows Tang and another tech executive Zhang Ying together at the Nasdaq offices, giving the finger to the camera. (microblog post) The implication is obviously aimed at NetEase for spoiling Momo’s coming out party, though Zhang later issued his own explanation for the pose on his own microblog. (microblog post)

Debate on the topic among other executives was surprisingly critical of NetEase and its founder Ding Lei. Lin Wenqin, a vice president at e-commerce giant (Nasdaq: JD), was representative of the sentiment, wondering why Ding harbored such deep resentment towards Tang. (microblog post) Few people came to NetEase’s defense, though several people did point out that NetEase has produced many of China’s Internet entrepreneurs.

Personally speaking, I also have mixed feelings about NetEase’s actions, which in the end didn’t even end up delaying or harming investor sentiment towards Momo’s IPO. On the one hand actions like Tang’s are clearly unethical and probably illegal and shouldn’t be condoned. But at the same time, NetEase was obviously harboring a grudge towards this former employee and really should have taken action at the time of the offenses rather than wait for Momo’s IPO.

Next let’s look at Xiaomi, which was in the headlines after being accused of stealing designs for its new line of smart air purifiers from Japanese firm Balmuda. Not too many outsiders commented on that scandal, though some critical views did come from a leading executive at Huawei, which is also a major smartphone rival of Xiaomi.

That instance saw Yang Tuo, Huawei’s chief marketing officer for China, slip into classical Chinese with an adage that roughly translates to “Good deed doers go unnoticed, while only Heaven knows what motivates bad deed doers.” (microblog post) The post seems to imply that innovators like Huawei get no credit for their positive behavior, while the copycat ways of companies like Xiaomi are ignored by everyone and only noticed by Heaven.

Various Xiaomi executives also issued their own long list of explanations on their microblogs, mostly trying to portray their company as innocent or perhaps the victim of someone else’s copycatting. Anyone wishing to sample those can click here to read explanations by company executives Xia Yongfeng, Wei Lai and Tang Yanglin.

Finally, let’s wind up this week’s round up of online chatter with Lenovo, whose talkative CEO Yang Yuanqing was busy talking up the 10th anniversary of his company’s IBM purchase on his microblog. Yang notes the historic nature of the deal, announced on December 8, 2004, and points out Lenovo has grown from a company with $3 billion annual sales at the time to one that now earns $45 billion per year. (microblog post)

Yang also points out Lenovo’s stock has risen 300 percent over that period, compared with a 67 percent rise for IBM and 72 percent gain for the S&P 500. (microblog post) I’ll admit that I’ve been a frequent Lenovo skeptic over the years, as I do think the company is a bit too acquisitive and isn’t a great innovator. But that said, I have to congratulate Lenovo at this point in time for its huge accomplishments over the last decade.

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