Elonex: the end of an era

IP riches sustain founders

With more than a decade of unbroken profitability (not something Dell could boast), Wetrin was now one of the richest people in the UK technology business - in the 1997 Sunday Times Rich List, he had assets of £45m.

But bit by bit, this has slipped away. While Elonex could boast profits every year, its announcements carried more important information further down the page: each year margins were tighter, price competition more intense. The company diversified into more profitable areas. By 1999 it was offering consultancy, training, networking, even disaster recovery – but the time when Spiro would boast that "We may have to lose the luxury of being a privately funded company" in order to crack America had passed.

Elonex was, and always was, a regional PC supplier. And in the UK, that has not been a happy place to be in the last few years.

"In a nutshell, the PC market in the last two years has become much more concentrated," says Michael Larner, senior research analyst at IDC UK's PC division.

In 2004, the top 10 players had 69 per cent of the market, Now it's 80 per cent. The major problem for local manufacturers, he says, is a price war between Dell and Acer. "Also Lenovo is proving viable. The local players all have to think about niches," he warns.

For Elonex, that niche in recent years has been to back the idea of the Windows XP Media Centre PC. But that market has turned into a classic PC bust: "We looked back to 2000 to see articles proposing this as the Next Big Thing," Larner says.

It's still in that position. Without a clear definition of what one of these PCs actually is – and without a compelling reason to pay £1000 plus the price of a large LCD screen to put more technology in a living room which already might have an Xbox 360 or a Playstation 3 to browse the internet, then he doesn’t predict sales for Media Centre PCs will take off for at least another 12 months. It's clear that Elonex finances couldn't wait that long.

But if, as seems increasingly likely, we won't see the Elonex PC business again, Wetrin has left a legacy that may be far more significant for UK technology companies that will follow: Elonex owns a portfolio of more than 200 patents, property that has already realised more than £100m, and which will continue to do so.

Look for Spiro today, and you find him at the head of Luxembourg-based Inpro Licensing SARL. Look down the list of executives, and Inpro's CTO is a man called Dan Kikinis. It's Kikinis who was responsible for most of Elonex's innovative widgets. Inpro was set up to license IP, specifically the Elonex portfolio, though now it is looking for new material. If its success as the IP division of Elonex Plc is any guide, we haven't heard the last of Spiro.

The tradition of innovation at Elonex came about because of a hard lesson learned at the beginning of the 1990s. Forced to pay royalties to IBM for using its technology, Elonex decided that this was a fine way to build competitive advantage. "We decided to build our own armoury instead," said Spiro at the time.

In 1991, it began working with Silicon Valley-based Oakleigh Systems, where Kikinis turned out to be a staggeringly prolific patent factory. Renamed Elonex Technologies in May 1995, the company created and filed patents for every type of PC technology, from flexible keyboards to PCs that became scanners.

The portfolio has everything: "Smart phone integrated with computer system", "Apparatus and method for minimizing dram recharge time", "Method for collecting URLs from printed media" and, get this: "A PC peripheral interactive doll". Look it up on the WIPO database: WO9732300.

Kikinis was innovative in the best Elonex tradition: having "reverse engineered" (as he puts it) the patent filing process, he could do the basic work in a day, rather than the weeks or months that many companies took.

The big earners for Elonex were a series of patents filed in the US numbered 5648799 and 5389952, specifying how a PC would automatically switch to a low power mode.

When the Video Electronics Standards Association (VESA) adopted the DPMS standard for lowering power consumption, Elonex decided that its members – a who's who of PC and monitor manufacturers – had infringed Elonex patents. A cascade of law suits and licensing deals followed.

The result was a steady income stream for Elonex. In 1996 Hewlett-Packard has licensed its technology. In 1998 Hitachi did the same, becoming at the time the local agent for Elonex IP in Japan, licensing to other Japanese manufacturers.

In the late 1990s the company that used to be described as "secretive Elonex" became "litigious Elonex" as the company launched suits against Compaq, LG, Delta Electronics Inc, Amtram Technology Co, Kuo Feng Corp, Gateway, Lite-On Technology, Compal electronics, ADI Corp, Siemens, Mitsubishi, Viewsonic, Mag Technology, Packard Bell/NEC, Micron, and even its stateside big brother, Dell. Its licensees included Apple, Acer and Sony – companies that the Elonex PC business struggled to compete against.

As Larner says, for a local PC manufacturer to attempt to compete with Dell and Acer on price is a "false hope". But as Elonex as a PC brand disappears over the horizon, Wetrin, Spiro and Kikinis have created what potentially is a more sustainable business. Even if that business doesn't have factories, doesn't sponsor Wimbledon football club – and doesn't need a marketing director. ®