Seeking Alpha
Profile| Send Message|
( followers)  

The following is excerpted from IRG's weekly stock report:

• • •

Hardware

  • Dell (NASDAQ:DELL) generated a good operating income in the Asia Pacific Region and particularly in China in the third quarter of 2008 as its sales volume surged by 44 percent year-on-year and its income increased by 18 percent. However, market insiders pointed out that since April 2008, when Dell expanded its sales channels, its distributors' inventories of unsold products have expanded and estimated that these included more than RMB500M worth of unsold products. If the unsold computers are included into the calculations of the financial report, Dell's sales volume has not increased by such a large margin.

Internet

  • eBay (NASDAQ:EBAY) established its first South China office on November 25 in the Nanhai District of Foshan, Guangdong province, reports Sohu. The office plans to promote small and medium-sized local e-commerce enterprises through government partnerships. More than half of eBay sellers come from the Pearl River Delta. The company launched the first "eBay Nanhai E-commerce Contest" on the same day to train college students in the e-commerce business.
  • Online travel company eLong Inc. (NASDAQ:LONG) booked a third quarter net loss of 15.5 million yuan, widening from a loss of 7.4 million yuan a year earlier, due to development expenses and higher sales and marketing costs. Gross revenue over the quarter rose 7 percent year-on-year to 90.0 million yuan. Yahoo! BuzzHotel commissions rose 1 percent to 65.2 million yuan, while airline ticket commissions rose 28 percent to 19.9 million yuan. The gross margin in the third quarter was 71 percent, compared to 74 percent a year earlier, with air tickets making up a greater proportion of revenue relative to hotel bookings. The company expects fourth quarter revenue to be between 83 million and 92 million yuan.
  • Zhaopin.com CEO Liu Hao said that growth on Zhaopin.com has fallen 33-50 percent year-on-year since November 1, and that he expects the entire online recruitment industry to leave its period of high-speed growth to enter its first adjustment period of zero growth. Zhaopin.com will continue growing next year but won't see rates as high as 2008. Zhaopin.com has booked annual growth of 80-100 percent over the past four years. Zhaopin.com may delay its plans to go public, previously expected for Hong Kong or Nasdaq markets in 2010. The company has 2,800 employees. Macquarie Capital and Seek Limited entered agreements to investment a total of US$110 million in Zhaopin.com in July.

Mobile/Wireless

  • Nokia Siemens Networks and Fujian Mobile, a branch of China Mobile (NYSE:CHL) in Fujian province, have teamed up to provide an e-commerce platform that promises an important link between rural consumers and urban businesses. The solution allows affordable access to a wide range of consumer products to villagers in Fujian province, while opening up a vast market to urban retailers and product distributors. In addition, the service gives the operator the opportunity explore a potentially powerful new business model of Business to Business to Consumer (B2B2C) services that helps them to improve local presence in rural areas. The business model has been successfully piloted over five months at two counties in Fujian province of southeast China in partnership with Fujian Mobile and local retail suppliers. Nokia Siemens Networks has collaborated closely with Fujian Mobile and provided extensive consulting services in identifying this new opportunity.
  • The size of China's wireless network equipment market is estimated to grow to 12.47 billion yuan with an 11.5 percent rise quarter on quarter. Telecommunications network quality has become a deciding factor in Chinese telecom carriers' existing efforts to improve their competitiveness after three full-service telecoms giants takes shape in China, investing much to upgrade their 2G networks. China Mobile, one of the three giants, firstly started 3G trial commercial service in the country. So far, it has had a GSM network coverage of up to 98 percent across the country, with a user base of more than 400 million. One of its current tasks is to offer better service on the basis of a huge 2G network in the country; on the other hand, it must build and improve its 3G network.
  • The number of mobile phone web users in China hit 73.05 million by the end of June 2008, accounting for around 30 percent of China's 253 million internet users. Chinese mobile phone users access the Internet mainly via WAP (Wireless Application Protocol). Numbers of active WAP users and WAP sites with independent domain names amounted to 39 million and 65,000 respectively by the end of March 2007. It is expected that in 2008 there will be 230 million WAP users in China, with a total market valued at 22 billion yuan. Taiwan indicated that its newly launched OMNIA i908 smartphone has drawn intense attention among consumers in the market and is expected to serve as growth drives in sales in the remaining months of the year.

Telecommunications

  • Industry and Information Technology vice minister Xi Guohua said the time is now ripe for China to issue third-generation mobile licenses. The central government is currently studying 3G policy and implementation, and will announce the policies soon. The introduction of 3G could be considered part of the government's efforts to give the economy a boost. The telecom industry will play a major role in domestic consumption. Upgrading telecom infrastructure construction can have a stimulating impact on the economy. The 3G licenses will be issued once the restructuring of the telecom industry is complete. China Mobile, China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) were reorganized into full-service groups with both fixed-line and wireless businesses. China could issue 3G licenses as early as next month.
  • China Mobile announced that its customer net growth reached 7,194,000 in October 2008, down from an increase of 7,246,000 in September. By the end of October, China Mobile had total number of customer of about 443 million.
  • China Mobile also announced that it will allocate 60 percent of its investment in developing 4G mobile broadband technology. Being the leading mobile service operator in the country, China Mobile has been preparing the Long Term Evolution Technology (LTelecommunications) for development of 4G services. The company was ready to launch 4G services with all its preparation done. The first stage trial run of the new technology may take place by the end of 2009, and another trial of larger scale is scheduled for 2010. Concerning the migration of its 3G TD-network to the new LTelecommunications technology, the company had already instructed its TD equipment suppliers to provide equipment that are compatible with both systems, so as to ensure effective use of resources.
  • China Unicom's expenses on the mobile communications field, particularly on the 3G segment, will total around 100 billion yuan (US$1,436 billion) in 2009-2010, according to the company. Taking opportunities brought by the 3G business, the mobile telecom industry should quickly boost network upgrading, noted China Unicom, adding that it will make preparations for the 3G business when it improves the 2G network. The company's combined operating revenues and EBITDA reached 149.1 billion yuan (US$22 billion) and 72 billion yuan (US$10.5 billion). Assets amounted to 366.5 billion yuan (US$54 billion) and the number of users totaled 259 million, including 128 million GSM users, 109 million fixed-line phone users, and 23 million broadband users. In terms of assets and market value, China Unicom respectively ranked No. 4 and No. 12 among global major operators.
  • Huawei Technologies' global shipment of mobile broadband products has totaled over 20 million sets. The mobile broadband market will leap at an annual growth pace of 46 percent in the coming three years and the output of mobile broadband products will amount to 100 million sets in 2011. The company plans to further join hands with the GSMA to explore potential markets for the mobile communications industry.
  • Huawei has taken its aggressive tender bidding strategy overseas, as seen by its recent lowball bid in a 3G equipment tender held by Costa Rican telecom operator ICE. Huawei submitted the lowest bid, worth US$245 million, in the ICE tender, which was seeking 3G equipment capable of supporting 950,000 channels. By comparison, other competitors for the tender, Ericsson (NASDAQ:ERIC) and ZTE Corp. (OTCPK:ZTCOF), announced prices of US$341 million and US$447 million, respectively. Huawei has significantly increased its market share in China through offering such ultra-low prices. In October this year, the company won a 25 percent share in a major China Telecom tender for CDMA network equipment through a low-price strategy. The company also demonstrated its aggressive strategy when competing for ICE's previous 3G equipment tender, held in August this year.
  • China Unicom will use its core network to provide both 2G and 3G service, enabling users to switch to 3G without changing their mobile numbers, reports qq.com. Unicom was expecting to disseminate a licensed WCDMA network in 2-3 months.
  • AsiaInfo Holdings (NASDAQ:ASIA) has inked a contract with China Unicom to develop a business intelligence system for China Unicom's Zhejiang subsidiary. Under the terms of the agreement, AsiaInfo will develop a BI system for Zhejiang Unicom to improve decision-making capabilities, efficiency and accuracy. AsiaInfo will also integrate historical data from China Unicom's existing GSM business with its recently acquired fixed-line and broadband network into a single, unified BI system. The BI system is expected to be equipped with data mining, data analysis and data summarization capabilities.

Media, Entertainment and Gaming

  • Nineyou has scheduled the release of the new version, "Guang Hui Sui Yue," of its licensed Q-style 3D pet-themed MMORPG "Concerto Gate II" for December 1, 2008. The version's new features include riding animals, scenes, skills, virtual items and a friend status reminder function. It will also increase the game's maximum level to 35. Concerto Gate II recorded 103,905 peak concurrent users on November 10, the first day of second-round closed beta testing.
  • China Game released the first expansion, "Feng Huo," of its in-house developed Three Kingdoms 3D MMORPG "Warage". The expansion added new systems for equipment upgrades, battles and non-gamer character collection along with new raids, riding animals and equipment to the game. Warage entered open beta testing on September 10.
  • Ku6.com announced the release of its non-video real estate channel. Content on the channel links to Guangzhou-based real estate websites Snifast.com and Mysupa.com and covers nationwide cities including Beijing, Shanghai and Guangzhou. Youku.com, another Beijing-based video site, partnered with Telstra-invested SouFun to release a real estate video channel.
  • Giant Interactive (NYSE:GA) plans to start a week-long promotion of its in-house developed MMORPG "ZT Online" for gamers above level 45 on December 1, 2008. Promotion activities involve honor points exchangeable for virtual items, distribution, virtual item raffles and virtual currency giveaways for gamers that login to the game and/or complete certain tasks. Giant Interactive-invested Shanghai-based social networking site 51.com (NASDAQ:JOBS) confirmed its ownership of "Rainbow QQ," a plug-in for Tencent's instant messaging tool QQ, and has registered the plug-in with the National Copyright Administration. Tencent began blocking users with Rainbow QQ plug-ins from logging in to QQ. Fifteen former Tencent employees joined 51.com to work on research and development for IM software. 51.com released its IM software on January 1. Tencent sued the 15 employees for violating their contracts' non-compete clauses in early November.
  • Oak Pacific Interactive Corporation kicks off a web game development plan, the V Plan, using 500 million yuan to fund medium- and small-sized web game R&D teams and acquire agency products. According to qq.com, Oak has a combined total of 86 million registered users for its campus social networking service Xiaonei.com and online community site Mop.com.
  • China Cable TV Network (CATV.net) plans to begin closed beta testing of its licensed 3D martial arts MMORPG "Wu Lin Qun Xia Zhuan Online II" on December 5. CATV.net will not delete gamer accounts after testing and plans to give away virtual items valued at RMB 1,969 to each participating gamer. Activation accounts for the testing will be available starting. The game entered alpha testing on November 18.
  • The Carlyle Group announced that it would invest US$50 million in China's Hao Yue Education Group, as it sought to tap demand for private higher-education services in the world's most populous country. Tthe investment was funded by the Carlyle Asia Growth Partners Group. The deal comes after Carlyle, which had $91.5 billion of assets under management committed to 66 funds at the end of September, last year invested $20 million in Topia Education, which runs tutoring institutes in South Korea. According to Reuters, private equity firms are increasingly investing in the fast-growing private learning sector, betting that the obsession of many Asian parents with their children's education will make it recession-proof.

Alternative Energy

  • Yingli Green Energy Holding Co. Ltd. (NYSE:YGE) reported third quarter results with net revenues of US$325.5 million, up 73.1 percent year-on-year and 11.2 percent quarter-on-quarter, but net income was US$22.2 million, down 15.8 percent annually and 27.2 percent sequentially. The company's PV module shipments increased 17.3 percent quarter-on-quarter to 80MW. Yingli reached total annual production capacity of 400MW for polysilicon ingots and wafers, PV cells and PV modules, respectively, in September and targets 600MW capacity by the third quarter of 2009.

Software

  • Kingsoft Corp. recorded profit of 102.3 million yuan (US$15 million), up 273.8 percent year-on-year and 104.6 percent quarter-on-quarter, for the third quarter of 2008. Revenue was 217 million yuan (US$32 million), up 48 percent year-on-year and 26 percent compared to the second quarter. Kingsoft's entertainment software business grew 47 percent year-on-year to account for 68.6 percent of total revenue at 148.9 million yuan (US$22 million). The company recorded 1.2 million monthly average paying game users, an increase of 20 percent both annually and sequentially. Monthly average revenue per user came in at 40 yuan (US$6), up 29 percent year-on-year and 18 percent quarter-on-quarter, while daily average peak concurrent users rose 87 percent annually and 17 percent sequentially to 1 million gamers. The company's applications software business generated revenue of 64.5 million yuan (US$9.4 million). Revenue from the business grew 3 percent quarter-on-quarter due to rising sales of WPS and 41 percent year-on-year due to a 33 percent increase in online security service subscribers to 8.7 million daily average paying users.
  • Bao Feng Wang Ji Technology has completed the third-round investment of US$15 million lead by Matrix Partners China and joined by International Data Group (IDG). Bao Feng Wang Ji Technology began generating profits in October and is targeting monthly profit of 5-10 million yuan (US$0.7-1.4 million) in 2009, rather than its previous annual revenue target of 100 million yuan (US$14.6 million). The investment will be used for talent recruitment and video content partnerships. The company received first- and second-round investment of US$3 million in March 2006 and US$6 million in early 2007, respectively, both lead by IDG. The company planned to list in Hong Kong in 2010.
Source: Chinese Tech Stock Weekly Summary (Nov. 24 - 29, 2008)