Chinese Tech Stock Weekly Summary (Dec. 29, 2008 - Jan. 4, 2009)

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

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Software

• Microsoft (MSFT) would pre-install the Chinese household and student version of Microsoft Office on Dell (DELL) PCs in China. Shoppers can choose Microsoft Office-preinstalled PCs on the website of Dell. On top of that, these PCs are also available at sales outlets and some shopping malls. Dell hopes the partnership with Microsoft will boost up its sales in red-hot selling season during the New Year holiday and Chinese Spring Festival holiday. Microsoft has massively marked down its word-processing software and operating system in this country. Microsoft China cut the price of Chinese version of Windows XP from 960 yuan (US$140.68) to 399 yuan (US$58.47). It is one of the latest price cuts by the company in this country during the past few months. It lowered prices of Office from 699 yuan (US$102.43) to 398 yuan (US$58.32), which can be installed on three PCs. The version that can only be installed on one PC has been cut down to 199 yuan (US$29.17).

Internet

• China had recorded 290 million Internet users, 100 million blogs and 2.1 million websites by late November. China's online population has grown by more than 31-fold in the last eight years. China had 253 million Internet users by late June.
• China E-Learning Group has issued 350 million shares at HK$0.20 (US$0.03) apiece, upon the conversion of HK$70 million (US$9.0 million) convertible notes in the month of December. The conversion shares represent 32.9 percent and 24.76 percent of the existing and enlarged issued share capital of the company. As at 31 December 2008, the aggregate outstanding principal amount of the convertible notes was HK$588 million (US$75.9 million).
• 13 million CN domain names have been registered by October 2008, making the national domain the largest in global ranking, showed the latest statistical data released by the China Internet Network Information Center (CNNIC). Previously, Germany's national domain name DE was the largest around the world. CN overtook Britain's UK, and climbed to the number two in 2007. In the past year, the CN domain name benefited from the fast economic development and prosperity of the Internet industry and became more popular among the country's 253 million online users. On May 12, 2008, the areas struck by the earthquake lost communications with outside. In the emergency, Abazhou.gov.cn, the official government Web site of the Aba Autonomous Prefecture in Sichuan Province took on the responsibility of carrying information. In less than two days, its traffic reached 180,000 person-times. Many lives were saved with its support.

Mobile/Wireless

• Over 108 companies located in a region of Shenzhen City renowned as a handset manufacturing hub are to receive subsidies from the government as part of supportive measures in the face of the worsening economic situation. Li Wang, vice president of Yulong Computer Telecommunication Scientific (Shenzhen) Co. Ltd., said that his company will receive RMB 3 million (US$437,995) from the government of Shenzhen City's Futian region to subsidize research and development of new products. ZTE Corp. (ZTCOF.PK) is also on the list of companies to receive cash from the local government. Several mobile TV system and terminal companies that won bids in the first CMMB (China Mobile Multimedia Broadcasting) mobile TV tender recently held by the State Administration of Radio, Film and Television (SARFT) are also to receive local government financing.
• China's Ministry of Industry and Information Technology (MIIT) has granted network access licenses to two mobile handsets that feature CMMB (China Mobile Multimedia Broadcasting) technology, marking the first time that CMMB handsets have been licensed in China. The two models, Hisense Group's TM68 and Yulong's Coolpad 6168V, are both TD-SCDMA mobile phones with integrated CMMB mobile TV chips. MIIT has long prevented CMMB-enabled mobile phones from entering the open market by refusing to grant them network access licenses. As a result, CMMB phones could only be provided for free to selected users. The operator is seeking to cooperate with local CMMB mobile TV operators over its mobile TV billing system, MMBMS, which will be launched for commercial use next year. China Satellite Mobile Broadcasting Corp had selected 120 companies to supply CMMB-enabled mobile terminals, which included CMMB-enabled GSM, CDMA, and TD-SCDMA mobile phones.

Telecommunications

• China Mobile Limited (CHL) has agreed to spend up to 1 billion yuan (US$146.5 million) renting the 3G TD-SCDMA network from its parent China Mobile Communications Corporation (China Mobile Group). China Mobile is not likely to get the TD-SCDMA assets from its parent in the near future, because the TD-SCDMA business is still at its infancy. China Mobile Group has injected all its assets except for the TD-SCDMA assets into the New York- and Hong Kong-listed company. China Mobile is entitled to extend the lease in the future. China Mobile Group, which has poured 35 billion yuan (US$5.1 billion) in total into building the TD-SCDMA networks in the past two years, will make a big investment in the network construction in the future.
• The State Council decided that the time was ripe to issue 3G licenses based on TD-SCDMA, WCDMA and CDMA 2000 standards. China Mobile is already operating the TD-SCDMA test network would lease the network from its parent for a year for a maximum fee of 1 billion yuan (US$146.5 million). China Unicom (CHU) chad completed construction and testing of a WCDMA trial network in more than 60 Shanghai locations by November. China Telecom (CHA) expected to begin internal trials of the CDMA 2000 network in Beijing before the end of 2008.
• Chinese experts predict slow uptake of 3G technology. The progress of 3G in China in 2009 could be hobbled by lack of demand and consumer concern over pricing. China could develop as many as 73 million 3G users in 2009, with large numbers of users keen to transfer from 2G and 2.5G services. However, analyst Deng Zhongyuan from Analysys International is unsure of this forecast. Internet portal 3g.cn, the aspect of 3G that most concerns consumers is the cost of access. The second biggest concern is the price of upgrading to 3G handsets, a problem that will be particularly acute for China Mobile. The lack of complete 3G coverage across China is another factor that will hinder uptake of 3G.
• China Mobile kicked off beta tests on the social networking service (SNS) platform 139 Community at www.139.com, which is tailored for its mobile phone subscribers. Meanwhile, it is starting to take subscription applications for the new service in Guangdong. Besides regular functions like personal space, photo sharing, social networking, the SNS of China Mobile is highlighted for features such as online short messaging, free online hard disks, and management of short-message chat record and address list. The 139 email service previously launched by China Mobile has integrated into 139.com.

Media, Entertainment and Gaming

• China's interactive entertainment portal site Nineyou is likely to buy in the Taiwan-based role-playing game developer Softstar Entertainment Inc. The Taiwan company plans to collect about 20.7 million yuan (US$3.0 million) to 31.1 million yuan (US$4.6 million) via a private share placement. The new shareholder is expected to hold 10 percent to 20 percent shares in the Taiwan company. The share placement has attracted many game developers from the mainland, Hong Kong, and Taiwan, including Softstar's former shareholders, GigaMedia Ltd. (GIGM), Soft-World International Corp, and Nineyou. Most of people in the online game circle believed that Nineyou would be the winner. Nineyou is a well-known game operator and agency in China.
• Kingdee announced that company CEO Ho Ching-hua has resigned due to health and family reasons. Ho will remain at the company as a non-executive director and chief strategy consultant.
• Online video site 56.com has won an online video broadcasting license from the State Administration of Radio, Film and Television. The company revealed its new executive lineup with former Sohu vice president Wang Jianjun as CEO and current chief executive Zhou Juan taking over as president and chief operating officer in place of exiting president and chief financial officer Zhang Fuxing. 56.com plans to add webgame content to its platform soon.
• The Software Industry Association said that the total revenue of China's overly-saturated game industry is expected to be over 54 billion yuan (US$7.9 billion) for the entire year. There are more than 550 major online game companies in China and the total revenue of these companies will be over 20 billion yuan (US$2.9 billion) in 2008, accounting for 37 percent of the total revenue of the entire game industry. Game consoles and their related businesses will contribute about 32 billion yuan (US$4.7 billion) in revenues in the same period, accounting for 59.3 percent of the total revenue. Other games such as mobile phone games, training games and those in other areas, are expected to make about 2 billion yuan (US$293.1 million), accounting for 3.7 percent of the total revenue.

Hardware

• Domestic demand for flat-screen TVs reached 12.2 million in 2008, with LED and plasma TVs making up 11 million and 1.2 million of the total. Domestic brands captured most of the flat-screen market in 2008, and China's city residents owned a total of 28 million flat-panel TVs, 85 percent of which were LED TVs, by late 2008. CECC estimates that flat-screen demand will be 15 million in 2009, meaning that growth will fall to less than 30 percent for the first time. China's demand for flatscreen TVs was 8 million in 2007.