The following is excerpted from IRG's weekly stock report:
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• IBM Global Services China (IBM) , the services and consulting arm of IBM China, has acquired a 1.56 percent stake in Sichuan Changhong Electric from its parent company and largest shareholder, Sichuan Changhong Group for US$15.8 million. In addition to television sets, Changhong also produces air-conditioners and other electronics products, including MP3 players, settop boxes and DVD players. The company is also an IBM customer, having adopted the Product Innovation Management model developed by IBM Global Services.
• Microsoft's (MSFT) plan to lay off 5,000 employees globally will have little effect on its China region business and employees. The insider did not disclose how many employees would be laid off in China. Microsoft invested US$280 million in a Beijing research center that will accommodate 5,000 and be complete in 2010.
• Nokia (NOK) saw sales in China fall to 12.9 million units in the fourth quarter of last year, down 36.1 percent year on year and down 34.8 percent from the previous quarter. In 2008, Nokia's sales in China accounted for 13 percent of the company's total sales. As a result of the economic turmoil, most handset users are reluctant to replace old cell phones, leading to the decline of new phone sales, one insider noted. By the end of last year, the average price of a Nokia handset was 71 euros (US$91.2), lower than the average of 83 euros (US$106.6) a year earlier.
• China's mobile phone market is likely to grow 7.7 percent in 2009 despite the downward trend in the global market, with handset shipments rising to 239.1 million units. Partly boosted by the Chinese government's initiative to provide subsidies to rural residents for home electronics purchases, the world's largest mobile phone market is expected to see its new subscribers exceed 90 million this year. Chinese mobile phone makers would ship over 360 million units to both domestic and overseas markets, representing a year-on-year rise of 20 percent. Currently, China has more than 600 million mobile phone subscribers. China's three leading telecom carriers recently said they will invest around 100 billion yuan (US$14.6 billion) into third-generation (3G) networks this year. However, the research firm said that China will not see its 3G handset output increasing dramatically this year, with only 3 percent of the total, or 8 million, 3G mobile phones being produced.
• China TechFaith Wireless Communication Technology (CNTF) said that it and Chinese smartphone brand QiGi have signed a cooperation agreement to launch four new high-end smartphones for China Telecom (CHA) and China Unicom (CHU) customers in the second quarter. The company will launch two CDMA1X smartphone, one a CDMA phone powered by an Android operating system, the other running on the Windows Mobile 6.1 operating system. The other two models will include an EVDO Windows Mobile 6.1 smartphone and a WCDMA Windows Mobile 6.1 smartphone, both designed for the 3G network recently rolled out in China.
• Huawei topped the list of international patent applications in 2008. It applied for 1,737 patents, as Chinese and Korean firms filed an extra 12 percent more for patents than 2007. Chinese firms made some 6,000 patent applications and Korean companies nearly 8,000. However, the US maintained the number one spot, accounting for nearly a third of the applications over 53,000. Panasonic (PC) filed the second most patents, with 1,729 applications. Japanese inventors filed the secondmost patents after the US, and Japanese companies took 28 spots on the list of the top 100 patent filing companies. Patent applications grew by just 2.4 percent in 2008, compared to an average 9.3 percent growth rate in the previous three years.
• China Mobile (CHL) plans to buy equipment for its new third-generation network from Ericsson (ERIC) and Nokia Siemens Networks. Still, local telecoms equipment makers Huawei Technologies, ZTE (OTCPK:ZTCOF) and Datang Telecom will likely get the bulk of orders. China Mobile, the world's largest mobile carrier, recently obtained government approval to operate the nation's homegrown TD-SCDMA technology for its 3G network. China Mobile will spend 58.8 billion yuan (US$8.6 billion) in 2009 to build out its TD-SCDMA network, the government said earlier this month. The relative immaturity of TDSCDMA handsets was the major obstacle to the technology's development, but that he was confident there would be a strong range of handsets available by the end of this year.
• NTT Communications Corporation (DCM) has agreed with China Telecom Shanghai, a subsidiary of China Telecom Group, to launch the Yuanqu Data Center in Shanghai. NTT Com also announced that the data center will introduce Global e-VLAN point of presence (POP) to provide international wide-area Ethernet service on February 2. Customers will be able to connect their servers and systems to a high-speed backbone network directly on the premises of the data center, thereby minimizing connection costs. Data centers are a key way that NTT Com supports secure, stable, optimized operations of corporate customers on a worldwide basis. NTT Com data centers in 27 cities of Asia-Pacific, North and South America and Europe place a special emphasis on providing globally consistent solutions for multinational customers. The rapid increase of global companies operating in China has raised the demand for high-quality, high-reliability data centers offering seamless connection to international wide-area networks, such as the new Yuanqu Data Center.
• China's telecom industry reported 2.2 trillion yuan (US$328.1 billion) in business volume in 2008, up 21 percent on year; and 814 billion yuan (US$119 billion) in revenue, up 7 percent. China's fixed phone users in 2008 decreased 2.5 million to 340.8 million. Included were 16.6 million in urban areas and 8.2 million in rural areas. The number of local wireless phone users fell 15.6 million to 68.9 million, and the proportion in the number of fixed phone users dropped to 20.2 percent, 2.9 percentage points lower than the year-end of 2007. More Internet users of basic telecom enterprises inclined to adopt broadband access service. In January-December 2008, the number of Internet dialing users dropped 5.0 million to 14.4 million, while that of Internet broadband access users rose 17.0 million to 83.4 million. Revenue from mobile communications and data communications in 2008 increased by 15.1 percent and 35.1 percent, respectively, with the proportion in the total revenue of telecom industry climbing up 3.9 percentage points and 2.04 percentage points. The total duration of long-distance calls in 2008 amounted to 421.3 billion minutes, up 2.5 percent on year. The duration of traditional fixed-line long-distance calls and IP calls dropped 15.8 percent and 6.4 percent, respectively, while that of mobile long-distance calls went up 23 percent.
• China Mobile Ltd. has won the bid for Hong Kong's Broadband Wireless Access (BWA) license. China Mobile acquired the license for HK$494.7 million (US$63.8 million). Two local operators, CSL New World Mobility and Genius Brand Ltd, which is a joint venture comprising PCCW Ltd and mobile player Hutchison Telecommunications International Ltd, also won bids. China Mobile had not revealed any details about the services it will offer under the license. However, industry analysts said the company could use the frequency band to deploy its TD-SCDMA service in Hong Kong. BWA is a radio access technology that can support a variety of wide area high-speed wireless data services.
Media, Entertainment and Gaming
• Zoom Technologies, Inc. (ZOOM) announced that it has entered into a definitive agreement to acquire Tianjin Communication Broadcasting Group Digital Communication Company Limited (TCB Digital). TCB Digital is primarily engaged in research and development, manufacturing, and sale of advanced mobile phones, and also manufactures other electronic products. Zoom will initially own 51 percent of TCB Digital by issuing 4,225,219 Zoom shares. Another 29 percent of TCB Digital may be exchanged for an additional 2,402,576 Zoom shares, resulting in Zoom owning 80 percent of TCB Digital. Zoom will also have options to acquire five other companies that are under the ownership of TCB Digital's majority shareholder, with the option price of each company based on the higher of a minimum price or a multiple of that company's net income. TCB Digital currently has over 1,000 employees including about 700 EMS manufacturing operators, over 100 sales executives, over 80 R&D engineers, and over 90 after-sales service technicians. TCB Digital generated revenues of US$49 million and comprehensive net income of US$2.47 million, and ended 2007 with US$11.8 million net assets.
• Online game operator Perfect World (PWRD) said that "Chi Bi", one of its multimedia online roleplaying games ((MMORPG)), has signed an agreement with KTHitel (KTH), the portal network operator and content provider of the Republic of Korea. The game, featuring warcraft in ancient China, has been rolled out in Taiwan Island, Malaysia and Japan since its launch in China in January 2008. "Chi Bi", with advantages in systematic structure and technology, is sure to gain favors from Korean players. Chi Bi's debut in Korea provided chances for both Perfect World and KTH to expand web game operation in the future.
• Advertising and media company CCID Media, a subsidiary of China Center for Information Industry Development, is expected to record a net loss of 20 million yuan (US$2.9 million) for 2008. The company credited the loss because of the shrinking market demand, which caused the profitability of advertising.
• Beijing Gehua CATV Network is expected to announce revenues for the fiscal year 2008 amounting to 1.4 billion yuan (US$199 million), an increase of 14.75 percent year-on-year. Net profits on the other hand, amounted to 331.1 million yuan (US$48.4 million). The company will have the net profit to decline 30 percent year-on-year in the first quarter of 2009 as increasing costs outweigh gains in revenue.
• KongZhong Corp. (KONG) announced that its Chief Financial Officer Mr. Sam (Hanhui) Sun has indicated his intention to leave the Company to pursue other interests. Mr. Sun remained in his position until February 1, 2009, but will continue to stay on with the Company for a brief transition period. The Company appointed Mr. Jay Chang as the Chief Financial Officer on February 1, 2009. Previously he worked as Chief Financial Officer of TOM Online and the Director of Equity Research at Credit Suisse, responsible for covering the Internet and telecommunications sectors in China. Most recently, Mr. Chang was the President of 56.com, an online video provider in China.
• Sina (SINA) announced the members of its new nine-member board of directors. The board will comprise of four Sina and four Focus Media executives including President and CEO Charles Chao. Focus Media Chairman and founder Jason Jiang will be among the members and has pledged not to sell his Sina shares for at least six months. He will concentrate on Focus online advertising subsidiary Allyes. Chao will become a non-independent director of Focus Media.
• The Chinese semiconductor market is likely to slide by 5.8 percent in 2009 and to rebound in 2010 by about 9 percent, according to a market research institute. The institute also predicted that semiconductor inventories would be mostly digested by the third quarter of this year. The shrinkage of market demand and the consequent increasing inventories will result in the dull period for semiconductor sales in 2009. In the fourth quarter of 2008, overstock of electronic products almost doubled in China. The supportive policies for software and integrated circuit sectors released by Chinese government and the pickup of consumer's confidence in wake of rewarming of the entire economic environment will be main driving force behind the growth of the industry.
• Yingli Green Energy Holding Co. Ltd. (YGE) announced that Yingli Energy (China) Co. Ltd., its wholly owned subsidiaries, has entered into a credit agreement for a three-year loan facility with a fund managed by Asia Debt Management Hong Kong Limited ("ADM Capital") to secure additional financing for its business expansion. Pursuant to a credit agreement, ADM Capital has agreed to provide a three-year loan facility of up to US$80.0 million to Yingli China for its production capacity expansion and general corporate use.