Chinese Tech Stock Weekly Summary (Mar. 23 - Mar. 29, 2009)

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

• • •

Internet

• Tencent’s (TCEHF.PK) newly developed Q-style 3D online car racing game called QQ Speed hit a recorded 550,000 peak concurrent users (PCU). Meanwhile, the company plans to start alpha testing of Da Ming Long Quan, its licensed Ming Dynasty-based 2D martial arts MMORPG by early April. The game was developed by Shanghai Jia You Network Technology Company.
• Online travel service provider Tuniu.com announced that it has secured the first round of venture capital investment from Gobi Partners. Details of the funding were not disclosed. Established in October 2006, Tuniu.com is oriented as a B2C e-commerce website providing online booking services nationwide. Tuniu.com has created a new online booking form, by making full use of the Internet resources, integrating tourism industrial chain, and serving customers via calling centers and operating systems. According to Tuniu.com, they are different from other ticket and hotel room booking websites as they focused on the booking of holiday-making products. Based in Nanjing, Tuniu.com currently has subsidiaries and offices in Beijing, Shanghai, Hangzhou and Guangzhou.
• HC International, a Chinese business-to-business (B2B) e-commerce company, announced that it recorded profit of RMB 1.9 million (US$0.3 million) for the full of year 2008, compared to a RMB 39.4 million (US$5.7 million) loss in 2007. Revenue was up 12.4% year-on-year to RMB 313.9 million (US$45.2 million) driven by revenue from market research and analysis which grew 49.9% to RMB 49.46 million (US$7.1 million). Online business was up 6.6%. to RMB 114.94 million (US$16.5 million). As of December 31, 2008, the company had about 8.4 million B2B users.

Telecommunications

• Huawei Technologies Co. Ltd. is in the final running for a significant network infrastructure contract with wireless provider Clearwire Corp. (CLWR). Clearwire is in the process of selecting vendors to build a wireless broadband network that would cover 120 million people by 2010, offering Internet speeds on par with the cable connections. Clearwire raised US$3.2 billion for the rollout last year from a consortium of tech companies including Google (GOOG) and Intel (INTC) to build the network based on a fourthgeneration technology called WiMax. Other finalists for the contract include Motorola (MOT), Samsung Electronics (SSNKF.PK) and Nokia Siemens Networks (NOK). Clearwire may select more than one vendor for its network and it isn't yet clear what the size of the award will be.
• ZTE (ZTCOF.PK) has secured a US$15 billion line of credit to finance its Chinese 3G projects and the company's international operations. The company signed a five-year financing deal with China Development Bank. Specific terms of the deal are being finalized. ZTE's 2008 net profit grew 32 percent to 1.66 billion yuan (US$243 million) on the back of a 27 percent increase in revenue. The company won around 30 percent of the value of the 3G contracts issued by China's three main carriers over the year. China’s 3G and broadband rollout is expected to account for more than half of global telecom equipment spend over the next two years.
• China Mobile (CHL) subscribers sent 607.1 billion text messages in 2008, up more than 100 billion over the operator's 2007 SMS totals. The company’s subscriber count is now closing in on the 464 million mark - in all, China boasts about 650 million mobile subscribers nationwide. China Mobile customers purchased 76 million full-track music downloads in 2008, while another 41.5 million paid for mobile newspaper content, up a third over 2007 totals - the carrier now offers 110 different news periodicals. Adoption of China Mobile's Fetion IM service doubled from year to year, with 147 million users in 2008.
• ZTE aims to make its mark on the global telecoms equipment market by taking a route that its better-established Western rivals are either unable or unwilling to follow: vendor financing. ZTE revealed that it has agreed a US$15 billion credit line with the China Development Bank. Under the terms of the deal, the pair will work together to set up an investment and financing platform, including expansion to overseas markets. ZTE executives clarified that this does not mean it is looking to grow its business through acquisitions in overseas markets. The downturn means customers are at a financial impasse, and all are potentially interested in this sort of financial solution, he insisted.
• ZTE's net profit grew 32 percent to 1.66 billion yuan (US$243.2 million) and revenue also grew 27.3 percent in 2008, thanks to significant gains from China's 3G rollout. ZTE has attributed the result to fresh spending by domestic carriers on 3G and broadband. ZTE won about 30 percent of the total value of the 3G contracts issued by China's three main carriers in 2008. Revenue from international operations grew 33.5 percent to 26.8 billion in 2008, and accounted for 60 percent of the group's total revenue - up nearly three points from 2007.
• China Telecom Corp. (CHA) reported its 2008 net profit plunged 96 percent from a year earlier due to impairment losses on assets associated with its low-cost, limited wireless service. After posting disappointing results, the company slashed its capital spending plan for this year and also will delay plans to seek a strategic investor. The net profit for the 12 months ended Dec. 31 fell to 884 million yuan (US$129 million) while revenues rose 3.3 percent. Personal handyphones offer wireless services within a limited area and last month the government ordered China Telecom to shut down the service to avoid frequency interference with China's 3G technology. China Telecom plans to cut its capital spending to 39.2 billion yuan (US$5.7 billion) this year. The operator said its capital spending in 2008 exceeded its earlier guidance of 47 billion yuan (US$6.9 billion) because of investments related to integrating its services in the fourth quarter of last year.

Media, Entertainment and Gaming

• Focus Media Holding Ltd (FMCN), which operates outdoor audiovisual advertising networks in China, announced that it recorded US$800.3 million in net loss for the fourth quarter of 2008, compared to a net profit of US$51.3 million in the third quarter. Revenue during the fourth quarter dropped 15% to US$192.1 million. Net loss from continuing operations was US$422.2 million, and discontinued operations accounted for US$378.1 million. Focus sold its discontinued operations include the CGEN in-store ad network, wireless advertising business and out-of-home digital networks to Sina (SINA) last year. It recorded non-cash one-time impairment charges totaling US$220 million for the quarter on the restructuring of CGEN, a US$200 million charge, and wireless termination.
• Kingsoft has recorded a net loss of around 7 million yuan (US$1 million) from the illegal copy and sale of virtual coins in its MMORPG JX 2 Online. The company’s in-house engineer Ning Miaoyu and associate Wang Like were sued by the company for illegal coin sales that earned them more than 4 million yuan (US$585437). Wang gained access to the company database through Ning and copied more than 160,000 virtual coins to sell on Alibaba's (ALBCF.PK) Taobao.com.
• Changhong launched an online content platform, "Le Jiao," on March 26 with a total investment of 150 million yuan (US$22 million). The content will be shown on Changhong's LCD and plasma display panel (PDP) TVs, scheduled to reach shelves in early April, and touch on entertainment, education, daily life information and health. Changhong also partnered with content providers including Tencent to license more than 10,000 films or TV programs for the platform, said the report.

Hardware

• Dell (DELL) China booked US$3 billion in fiscal 2008 revenue, accounting for 5 percent of overall company earnings. The company's domestic computer shipments climbed 28 percent, four times the average growth of similar products in China.

Information Technology

• Domestic import and export volume for IT products fell 38.2 percent year-on-year to US$42.03 billion in January. IT exports made up 29.8 percent of the nation's total export volume at US$26.97 billion, down 29.55 percent year-on-year, while IT imports were 29.1 percent of domestic import volume at US$15.06 billion, a decrease of 49.34 percent year-on-year. The pace of IT import growth was 6.3 percentage points slower than imports in all industries in January; IT exports lagged behind total export growth by 12.1 percentage points.

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Apr 01 09:11 AM