Asian Tech Stock Weekly Review (October 26 – November 1, 2009)

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 |  Includes: AUO, BIDU, CAJ, CHA, CHL, CHU, CSIQ, CSUN, CYOU, DCM, GA, JASO, KDDIF, LGERF, LNVGY, MSFT, NELTY, NOK, NSANY, NTDOY, SNE, SOHU, SSNLF, SSUMY, TEF, TLSNF, TOSBF, TSL, TSM, UMC, ZTCOF
by: IRG Ltd

Japan

Hardware

With a stronger yen and sluggish sales of copiers and laser printers, Canon's (NYSE:CAJ) quarterly operating profit might be halved from the previous year despite brisk sales of its recently launched EOS Kiss X3 camera and cost cuts. But reports said that Canon is unlikely to change its annual forecast despite having to grapple with a stronger yen than it first estimated. The company will gain 60 billion yen (US$657 million) in July-September. Canon has forecast a 60 percent fall in annual operating profit to 190 billion yen (US$2.1 billion).

Casio Computer revised its fiscal 2010 first-half ended 30 September and full-year consolidated financial results forecasts given the unexpected drop in sales of mobile phones for Japanese carriers, the delay in the launch of some mobile phone models for markets outside Japan to the second half of the year, and the slump in sales of digital cameras outside Japan. Revenues for the first half are expected to be 197 billion yen (US$2.2 billion), down 21.2 percent from the previous forecast of 250 billion yen (US$2.8 billion). The company expects to move to net loss of 11 billion yen (US$122 million) with operating loss of 15 billion yen (US$166 million).

Konica Minolta has been named to the Dow Jones Sustainability Asia Pacific Index in recognition of its economic, environmental and social performance. Dow Jones Sustainability Indexes (DJSI) is the first global sustainability indexes to assess corporate sustainability from economic, environmental, and social developments. DJSI Asia Pacific was newly launched in January 2009 to assess companies in Asia and Oceania regions. 130 companies have been listed in the index this time, and within the list, 78 are Japanese companies including Konica Minolta.

Mobile/ Wireless

Bell-Park revised its forecasts for the full financial year upwards given the impact of iPhone sales and increased 3G phone sales. Bell-Park now expects sales of 44.44 billion yen (US$493 billion) and net income of 1.67 billion yen (US$18.5 million). Bell-Park primarily handles sales for Softbank, which has launched the iPhone 3G S in June and saw strong sales. Softbank launched a discount campaign for customers switching over from another operator. The campaign is expected to generate strong sales. Furthermore, Softbank is encouraging its 2G customers to switch to 3G as the 2G network will be terminated in March 2010.

Semiconductor

Toshiba Corp. (OTCPK:TOSBF) will open a portable fuel-cell which can power up digital gadgets by injecting methanol. Through this, chemical reaction with oxygen will recharge mobile digital electronic devices via a USB cable. Quick consume of the battery is the main problem because of the rising power consumption of mobile electronic devices. A single refill of methanol from a dedicated cartridge can generate enough power to charge two mobile telephones.

NEC Electronics Corp. (OTC:NELTY) widened its full-year net loss forecast due to lower demand for semiconductors used in cars, flat-panel televisions and handsets. The net loss in the 12 months ending March 31 is expected to be 55 billion yen (US$602 million), wider than the 9 billion yen projected earlier. The company forecasts its fifth straight year of losses as cost savings on production, research and labor are outpaced by declining sales of chips amid a glut. Continued shortfalls at NEC Electronics, 70 percent owned by NEC Corp., led the parent to announce plans in April to merge with Renesas Technology Corp. and create Japan’s biggest semiconductor maker.

Orders for Japanese equipment used to make semiconductors narrowly outpaced sales for the sixth straight month in September, underlining a recovery in a sector emerging from a prolonged slump. Orders for Japanese chip-making equipment stood at 67.79 billion yen (US$748 million), up for the seventh straight month. Monthly sales, inflated by book closings for the end of the quarter was down 40 percent from a year earlier but up 56 percent from the previous month. Samsung Electronics Co Ltd. (OTC:SSNLF) and TSMC (NYSE:TSM) and UMC have placed orders for new equipment with Tokyo Electron.

Nissan Motor Co. (NSASNY) and Sumitomo Corp. (OTCPK:SSUMY) announced that the two companies will set up a joint venture for the reuse of lithium ion batteries installed in electric vehicles in 2010 in an effort to bring down the high costs of zero-emission vehicles. Nissan will release a fully electric, medium-sized family sedan, the ''Leaf'' in Japan, the U.S. and Europe in late 2010 and mass produce it globally from 2012. Nissan will also study a similar framework to reuse the batteries in Europe with its alliance partner, Renault SA of France. Raw materials will also be recycled after the second-life batteries expire. the lithium ion batteries, which are more compact, lightweight and powerful than existing batteries, are likely to maintain 70 to 80 percent of their residual capacity even after the end of a normal vehicle cycle.

Media, Entertainment and Gaming

Nintendo Co. (OTCPK:NTDOY) lowered its annual profit and revenue forecasts on slumping sales of the company’s flagship Wii consoles. Net income is forecast to fall to 230 billion yen (US$2.5 billion) in the year to March 2010. The company, which cut Wii prices 20 percent a month ago, forecast the motion-sensing machine’s first annual drop in shipments due to lack of strong software titles. The Wii ended its three-year reign as the best-selling console in the U.S. and Japan during September after Sony Corp. (NYSE:SNE) lowered the price of the PlayStation 3 by 25 percent. The game maker sold 5.75 million Wii consoles in the six months to Sept. 30, 43 percent fewer than the 10.1 million units sold a year earlier. DS hand-held player sales lessened 15 percent to 11.7 million.

Telecommunications

KDDI Corp.’s (OTC:KDDIF) net profit for the fiscal second quarter dropped 25 percent on year, as sales promotion costs mounted amid weak demand. KDDI posted a net profit of 58.87 billion yen (US$653 million). The operator of au brand mobile phone services booked revenue of 869.36 billion yen (US$9.6 billion) for the three months, down 0.9 percent, due to introduction of discount package to attract new subscribers. As a result of strong sales promotions, it gained a net 102,300 mobile phone subscribers in September. This brought its number of users as of the Sept. 30 interim book closing to 31.23 million.

NTT Docomo (NYSE:DCM) said its net income for the half year through September fell 18 percent from a year earlier, as competition among operators intensified, forcing more jostling to win subscribers and higher outlays to improve services. Net income for the six months through September totaled 284.7 billion yen (US$3.1 billion), compared to 346.7 billion yen a year earlier. Operating revenue for the half year fell 5.4 percent to 2.15 trillion yen (US$23.8 billion). The company said it accelerated its strategy shift towards data services with rate revisions to its two flat-rate service plans during the second quarter.

KDDI Corp. will streamline its networks and communications infrastructure saddled with overlaps as a result of mergers and acquisitions carried out since 2000. Through such consolidation, KDDI expects to save an annual 15 billion yen (US$166 million) or so in the year ending March 31, 2011. KDDI will eliminate communications facilities with lower capacity utilization. It expects to incur around 40 billion yen (US$444 million) in costs in fiscal 2009 as a result of losses from facility closures and other measures. KDDI will slash the number of communications bases. The company will also reduce its use of communication cables by 15 percent to 22,000 kilometers.

Softbank Corp. reported second-quarter profit doubled on subscriber growth and lower handset subsidies. Net income rose to 43.4 billion yen (US$480 million) in the three months ended Sept. 30, compared with 21.7 billion yen (US$240.2 million) a year earlier. Profit at the main mobile unit climbed 63 percent to 71.5 billion yen (US$791.5 million). The company raised its annual capital expenditure plan to 260 billion yen from the 220 billion yen (US$2.4 billion) previously budgeted. The company kept its forecast for record annual operating profit unchanged, helped by a pricing plan with more expensive handsets and cheaper monthly phone bills that’s cut payments for subsidies. Softbank faces increasing competition from cheaper data plans announced by NTT DoCoMo Inc., the country’s largest mobile-phone operator, and second-ranked KDDI Corp.

Korea

Semiconductors

Hynix Semiconductor Inc. had its first quarterly profit in two years, bolstered by higher product prices. The company had strong profits for the third quarter on the back of market expectations for a steep rise in computer memory chip prices coupled with higher demand for computers. Net profit stood at 246.3 billion won (US$209 million) in the July-September period, compared with a deficit of 1.67 trillion won a year earlier. The third-quarter performance was caused by the quick recovery in chip prices and better-than-expected increase in computer shipments and cost-cutting efforts. Increased R&D investment last year also contributed. The price of dynamic random access memory (DRAM) chips climbed 26 percent from the previous quarter, and shipments climbed 12 percent.

Hardware

Samsung Electronics Co. has clinched a deal to supply equipment for fourth-generation wireless technology. The company agreed to supply the long term evolution (LTE) equipment to TeliaSonera (OTCPK:TLSNF), which will provide commercial service with the next-generation wireless technology for the first time in the world. LTE technology is a leading candidate to become the fourth-generation wireless technology standard for mobile phones. The technology is expected to be in full commercial use in 2010 and used alongside the currently available third-generation WCDMA wireless standard.

LG Electronics Inc. (OTC:LGERF) will buy US$900 million worth of LCD panels from Taiwan-based AU Optronics Corp (NYSE:AUO) and Chi Mei Optoelectronics Co in 2010. The spokesman did not disclose more details of the deal. LG would buy LCD panels from the two companies for US$500 million each. AU Optronics, the world's third-largest LCD maker by revenue, said its net profit attributable to equity holders amounted to NT$7.42 billion (US$227 million) in the third quarter of this year. AUO will build a new LCD panel plant in mainland China as it sees China to become the world's biggest TV consumer in two to three years.

China

Internet

Sohu.com Inc. (NASDAQ:SOHU) said its third-quarter net profit fell 7.2 percent from a year earlier due to the divestment of part of its gaming unit. Revenue rose 13 percent to a record US$136.6 million from US$120.7 million, in line with analysts' expectations of US$136.4 million. Third-quarter net profit climbed 21 percent to US$51.6 million. Third-quarter revenue from online games totaled US$68.7 million, up 3 percent from the previous quarter and 26 percent from the third quarter last year. Third-quarter brand advertising revenue totaled US$48.5 million, up 11 percent from the previous quarter but down 2 percent from the third quarter last year.

Baidu Inc. (NASDAQ:BIDU) announced that its third-quarter earnings increased 42 percent as large customers shifted more of their advertising budgets to the leading Chinese search engine's advertising platform. However, the company disappointed with its fourth-quarter revenue projection of US$174 million to US$180 million, well below the US$205 million expected by Wall Street. Baidu cited the temporary effect of the discontinuation of its older marketing system. That outlook sent Baidu had earnings of 492.9 million yuan (US$72.2 million), for the three months ended Sept. 30. Analysts polled by Thomson Reuters projected earnings of US$1.83 per ADS.

Tudou will invest100 million yuan (US$14 million) in expanding its programming. Tudou will produce more made for internet Tudou-branded digital video programming for its Chinese internet audience. The plan was unveiled as a response to recent rumors that Tudou is planning an IPO for the end of next year. Tudou has secured the exclusive online debut screening for season two of Sofia's Diary, a much-talked-about online video drama series. Tudou will be involved in production for season three. Tudou also spearheaded original productions including Tudou Angels, collaboration with the Strategic Management Group and Shanghai Media Group, as well as Internet Millionaires, in partnership with Nokia (NYSE:NOK).

Mobile/Wireless

Lenovo Mobile Communication Technology Co. Ltd. (OTCPK:LNVGY) terminated online purchase registration for the first China Mobile 3G Ophone, the Lenovo Mobile O1 effectively making China Mobile Communications Corp. (NYSE:CHL) the exclusive seller of OPhone O1 handsets. China Mobile had begun online purchase registration for the Lenovo Mobile O1 OPhone on the Lenovo Mobile Web site. Duan Hui, analyst with domestic consulting firm eShip Consulting, suggested that Lenovo Mobile's O1 marketing and sales strategy may not have been in line with China Mobile's, resulting in the retraction of O1 sales and marketing activities.

Telecommunications

ZTE Corp. (OTCPK:ZTCOF) said its third-quarter net profit rose 58 percent from a year earlier due to strong demand in its domestic market. ZTE’s net profit for the three months ended Sept. 30 was 408.6 million yuan (US$59.8 million). Revenue rose 43 percent mainly driven by sales of third-generation telecom equipment in China. ZTE has benefited from hefty spending on network equipment by China's telecommunications operators after the issuance of 3G licenses earlier this year.

China Unicom Ltd. (NYSE:CHU) and Telefonica SA (NYSE:TEF) have successfully achieved their planned investment of US$1 billion in each other. Telefonica raised its stake in China Unicom to 8.06 percent and China Unicom has 0.87 percent stake in Telefonica.

China Mobile this week became the world's first phone company with more than half a billion subscribers as price cuts lured new users, helping the carrier's profit rebound from its only profit drop in a decade. China Mobile lessened call fees and boosted handset subsidies to attract 15, 24-million users in the quarter as chairman Wang Jianzhou expands in lower-income rural areas to fend off mounting competition from China Telecom (NYSE:CHA) and China Unicom.

Barclays (NYSE:BCS) has acquired 89.56 million shares (0.64 percent issued share capital) of China Telecom. The total consideration amounted to HK$339.6 million (US$43.8 million). Barclays' shareholding in the company has then boosted to 7.54 percent.

Media, Entertainment and Gaming

· Changyou.com Ltd. (NASDAQ:CYOU), is Sohu.com’s massively multi-player online games (“MMORPG”) business unit, had net income increased 9 percent quarter-on-quarter and 18 percent year-on-year to US$37.8 million in the third quarter of 2009. The company generated total revenues of US$68.7 million. Changyou had that its registered accounts in all games stood at 75.1 million on September 30, representing an increase of 9 percent quarter-on-quarter and 46 percent year-on-year, with active paying accounts in the quarter at 2.4 million. Changyou is expected to generate between US$69 million and US$71 million in total revenue in the fourth quarter of 2009 and non-GAAP net income of between US$41.5 million and US$42.5 million. Sohu posted third quarter net income of US$47.1 million, up 11 percent quarter-on-quarter and 17 percent year-on-year, on revenues of US$136.6 million, representing growth of 7 percent sequentially and 13 percent annually.

· Giant Interactive Group Inc. (NYSE:GA) signed an agreement with Astrum Nival, LLC, to grant a license to Astrum Nival to operate ZT Online, Giant's flagship 2D massively multiplayer online role playing game, in the Russian Federation and other Russian speaking territories. ZT Online is Giant Interactive's first internally-developed 2D free-to-play MMORPG. Since its commercial launch, ZT Online has reached peak concurrent user (PCU) levels over 2.1 million and was voted the most popular game in China in 2006. As a free-to-play game, revenues are derived from in-game purchases of virtual items and services. ZT Online is currently operated in Mainland China by the Company and in Hong Kong, Macau, Taiwan, Malaysia and Singapore via a license to Lager Network. Giant has also granted a license to VinaGame Software Service Joint Stock Company, or VinaGame, to operate ZT Online in Vietnam.

· Chinese online game makers are preparing to compete with Electronic Arts (ERTS) and Activision Blizzard (NASDAQ:ATVI) in the Western markets. Changyou raised US$120 million in its April Nasdaq IPO. The company began testing the game in Europe in August. Many U.S. gamers still prefer consoles such as Microsoft's (NASDAQ:MSFT) Xbox and Sony's (SNE) PlayStation than to online play.

Hardware

The volume of PC sales in China might climb 13 percent this year, boosted by Beijing's stimulus program, Microsoft Corp.'s chief executive for the Greater China region said. The release of Windows 7 might not convince the public to replace older PCs faster than they otherwise would. Pre-release orders for Windows 7 over the past month had been the equivalent of three months' worth of sales for Vista, the previous Windows operating system.

Lenovo expects to boost its PC sales from the launch of Microsoft's new operating system. Lenovo launched two new laptops under its corporate line, both running the new Microsoft operating system. Industry-watchers are betting on further recovery of computer sales next year as the global economy improves and businesses replace old machines. Microsoft launched Windows 7, its most important release for more than a decade, aiming to win back customers after the disappointing Vista. Taiwan's Acer's chairman J.T. Wang expected the launch of Windows 7 to be a positive factor for sales as consumers look to upgrade computers running on the Vista or the 8-year-old XP system. PC shipments in the Asia Pacific region, excluding Japan, grew 17 percent in the third quarter.

Shenzhen Coship Electronics Co., Ltd. revised guidance for its financial results for the first three quarters of 2009 with net profits likely to fall 30 percent caused by a contraction in set-top box business. Set-top box price has been on the decline as competition in the domestic market intensifies after the government-backed digital TV penetration program. The interim report unveiled by Coship Electronics earlier showed that net profits amounted to 33.99 million yuan (US$4.9 million) in the first half of the year, when net cash flow from operating activities stood at negative 30.22 million yuan (US$4.4 million). By the end of June, account receivable had approached half of the total assets.

Alternative Energy

China Sunergy (NASDAQ:CSUN) has entered into a framework agreement to deliver 100MW of solar cells and modules to Canadian panel manufacturer Opsun Technologies between 2009 and 2014. Modules will be provided through OEM arrangements under the agreement.

Canadian Solar Inc. (NASDAQ:CSIQ) has raised net proceeds of roughly US$103 million from an offering of 6.9 million shares, after underwriting discounts and commissions and before offering expenses.

Trina Solar Ltd. (NYSE:TSL) has signed an agreement to supply 108MW of modules to European PV equipment distributor PROINSO for use in the European market, including Italy and Spain. Shipments are scheduled to begin in the fourth quarter, with 38MW and 42MW of modules to be delivered in the fourth quarter of 2009 and the first quarter of 2010, respectively, and shipments will continue through the first half of 2010. PROINSO has an option to purchase an additional 12MW of modules in the first quarter of 2010, under the agreement.

JA Solar Holdings Co. Ltd. (NASDAQ:JASO) has established a 3MW solar power station in South Korean. Shanghai Jinglong, JA Solar's sister company, has established a 20MW solar power station in Spain. Both JA Solar and Shanghai Jinglong are subsidiaries of Hebei-based Jinglong Industry and Commerce Group.