Asian Tech Stock Weekly Review (November 9-15, 2009)

by: IRG Ltd



Nippon Telegraph & Telephone Corp. (NYSE:NTT) had a 38.2 percent decline in its fiscal second-quarter net profit, as demand for its mobile phone services slackened. NTT had a 142.7 billion yen (US$1.6 million) net profit, as revenue declined to 2.4 trillion yen (US$26 billion). NTT's lackluster results mainly reflect weak performance at its unit, NTT DoCoMo Inc., Japan's biggest mobile phone services operator by subscriber numbers, in which NTT owns a stake of about 63 percent. NTT DoCoMo had recently that net profit for the three months ended Sept. 30 sank 20 percent from the year before due to a continued slump in call revenue and a falloff in sales of mobile handsets.

Softbank Mobile Corp. (OTCPK:SFTBF) ranked first among Japanese cellphone service providers in net subscription gains in October for the third straight month. Softbank Mobile, a subsidiary of Softbank Corp., gained a net 97,500 new contracts in the reporting month, due to the continued popularity of Apple Inc.'s (NASDAQ:AAPL) iPhone 3GS handsets marketed by the firm in Japan. Emobile Ltd. replaced KDDI Corp. (OTC:KDDIF), which provides ''au'' mobile phone services, as the second-largest net contract gainer with 80,000 contracts. NTT Docomo Inc. came third with 55,100 contracts, followed by KDDI with 27,500 contracts.

KDDI Corp. will acquire a 50 percent stake in BRAC BD Mail Networks Ltd. of Bangladesh through a third-party allotment of new shares by the Dhaka-based Internet access service provider. KDDI will invest in the company known as bracNet as the penetration rate of the Internet remains as low as 2 percent in Bangladesh despite strong demand. The Bangladeshi company was founded in 2005 by Defta Partners, a venture capital firm in California, and Bangladesh Rural Advancement Committee, a non-profit organization in Dhaka. KDDI has yet to announce details of the equity acquisition deal, including its value and date.



SK Telecom Co. (NYSE:SKM) has completed the sale of its 3.8 percent stake in China Unicom Ltd. (NYSE:CHU) for 1.5 trillion won (US$1.26 billion) in a move to adjust its business portfolio. The proceeds will be used to boost its financial health, launch a fixed-line and mobile convergence business in China and fund research and development projects. SK Telecom purchased US$1 billion worth of convertible bonds issued by China Unicom, China's No. 2 mobile provider, listed on the Hong Kong Stock Exchange. SK Telecom converted the bonds into shares in August 2007.

Media, Gaming and Entertainment

NCsoft Corp.’s third-quarter earnings rose more than nine fold from a year earlier 46.9 billion won (US$39.8 million) led by a surge in sales in North America and Europe. Sales were 166.3 billion won (US$143 million) while operating profit recorded a seven-fold increase with 56.6 billion won (US$48.9 million). Third-quarter bottom line marked the highest quarterly net profit and a fourth straight quarterly rise. The company ascribed its stellar performance to the popularity of its new game Aion among overseas users, which was introduced in North America and Europe in September. Sales in North America doubled on quarter to 24.2 billion won while those in Europe quadrupled to 17 billion won (US$14.6 million).


MagnaChip Semiconductor has emerged from bankruptcy protection in the U.S. as it was acquired by U.S. funds managed by Avenue Capital Management. The exit came about five months after MagnaChip's U.S. parent filed for bankruptcy amid falling revenue. The company is financially robust and ready to continue executing our growth plan. MagnaChip was acquired by a unit of Citigroup (NYSE:C) in 2004 after spinning off from Hynix Semiconductor Inc.

Hyosung Corp. abandoned a bid for Hynix Semiconductor because of speculation it received political favors to pursue the takeover. Hyosung was the one of 43 South Korean groups to bid for Hynix. Korea Exchange Bank said creditors will resume their search for a buyer as they seek to recoup the US$4.6 billion spent bailing out the world’s second- largest maker of computer-memory chips.

Samsung Electronics Co. (OTC:SSNLF) and other major makers of NAND flash memory chips saw their third-quarter sales increase sharply thanks to a surge in prices. Samsung Electronics recorded US$1.29 billion in sales of NAND flash memory chips used for mobile electronic devices in the July-September period, climbed 24.4 percent from three months earlier. Industry leader Samsung's market share rose slightly to 38.5 percent in the third quarter from 37.6 percent from the previous quarter. Japan's Toshiba (OTCPK:TOSBF) had US$1.16 billion in third-quarter sales, climbed 21.3 percent from the previous quarter. Its market share remained unchanged at 34.7 percent. U.S. chipmaker Micron Technology's (NASDAQ:MU) sales climbed 33.9 percent on-quarter to US$291 million, with its market share rising to 9.4 percent. Hynix Semiconductor Inc. had US$219 million in sales, climbed 11.7 percent from three months earlier. Hynix had an 8.7 percent market share, while its industry ranking fell one spot to third.


Samsung Electronics Co. widened its lead over rivals in the North American mobile phone market in the third quarter, helped by the popularity of its key models. Samsung sold 12.1 million handsets in the July-September period, garnering a 25.6 percent share of the North American market. The figure was climbed 0.9 percentage point from three months earlier. Samsung was the top seller in the North American market for five quarters running. Samsung's sales also topped the 12 million mark for the first time. LG Electronics (OTC:LGERF) sold 9.8 million units in North America in the third quarter. LG's market share declined 1.9 percentage points to 20.7 percent. Motorola (MOT) shipped 7.9 million handsets, with its market share dropping 0.6 percentage point to 16.7 percent.


Internet Ltd. (OTC:ALBCF) said its third-quarter net profit fell 20 percent to 236.0 million yuan (US$34.6 million), as higher spending on marketing, staff and technology more than offset a double-digit rise in revenue. Revenue for the three months ended Sept. 30 rose 32 percent. Third-quarter revenue climbed 12 percent from the second quarter. The decline in net profit was as expected, as a result of previously announced continuing investments in customers, people and technology. Spending jumped in various areas during the July-September quarter including sales and marketing expenses which soared 65 percent from a year earlier.


China's mobile value-added market experienced stable development in terms of market size in the third quarter of this year. China's mobile value-added market size topped 39.2 billion yuan (US$5.7 billion) in the third quarter of this year, up 17.9 percent on year and 0.7 percent on quarter. China's economic recovery in the third quarter drove up the consumption of mobile telecom services. Carriers' application of various 3G service promotions during the third quarter stimulated a nonstop boost of mobile value-added services. The WAP segment was able to grow atop 3G service promotions and mobile Internet development, which boosted telecom industry's data services.


China Telecom (NYSE:CHA) will issue three-year notes worth 10 billion yuan (US$1.5 billion). The company will use the funds raised to boost its working capital and to pay off some of its short-term debt.

ZTE Corporation (OTCPK:ZTCOF) had its 3Q results ended 30 Sep 2009. ZTE succeeded in gaining further inroads in the market segment comprised of multi-national carriers with its LTE, UMTS and GSM products. This success was attributable in large part to leveraging opportunities presented by the need for network construction in emerging markets against the backdrop of an improving global economic environment. The Group had 2009 revenue to-date from principal operations of 42.8 billion yuan (US$6.3 billion), representing growth of 41.27 percent as compared to the same period last year, while net profit attributable to the parent company grew 46.13 percent to 1.2 billion yuan (US$175 million). In the third quarter, the Group had revenue from principal operations of 15.1 billion yuan (US$2.2 billion), representing growth of 42.81 percent as compared to the same period last year, while net profit attributable to the parent company grew 58.18 percent to 409 million yuan (US$60 million). The Group had substantial growth in operating revenue largely attributable to large-scale 3G network construction in the domestic China market.

Media, Entertainment and Gaming

· Shanda (NASDAQ:GAME) will invest US$100 million in a new company, which will be established by Golden Eagle Broadcasting System, and partner in the future on audio-visual content. Danni Long will be the newly appointed president of the company. Danni Long was invited to join Hurray Holdings (HRAY) as CEO.

· Phoenix Satellite Television, founded in 2005, had a US$25 million investment from Intel Capital as well as Bertelsmann Asia Investment Funds and Morningside Ventures. Foreign companies like Phoenix have had a difficult time breaking into China's highly sensitive traditional media markets, with names like Time Warner (NYSE:TWX) and News Corp. (NASDAQ:NWS) making little inroads despite years of investment in the sector. Beijing has been less restrictive on media delivered over the Internet and mobile phones, making the media more attractive to foreign investors in a country that is the world's largest Internet and cellular market.


TPV Technology would merge with LG Display Co Ltd to produce LCD television and monitors in China involving total investments of US$84 million. TPV would set up a venture with LG Display to manufacture LCD modules and televisions in Xiamen with a US$34 million investment, and a monitor and public display product manufacturing venture in Fujian involving total investment of US$50 million. TPV will hold 49 percent of the ventures and South Korea's LG Display, the world's No.2 maker of LCD screens, will own 51 percent. Asian panel makers are rushing to increase their presence in China, which is expected to become the world's biggest market for liquid crystal display (LCD) televisions within a few years. LG Display signed a deal with the Chinese city of Guangzhou to go ahead with a proposed US$4 billion panel plant in China.


Semiconductor Manufacturing International Corp. (NYSE:SMI) will pay US$140 million in cash to larger rival Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) and may offer US$100 million worth of SMIC shares to TSMC to settle a trade-secrets lawsuit. A California jury ruled last week that SMIC stole trade secrets from TSMC, possibly putting SMIC on the hook for more than US$1 billion in damages for TSMC.

SMIC’s shares climbed by 74 percent after the company named a new chief executive officer to replace founder Richard Chang. Chang will be replaced by David Wang, 63, a director at Solar Fun Power Holdings Co. (SOLF). Chang’s resignation follows an accord reached by the company this week to resolve a trade-secrets lawsuit filed by TSMC.

Alternative Energy

Yingli Green Energy Holding (NYSE:YGE) booked a net income of 120.8 million yuan (US$17.7 million) with net revenue of 2.23 billion yuan (US$326.0 million) in the third quarter of 2009. The company updated its annual PV module shipment target to 490-500MW this year, representing an increase of 74.0-77.6 percent year-on-year, and upgraded its gross margin target for fiscal year 2009 to 19-20 percent.