Asian Tech Stock Weekly Review (August 9 – 15), Part II: China

by: IRG Ltd

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Sohu (NASDAQ:SOHU) restructured its wireless division by merging its mobile portal businesses into internet divisions, while keeping some services including ringing tones, short messages, games and social networking within the wireless division. The general manager for the restructured wireless division will be Sohu Vice President Fang Gang. Sohu's former GM Yue Guofeng left for Baidu's (NASDAQ:BIDU) newly established wireless internet division. International’s (NASDAQ:CTRP) net income increased 48 percent year-on-year and 24 percent quarter-on-quarter to $34.68 million in the second quarter of 2010. Total revenues reached US$109.36 million in the quarter. Hotel reservations contributed $46.62 million as hotel reservation volumes surged 34 percent year-on-year, and commission per room night boosted 5 percent year-on-year. The company's air ticketing business had $45.30 million. Packaged-tour revenues in the quarter were $9.89 million, while corporate travel revenues surged 83 percent year-on-year to $4.96 million on accelerating demand for corporate travel. The company expects net revenue of 35-40 percent above the $80 million recorded in the third quarter of 2009. Ltd. (OTC:ALBCF) had a 45 percent jump in second-quarter net profit to 363 million yuan ($53.6 mm) because of accelerating subscriber growth and boosting use of its value-added services. Revenue from domestic market expanded by 41.1% from the second quarter of 2009 and 15.9% from the first quarter of 2010 contributing 34.5% to the total revenue. The company saw early signs of margin improvement after declaring 2009 a time for investments meant to boost revenue and margins later on. But it sees China's exports growth to decline in coming quarters, which could crimp the prospects for the many small and medium-sized Chinese exporters on Alibaba's site. As of June 30, 2010, the Alibaba had had 39.794 million registered users and 6.252 million registered storeowners at home, up 3.639 million and 832,815 from March 31, 2010, respectively. Total revenue amounted to 1.366 billion yuan ($201.7 mm), leaping 48.6% from a year ago and 11.9% from the previous quarter. Over 25 percent of users in Alibaba's China Gold Supplier paid-membership class used value-added services in the first half of the year. Alibaba sees the company's value-added service penetration among members in each marketplace to boost more than 5 percent year-on-year in coming years. Alibaba added at least 51,000 customers for the China TrustPass program for marketing on its China website. It also gained 5,100 subscribers to the company’s export-oriented China Gold Supplier program. Alibaba also said it will acquire US companies to widen its overseas business. The company accomplished its acquisition of Vendio Services Inc. to surge its overseas business. The purchase is part of the $100 million that Alibaba has set aside for investment in its AliExpress website, which is aimed at US online merchants.


China Wireless Technologies Ltd.’s (CHWTY.PK) net pofit for the first half of this year skyrocketed 740.4 percent year on year to HK$272 million ($35 million). Its operating revenue in the period from January to June was 193.8 percent more than in the same period of last year. China Wireless Technologies attributed the surge in operating revenue of HK2.1 billion ($270.3 million) to the significant growth in China's 3G handset users and a robust increase in its 3G Coolpad handset sales. The company's revenue from 3G Coolpad smartphone sales were HK$1.8 billion ($231.7 million) 626.1 percent more than the same period of last year. Sales volume hit 1.42 million units, compared to 100,000 units a year earlier.

Spreadtrum Communications, Inc. (NASDAQ:SPRD) released its financial report for the quarter ending June 30, 2010. Net profits amounted to $11.1 million, in contrast to net loss of $13.1 million a year ago and net profits of $ 6.6 million a quarter ago. Total revenue rose 341 percent year on year and 37 percent quarter on quarter to $71.4 million, bigger than the earlier expected $65 million-$68 million. The board of Spreadtrum Communications Inc. also appointed president and CEO Leo Li as the company's board chairman. Independent director Scott Sandell was assigned as the lead director of the fabless semiconductor company.

Telestone Technologies Corp's (NASDAQ:TSTC) second-quarter profit declined 15 percent to $1.7 million, or 16 cents a share, compared with $2.0 million, or 19 cents a share, due to accelerating operating expenses as the developer of telecom networks technology shifted focus to high-margin wireless fiber-optic systems, sending its shares down 20 percent in extended trade. The company increased sales and marketing efforts to secure higher-margin wireless fiber optic distribution system (WFDS) projects and installations. Revenue from WFDS installations accounted for about 21 percent of revenue in the first half of the year. Revenue rose 37 percent to $16.6 million. Operating expenses more than doubled to $5.3 million.

China Tietong, formerly China Railcom and a wholly-owned subsidiary of China Mobile (NYSE:CHL), is expected a 35 percent growth in subscribers this year, reaching a total of 10 million subscribers by the end of this year. To accommodate for an expected 70 to 100 percent in traffic on its network, China Tietong has selected Huawei Technologies as the sole supplier for an expansion of its CTTNET nationwide IP network. Under the scope of the deal, China TieTong will deploy Huawei’s NE5000E routers, which, according to Huawei, can support a port capacity of 2.56Tbps, and is scalable to 200Tbps.

Media, Entertainment and Gaming

· China's Ministry of Culture has given approval for Inc. (NASDAQ:NTES) to operate the Wrath of the Lich King (WLK), an expansion pack for leading online game World of Warcraft (WoW). Approvals from both the General Administration of Press and Publications (GAPP) and MoC are required to operate imported online games in China. NetEase received GAPP approval for the expansion in late July. NetEase's total revenue from WoW including WLK would amount to $272 million in the third quarter of 2010. WoW's aggregate concurrent user (ACU) figure is also expected to increase by 20 percent in the same period.

· Perfect World Interactive (NASDAQ:PWRD) President Zhu Qi reveals that Beijing Perfect World Co., Ltd. has not talked with Electronic Arts (ERTS) about any capital cooperation. Some reports were made that EA intended to gear up in North America and China through taking stake in the Chinese online game developer and operator. Zhu points out that the company is cautious to launch mergers and acquisitions, but will not miss any opportunity. Perfect World Board Chairman and CEO Michael Chi have reiterated that Chinese online game companies rely on globalization for their future growth. Besides interactive entertainment business, Perfect World lately adjusted the development strategy of its movie and TV opera operations. Affiliated Perfect World Culture Communication Co., Ltd. earlier acquired the majority stake in two Chinese peers.

· CDC Corporation (NASDAQ:CHINA) recorded a net loss of $7.9 million in the second quarter of 2010, further deepening the previous quarter's loss of $3.6 million. The company had revenues of $78.6 million in the second quarter, an increase from $77.8 million in the prior period. CDC Software contributed revenues of $52.6 million in the period, up from $50.5 million in the prior quarter due to improved license sales and increased SaaS revenue. CDC Global Services saw revenues fall to $15.8 million from $16.4 million in the previous quarter. Revenues from the company's games unit CDC Games fell to US$7.1 million in the second quarter from $7.97 million in the first quarter of 2010 and $9.5 million in the year-ago period. The company's portal site,, reported revenues of $3.09 million in the period, up from $2.9 million in the prior quarter and compared with $3.1 million in the same period last year.

· Giant Interactive (NYSE:GA) generated net income of 186.02 million yuan ($27.22 million) or 0.79 yuan ($0.12) per share for the second quarter. Revenues were 321.65 million yuan ($47.43 million), with online game revenue accounting for 313.79 million yuan ($46.27 million). The company attributed the quarterly revenue and net income growth to recovery of its game ZT Online as well as the contribution of other recently launched games such as King of King's III and XT Online. Aggregate concurrent users (ACU) for online games in the quarter was 670,000, increasing 48 percent over the year-ago period and 13.9 percent sequentially, while aggregate peak concurrent users (PCU) increased 15 percent year-on-year and 2.8 percent quarter-on-quarter to 1.66 million, said the report. The number of active paying accounts (APA) increased 19.2 percent year-on-year and 4.5 percent quarter-on-quarter to 1.44 million.

Mobile/ Wireless

GrenTech's (NASDAQ:GRRF) revenues for the second quarter decreased 12.5 percent to 370.4 million yuan ($54.5 million) from 423.2 million yuan ($62.3 million) in the year-earlier quarter. Revenue in Q2 is in line with more traditional seasonal patterns. The company sees growth from this segment to be caused by the accelerating sales to China Mobile, the introduction of new products and an increased proportion of higher margin integrated services. The company's new products targeted at Chinese telecommunication operators, as well as other industrial users, also made an important contribution to the revenue. Gross margin fell to 24.9 percent. With the company's current sales pipeline and strategy to increase higher margin products in its portfolio mix, the company expects to achieve growth in revenue and net income this year. GrenTech is a China-based wireless coverage products and services provider and radio frequency (“RF”) technology developer,

Lin Yu, founder and CEO of NetQin Mobile Inc., a mobile phone security service provider, reveals that NetQin has attracted three rounds of venture capital investments, financing $35 million. Lin Yu said that within three years, the company will float shares on capital markets. NetQin is providing mobile phone security service for more than 55 million users in over 200 countries and territories around the world and taken more than 68 percent of the Chinese market. From the fourth quarter of 2009, the company began to make profits. NetQin does not charge users for anti-virus service and only asks for payment for the update of virus database.

Alternative Energy

JA Solar (NASDAQ:JASO) generated 196.22 million yuan net income ($28.94 million) in the second quarter of 2010. Revenues for the quarter boosted 25 percent reaching 2.4 billion yuan ($350.2 million) sequentially as gross margin was at 23.1 percent up from 22.9 percent. The company had second quarter shipments of 311MW, boosting by 14 percent sequentially. Combined with first quarter shipments of 272MW. The firm sees shipments in the third quarter of 375MW, and raised its annual shipment guidance to over 1.35GW. The company boosted its expectations for production capacity by the end of 2010 to 1.8GW. JA Solar's module capacity should reach 500MW, and wafer capacity is seen to be at 300MW by the end of the year.

LDK Solar (NYSE:LDK) generated $45.05 million net income in the second quarter of 2010. LDK Solar shipped 510.5MW of wafers and 73.9MW of modules in the quarter. The company estimated its annualized wafer capacity by the end of the quarter at 2.3GW. The company booked revenues of $565.29 million. Gross margin for the second quarter was 18 percent. For the 3rd quarter of fiscal year 2010, LDK Solar estimates revenues will be at $570 million to $600 million with wafer shipments between 520-550MW, and module shipments of 75-85MW. The company’s new revenue will be between $1.95 billion and $2 billion, based on wafer shipments of 1.95-2GW and module shipments of 250-300MW.

ReneSola (NYSE:SOL) reported second quarter net income of $36.06 million compared to net loss of $3.59 million in the year-ago period. Solar products shipments for the quarter boosted 6.6 percent sequentially to a total of 258.3MW, including 206.7MW of wafers in the period, down 6.9 percent sequentially, and 50.6MW of modules in the quarter. Net revenues boosted by 22.9 percent quarter-on-quarter to $253.88 million. Gross profit margin was at 30.2 percent. Renesola sees costs declining to $0.46/W to $0.48/W by the end of 2011. Renesola expects to have total shipments of 280-310MW, generating revenues of $300 million to $320 million. The company had adjusted its full year 2010 revenue estimates from $1 billion to $1.05 billion with a gross profit margin of 25-27 percent. Renesola shall expand wafer production capacity to 1.8GW from the current 1.2GW, while expanding module production capacity to 600MW from the current 375MW.

Suntech Power Holdings (NYSE:STP) expected to have a net loss of $147 million to $179 million for the second quarter of 2010 due to impairment charges in a polysilicon maker investment as well as to restructuring of its Shanghai facility and to foreign exchange losses in the period. The company will incur a net foreign exchange loss of approximately $35 million as a result of the depreciation of the euro against the US dollar and non-cash charges of $106 million to $126 million in the quarter related to its minority stake in Shunda Holdings. The company invested in Shunda in the second quarter of 2008. The company also expects a thin film equipment non-cash impairment charge of approximately $50 million to $55 million following its decision to halt production of thin film panels at its Shanghai plant. Suntech will expand its crystalline silicon-based cell and module capacity at its Shanghai facility by 1GW.


Semiconductor Manufacturing International Corporation (NYSE:SMI) had a net profit of $96.03 million in the second quarter of this year, its first in 13 quarters. Mainland chipmakers have struggled against a global decline in demand and against Taiwan-based manufacturers defending their market share, but rebounding sales have lifted the industry's profitability. Revenue boosted 42.5 percent to $381.1 million. Part of the profit is attributable to a change in the value of warrants and shares it has to pay Taiwan Semiconductor Manufacturing (NYSE:TSM) in settlement for an intellectual property and industrial espionage lawsuit last year. SMIC still had an operating loss of $12.1 million in Q2, which is less than the $28 million operating loss in absorbed in Q1.


SAP AG's (NYSE:SAP) revenue from software and software-related services in the Chinese market rose 20 percent in the second quarter of 2010. Growth reached 10 percent in the first half of this year but no specific figures were disclosed by the company. The revenue it captured from software and software-related services in the whole Asia-Pacific region during April and June rose 18 percent reaching 307 million euros ($394.4 million). Aggregate revenue was up 12 percent to hit 366 million euros ($470.2 million).

Disclosure: No positions