Asian Tech Stock Weekly Review (October 25 – 31, 2010)

by: IRG Ltd



Sony Corp. (NYSE:SNE) raised its full-year profit forecast by 17 percent to 70 billion yen (US$868 million), citing improved earnings at its games and personal- computer businesses. The company cut its full-year sales forecast to 7.4 trillion yen (US$92 million). Computer sales surged with the cost of building PlayStation 3 game consoles declined, helping Sony deliver second-quarter earnings that exceeded analysts’ estimates.


Softbank Corp. (OTCPK:SFTBF) and NTT DoCoMo Inc. (NYSE:DCM) had double-digit growth in group net profit for the fiscal second quarter as they step up competition in Japan's smartphone race, which is currently driven by Apple's (NASDAQ:AAPL) iPhone. Softbank had its net profit for the three months to Sep. 30 surge to 57.4 billion yen (US$713 million). As Japan's exclusive iPhone carrier, Softbank has capitalized on the device's success. The company has also introduced other smartphones that have together helped boost revenue from data transmission as subscribers use them to surf the Web, download music and play video games. Softbank's operating profit for the July-September period boosted to 158.9 billion yen (US$2.0 billion) which is also a quarterly record. Average revenue per user (ARPU) surged to 4,300 yen (US$53.4).



SK Telecom Co. (NYSE:SKM) had worse-than-expected third quarter net profit, largely because of higher network investment expenditure during the quarter combined with the cost of aggressive marketing to attract more smart phone users. SK Telecom had net profit of KRW363.88 billion (US$322 million) in the three months ended Sept. 30. The result was lower than the average KRW402.3 billion (US$358 million) third quarter net profit forecast of six analysts. The mobile carrier said its operating profit declined 16 percent to KRW519.32 billion (US$462 million) due to higher marketing expenses and increased depreciation charges. Sales surged 4.1 percent to KRW3.181 trillion (US$2.8 billion).


Samsung SDI Co. (OTC:SSNLF) reported that third-quarter net profit gained 67.2 percent from a year earlier, mainly due to brisk sales of rechargeable batteries used for high-end electronic gadgets, such as smartphones and tablet computers, combined with increased shipments of plasma-screen panels. Higher equity gains from its joint venture, Samsung Mobile Display, also helped the company's bottom line during the July-September period. Samsung SDI posted net profit of KRW159.7 billion (US$141 million) in the three months ended Sept. 30. Sales were KRW1.35 trillion (US$1.2 billion).


LG Electronics Inc. (OTC:LGERF) said that its third-quarter net profit plunged 99.2 percent from a year earlier to KRW7.57 billion (US$6.7 million), hit by severe losses in its handset business and lackluster demand for consumer electronics from Europe and the U.S. But the result was well above market expectations. The ongoing global economic slowdown is hurting overall consumer demand for electronics devices worldwide. LG Electronics lagged global peers such as Apple and Samsung Electronics in introducing premium smartphone offerings and its handset division reported a disappointing 32 percent decline in third-quarter sales--its worst-ever quarterly loss in history.


Internet Inc. (NASDAQ:SOHU) announced that its third-quarter net profit surged 9.6 percent from a year earlier to US$41.0 million because of strong advertising and online gaming revenue, defying analyst expectations for net profit to fall as the company also gave an upbeat fourth-quarter outlook. The result was well above the average US$34.8 million forecast of nine analysts polled by Thomson Reuters. Sohu expects fourth-quarter revenue of US$163 million to US$168 million, up from US$135.8 million a year earlier and above the average US$162.6 million forecast of 11 analysts. Sohu generated net profit excluding share-based compensation in the three months ending Dec. 31 to be between US$43 million and US$45 million. Revenue surged 20 percent to US$164.1 million. Brand advertising revenue surged 22 percent to US$59.1 million.

Alibaba Group (OTC:ALBCF) started letting users of its Etao search engine choose's Sogou search service as well as Microsoft's (NASDAQ:MSFT) Bing to return certain search results, a move that could give a slight boost to Sogou as it looks to field more searches and expand against market leader Baidu (NASDAQ:BIDU) and number two Google (NASDAQ:GOOG). The move is also one of the first signs of how Alibaba and Sohu might cooperate to promote their services after Sohu had finished selling a combined 16 percent stake in its Sogou Inc. unit to an investment unit of Alibaba and a vehicle of Yunfeng Fund LP. Etao can now be toggled between Sogou and Bing for general internet search results on part of its search page. The search results, displayed in a group beneath other classes such as Taobao item listings, included only Bing results when the site launched earlier this month.

Baidu's net income grew 112.4 percent year-on-year to 1.05 billion yuan (US$157 million) in the third quarter of 2010 or fully diluted earnings per ADS of 3.00 yuan (US$.45). Total revenues came in at the top end of its previously guided range at 2.26 billion yuan (US$339 million), up 76.4 percent year-on-year. Revenue per online marketing customer surged 40.7 percent year-on-year, or 10.7 percent quarter-on-quarter to 8,300 yuan (US$1244) as active online marketing customers jumped 25.9 percent year-on-year and 7.1 percent quarter-on-quarter to 272,000. Traffic acquisition cost (TAC), as a component of cost of revenues in Q3, was 201.7 million yuan (US$30.2 million), declining to 8.9 percent of total revenues compared with 15.3 percent in the year-ago period and 9.7 percent in the prior quarter, due to faster organic traffic growth during the quarter. has secured distribution rights to National Geographic Channel (NGC) programs. Youku has set up a channel at to house the programs. This is the first time NGC has partnered with a Chinese video site. expects revenues to at least double year-on-year to between US$20 million and US$30 million this year, and to double that figure again in 2011. The site is looking for partnerships with major domestic e-commerce sites including and, with the target of generating more revenues from e-commerce site commissions than advertising in future. The site currently relies largely on internet advertisements and online game tools for revenue, with the former accounting for approximately 50 percent of the total. The site has no specific plans for an initial public offering so far.

Sina Corp. (NASDAQ:SINA) has been authorized by NBA to set up an official NBA Chinese website. The portal remains the largest one that gets NBA's authorization to broadcast live NBA games. The duration of the authorization covers all the seasons during 2010-2013 and Sina will broadcast at least 200 games each season, much beyond a sum of the other two authorized Chinese websites.


ZTE Corp. (OTCPK:ZTCOF) reported that its third-quarter net profit surged 18.4 percent to 483.9 million yuan (US$72.5 million) from a year earlier as network investment by overseas carriers recovered and Chinese carriers rolled out optical broadband networks. Revenue surged 1.3 percent to 15.34 billion yuan (US$2.3 million). Changing trade policies in India and the European Union have impacted revenue for network equipment makers this year, the company said without elaborating. ZTE will center on opportunities related to network upgrades in developed markets and the spread of broadband networks in emerging markets. It also said it will work internally to control expenses.

China Mobile (NYSE:CHL) has received regulatory approval to acquire 20 percent stake of Shanghai Pudong Development Bank via its Guangdong subsidiary and other preconditions for the deal have been met. China Mobile will acquire shares of SPD Bank at 13.75 yuan (US$2.06) each share, and the total expenditure was lowered to 39.5 billion yuan (US$5.9 billion). Thus far, China Mobile's Guangdong subsidiary has become the second largest shareholder of SPD Bank.

China Unicom (NYSE:CHU) has completed its issue of US$1.839 billion of guaranteed convertible bonds and the bonds started to be traded on the Hong Kong Stock Exchange on October 19. The five-year bonds at yield of 0.75 percent will mature on October 18, 2015 and could be converted into shares at price of HK$15.85 (US$2.04) per share both on the Hong Kong Stock Exchange and the New York Stock Exchange. The funds raised will be used to replenish the company's working capital and support its 3G and broadband businesses. The convertible bonds issue is the largest ever international convertible bond issue by a Chinese issuer.

China's 3G handset market is projected to expand to 33 to 39 million units in 2010, surged from 5 to 7 million units in 2009. Disappointing 3G handset sales in China during 2009 were largely due to an underdeveloped supply chain. In 2010, with international brand vendors offering higher quality products at lower prices, sales improved dramatically. South Korea's Samsung Electronics and Motorola (MOT) are the most aggressive in distributing through the telecom carriers. Nokia (NYSE:NOK) has begun to work with telecom providers but its progress still lags behind competition. Research in Motion (RIMM), Apple and HTC target the high-end segment with smartphones.

China Telecom Corp. (NYSE:CHA) reported that its third-quarter net profit excluding amortization of upfront connection fees surged 27 percent from a year earlier to 3.78 billion yuan (US$565.4 million), higher than analysts' expectations, as growth in its broadband and mobile businesses at least offset a continued decline in its fixed-line business. The average net profit forecast in a survey of five analysts was 3.65 billion yuan (US$547 million). Revenue excluding the amortization surged 6.5 percent to 55.61 billion yuan (US$8.3 billion). China Telecom had 9.15 million subscribers to its 3G mobile services at the end of September.

Media, Entertainment and Gaming

· VisionChina Media (NASDAQ:VISN) made a net loss in the third quarter of US$1.9 million, or US$0.02 per diluted ADS, improving on the previous quarter's net loss of US$93.2 million. VisionChina's total revenues were within previous guidance at US$37.94 million, up 23.2 percent year-on-year and 19.3 percent quarter-on-quarter. During the period, VisionChina sold 334,864 advertising minutes, up both on an annual and sequential basis, while the number of advertisers purchasing time slots declined to 612 from 614 in the prior quarter. The company estimates fourth quarter total revenues will be between US$41.1 million and US$44 million.

· AirMedia Group (NASDAQ:AMCN) reported Q3 net income of US$1.2 million, improving on losses of US$9.6 million in the third quarter of last year and US$4.7 million in the previous quarter. Total revenues grew 60.6 percent year-on-year and 7.6 percent quarter-on-quarter to US$60.6 million in the quarter, driven primarily by 82.5 percent year-on-year and 15.2 percent quarter-on-quarter growth in the company's airport digital frames revenues to US$31.1 million. AirMedia sold 14,301 time slots in the period, up 74.7 percent year-on-year and 44.2 percent quarter-on-quarter, while the average selling price (ASP) of digital frame slots increased 4.5 percent year-on-year, though decreased 20.1 percent quarter-on-quarter, to US$2,177. Revenues from traditional media in airports in the quarter expanded 65.3 percent year-on-year but slipped 1.4 percent quarter-on-quarter to US$12.07 million; revenue from digital TV screens in airports declined 13.3 percent year-on-year but improved 11.4 percent quarter-on-quarter to US$7.30 million and airplane-based TV screen advertising brought in US$5.24 million, up 29.3 percent year-on-year, but down 10.8 percent quarter-on-quarter. The company's newly formed gas station media network generated revenues of US$1.13 million, up 40.8 percent quarter-on-quarter.

· The9 (NASDAQ:NCTY) will introduce OpenFeint, an iOS and Android system-based mobile social gaming platform that allows developers to add social-networking features to their applications, in the Chinese market within this year. The platform, developed by The9-invested Aurora Feint, has, to date, recorded 3,400 games and 40 million registered users globally.

· Baidu's game business unit plans to provide 100 domestic third-party webgame developers and operators with 1 million yuan (US$149887) each in resources. The resources include operation support, 24-hour client services, game media coverage, promotions as well as provisional servers and bandwidth. Baidu's game unit has formed partnerships with at least 30 webgame companies and has launched over 30 games. To date, its platform has 50 million registered users, of which 30 million are active.

· Shanda Games (NASDAQ:GAME) will enter the social games market through various means, including acquisitions. The company's game industry investment fund "18 Fund" has begun to pay more attention to mobile games, mobile platforms and social networking site games. The fund has invested a total of around 700 million yuan (US$105 million) in 42 projects to date.

· Perfect World (NASDAQ:PWRD) has consolidated its overseas businesses, merging the former overseas distribution and business centers into an overseas authorization center, headed by the former chief of overseas distribution Zhang Bo. The company's now defunct overseas development center has been dissolved, and staff will be reassigned to Perfect World subsidiaries in Taiwan and Japan, while the new authorization center will be divided into three regional units, one for East Asia, one for Southeast Asia and one for Europe, South America and emerging markets, as well as an overseas quality control unit. The company has exported its games to 60 countries and regions and expects its 2010 overseas licensing and operating revenues to amount to US$100 million, double the amount recorded in 2009.


According to Analysys International, China's e-book reader sales came to 264,600 units in the third quarter, surged 9.93 percent from Q2. The increase in sales is attributed mainly to price cuts of the e-book device both on domestic and foreign markets and increasing public recognition of e-readers, said Sun Peilin, analyst with the consultancy firm. The price reduction of Amazon's (NASDAQ:AMZN) e-reader Kindle has triggered a worldwide price cut on the e-book reader market. And the high-profile launch of Bambook by domestic company Shanda Interactive Entertainment Ltd. (NASDAQ:SNDA) at 999 yuan/set (US$14.49) to a certain extent, stimulates consumption of the device.

Alternative Energy

JA Solar (NASDAQ:JASO) expects to have third quarter 2010 shipments in excess of 410MW of solar products, the company announced on October 26. The figure represents a 31.8 percent increase on second quarter shipments of 311MW, and 131.6 percent year-on-year growth. The company had previously said it expects third quarter shipments of 375MW and full year deliveries of at least 1.35GW.

LDK Solar (NYSE:LDK) signed a two-year polysilicon sales agreement valued at approximately US$300 million with BYD Company (OTCPK:BYDDY). LDK Solar will supply polysilicon with monthly shipments expected to commence in January 2011 and extend through the end of 2012. LDK signed a module supply contract with Czech photovoltaic projects developer H Power to deliver 84MW of solar modules next year.

Disclosure: Author holds no positions in the stocks mentioned

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