Chinese Tech Stock Weekly Summary

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

Internet

• Google (GOOG) China announced that it has entered an agreement with China Telecom (CHA) to work jointly on online advertising. The move is seen by observers as another move for Google to develop the China market following its signing of mobile search service deals with China Mobile(CHL) earlier this year. Under the agreement, Google will provide online advertising services for China Telecom's Vnet.cn and city portal web sites. The general manager of China Telecom's Internet and Value-added Service Department, revealed their plans to add more to online advertising projects. No details have as yet been disclosed about the alliance even though reports indicate that Google sees the partnership as one of its more strategic cooperation for the year.

• After months of speculation, MySpace (NWS) announced its launch in China, a market of 137 million Internet users. In the launch, MySpace China introduced itself as a "locally owned, operated and managed company", naming News Corp-owned MySpace Inc as only one among several investors. Industry observers see this move as a response to the fact that international Internet companies foray into the Chinese market tended to fail. Investors in MySpace China also include International Data Group and China Broadband Capital Partners, an investment company founded by former China Netcom Group Corp chief executive Edward Tian.

• Baidu.com (BIDU) announced its first-quarter revenue, with profit more than doubling, results that the company ascribed to surging demand for online ads. Baidu reported first-quarter revenue of 275.6 million yuan (US$35.6 million) as of March 31, the last day of the period being, an increase of 103 percent over the same period last year. Its net income went up 143 percent, to 85.5 million yuan (US$11 million). Looking ahead, Baidu said it expects this growth to continue, with second-quarter revenue to show gains of up to 41 percent on a sequential basis.

Software

• According to CDC Corporation's (CHINA) preliminary financial results for the first quarter of 2007, the company looks to achieving total revenues for the first quarter of 2007, ended March 31, 2007, of US$90 million, an increase of approximately 40 percent from US$64.6 million in the first quarter of 2006. The company expects adjusted net income to be approximately US$9.7 million, an increase of approximately 64 percent from US$5.9 million in the first quarter of 2006. CDC attributes its performance in the first quarter mainly to a record quarterly revenue at CDC Software of approximately US$75 million, which is up approximately 40 percent over the same period a year ago and covers license revenue of approximately US$14.5 million, which is up approximately 50 percent over the same period a year ago. Earlier in February 2007, CDC Corporation increased estimates fortotal revenues for 2007 to be in the range of US$415 million to US$420 million, which would be an increase of approximately 35 percent compared to total revenues for 2006. CDC Corporation also increased estimates for adjusted net income for 2007 to be in the range of US$57 million to US$62 million.

Hardware

• Home appliance manufacturer Changhong revealed its plans to indirectly acquire South Korean company Orion, a plasma monitor manufacturer. Changhong said it will initiate the construction of the first domestically invested plasma monitor production line in China. According to a resolution passed by Changhong's board of directors, Changhong will raise about 2.5 billion yuan for the acquisition of about 75 percent of the stake of Sterope Investments, sole shareholder of Orion. Sichuan Shijie Shuanghong Monitor Company currently holds that stake in Sterope and will sell to Changhong, with the company aiming to include its plasma technology into the listed company. According to Changhong, its plan of constructing the country’s first plasma screen line has already received approval by China's State Development and Reform Commission even as the issuance of shares for raising the funds still awaits the vote of its shareholders.

Telecommunications

• Shanghai Telecom announced the construction of a trans-pacific undersea cable expected to be completed and put into operation in 2008. Industry observers see first phase when completed as boosting Shanghai's international communications export capacity upon completion. Currently, Shanghai has nine international undersea cables connected it, which makes it use 70 percent of the total international communication capacity of China, which are unable to meet the increasing market demand. The Trans-Pacific Express, which involves a total of US$500 million in investment, is jointly built by China Telecom, China Netcom (CN), China Unicom (CHU), Chunghwa Telecom (CHT), Korea Telecom, and US-based Verizon (VZ).

Information Technology

• Microsoft (MSFT) China announced the signing of a memorandum of understanding with Alibaba to carry out strategic cooperation on e-commerce and IT services aimed at medium and small enterprises, as well as e-commerce organizations. Under the deal, the two companies said they will cooperate on the development and planning of online services for e-commerce, enterprise management, office automation and enterprise communications. Their achievements will be released through Alibaba's online software service platform, which is currently under construction, and to be used by 20 million middle and small enterprises who are expected to pay for the software according to demand. The agreement will also see the companies together in developing innovative application software for the enterprises and focus on mobile computing. In a related development, Alibaba said its online software service platform will be launched in the second half of this year.

• AsiaInfo Holdings, Inc. (ASIA) a leading provider of telecom software solutions and IT security products and services in China, announced first quarter results for the period ended March 31, 2007, with the company posting net revenue of US$23.5 million, an increase of 25 percent year-over-year, and a decrease of 7 percent sequentially. AsiaInfo Holdings, Inc. is a leading provider of high- quality software and customer solutions to many of China's largest enterprises. In addition to providing software and customer solutions to China's telecom carriers, the Company also offers a wide range of security products and services to small, medium and large sized Chinese enterprises across multiple vertical industries. Organized as a Delaware corporation, AsiaInfo began operations in the United States in 1993. The Company moved its major operations to China in 1995 and played a significant role in the construction of the national Internet backbones and provincial access networks for all of China's major national telecom carriers, including China Telecom, China Mobile, China Unicom and China Netcom. Since 1998, AsiaInfo has continued to diversify its product offerings and is now a major provider of enterprise software solutions in China.

Disclaimer: IRG is not responsible for the accuracy of the news compiled within this article, which is based on publicly available information.