Chinese Tech Stock Weekly Summary

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

Internet

• Sina.com (SINA) announced for the quarter ended March 31, 2007 total revenues of US$51.3 million, compared to US$46.7 million posted in the same period in fiscal 2006 and US$56.4 million for the fourth quarter of 2006. The Internet firm said its advertising revenues for the first quarter of 2007 totaled US$31.8 million, which is a 43 percent rise from the same period last year and an 11 percent decline from last quarter. The results take place in the context of advertising revenues in China posting 45 percent growth year over year to US$30.9 million for the first quarter of 2007. Sina said revenues from interactive voice response went down 32 percent quarter over quarter to US$3.5 million. The company said other non-advertising revenues, mainly search and other fee-based revenues, were US$1.3 million for the first quarter of 2007, representing a decline of 31 percent from the same period last year and 7 percent from last quarter, with Sina ascribing the drop in other nonadvertising revenues as being mainly due to the continued phasing out of the prior search business. Operating expenses for the first quarter of 2007 totaled US$22.9 million, an increase of 4 percent from the same period last year. Net income for the first quarter of 2007 was US$8.6 million compared to US$7 million for the same period last year.

• Tencent, an instant communications service provider, said it has taken a new step in the Internet search industry through the acquisition of a new domain name called wenwen.com. Industry sources said Tencent is reported to have bought the domain name for a low price, noting that the seller regretted the decision after finding out who the buyer was. Tencent has already included the new domain name wenwen.com in its search website soso.com, which offers a similar service as that of Baidu's zhidao.baidu.com. With wenwen, Tencent now has four domain names with repeated characters of QQ.com, SOSO.com, Paipai.com and wenwen.com. In a separate development, Tencent posted an 8.4 percent rise to 773.1 million yuan (US$100.8 million) in its total revenues for the first quarter ended March 31, 2007 over the fourth quarter of 2006. The company, however, said its online revenues decreased 9.1 percent quarter-on-quarter to 74.1 million yuan (US$9.6 million).

• Ctrip.com (CTRP), an online travel provider, announced a year-on-year 40 percent rise in its net revenues of 232 million yuan (US$30.2 million) for the quarter ended March 31, 2007. For the first quarter of 2007, Ctrip reported total revenues climbing 49 percent to 249 million yuan (US$32.4 million) from the same period in 2006. For the first quarter of 2007, the company posted net income of 65 million yuan (US$6.4 million).

• Internet travel service provider eLong.com (LONG) released its unaudited financial results for the first quarter ended March 31, 2007 indicating a 22 percent rise in revenue to 63 million yuan (US$8.2 million) compared with the prior year period. The company said its operating loss was 5.2 million yuan (US$678,000) compared to an operating loss of 15.5 million yuan (US$2 million) in the first quarter of 2006. The results mark an improvement of 10.3 million yuan (US$1.3 million),which the company attributed to higher revenue and lower general and administrative expense, partially offset by the increase in sales and marketing expenses and cost of services. The company recorded a net loss of 0.8 million yuan (US$104,000) for the first quarter compared to a net loss of 12.2 million yuan (US$1.5 million) in the prior year period. The company said it looks to total revenues for the second quarter of 2007 to be within the range of 73 million yuan (US$9.5 million) to 81 million yuan (US$10.5 million).

Media, Entertainment and Gaming

• Finet Group announced its decision to acquire Hangzhou Tianchang Network Technology Company, an online game company in China. Under the agreement, Finet will invest an aggregate 200 million yuan (US$26 million) in cash for the acquisition, part of which will be applied as Tianchang's capital for business expansion purposes, which include marketing and operations of Tianchang's online games in China, research and development of new MMORPG games, and game licensing.

Mobile/Wireless

• Industry sources indicated that the country’s Ministry of Information Industry has approved the use of European and American standards for 3G mobile phones. With the approval, the European WCDMA (Wideband Code Division Multiple Access) and American CDMA2000 join the previously approved Chinese TD-SCDMA (Time Division-Synchronous Code Division Multiple Access) standard as legal options for China's 3G industry. Currently, no 3G licenses have been awarded as yet, so that even if TD-SCDMA had been approved in 2006, global manufacturers have not shown readiness to produce handsets for the standard, with only Samsung and Motorola (MOT) developing products.

• Shanghai Mobile said it will begin the commercial use of EGPRS, which is expected to boost online surfing speeds for mobile phones. Shanghai Mobile explained its EGPRS network as one that makes online surfing up to four times faster than GPRS. At present, most of the newly launched mobile phones on the market support EGPRS. Earlier in April, China Mobile started to sell customized EGPRS mobile phones. Shanghai Mobile said that the traffic fee for EGPRS is the same as the existing fee for GPRS. Shanghai Unicom had previously launched EGPRS service for its own mobile phone users.

• Alcatel-Lucent (ALU) announced entering into an agreement valued at US$120 million for mobile communications solutions and service with China Unicom (CHU) and a US$340 million deal with China Mobile (CHL). The China Unicom agreement covers a range of network projects it has undertaken or plans to undertake in 2007. The projects include a CDMA2000 1xEV-DO Rev, a high-speed data network upgrade to be implemented in China Unicom's network in Macau, as well as a further expansion in the CDMA core network, radio solutions, and applications that will support China Unicom's broader mobile network expansion. Under the agreement with China Mobile, Alcatel-Lucent will provide China Mobile with GSM/GPRS/EDGE radio and core network equipment, customized solutions and related services that will support China Mobile's GSM/GPRS/EDGE network expansion programs in 2007.

Software

• Founder Technology Group announced signing with Microsoft on software outsourcing. The company, which is one of China’s largest PC makers, did not reveal the details of the amount involved in the software outsourcing deal with Microsoft (MSFT). In April 2006, Founder purchased software worthabout US$250 million from Microsoft in a collective outsourcing plan that included Lenovo, Tsinghua Tongfang and TCL. This 2007, only Lenovo and Founder have renewed the agreement with Microsoft.

• CDC Software, a subsidiary of CDC Corporation (CHINA), announced its acquisition of Syndmail, an email marketing and communication solution from Red Clay Consulting. This add-on product is designed for companies wanting to execute simple, targeted and effective email campaigns with their Pivotal CRM solution. Pivotal is a brand under CDC Software. No other details about the deal were released. Hardware

• Antenova Ltd, the integrated antenna solutions company, announced the expansion of its Asia operations with the opening of a sales and support office in Shanghai, China. Antenova said it has experienced tremendous growth in the past twelve months and is rapidly becoming the leading provider of high performance embedded antennas for mobile phones and notebook computers. The company said it has been boosting its Asia operations to keep up with customer demand and meet the manufacturing needs. Antenova said it is aiming for additional sales and support locations in South Korea and Japan by the end of the year. Antenova is a leading developer and supplier of integrated antennas and RF antenna modules for mobile handsets, portable devices and laptop computers.

• China 3C Group (CHCG.OB), a Chinese electronics retailer, posted revenue of US$84.5 million for the first quarter of 2007, compared to the US$13.4 million it posted in the same quarter last year. The company ascribed the climb of 530 percent in revenues to a rise in sales and to acquisitions last year. On a sequential basis, the company said revenues increased 33 percent to US$84.5 million from US$63.6 million in the fourth quarter of 2006. China 3C registered net income for the quarter was US$6.5 million, up 607 percent from US$913,548 for the same quarter last year. The company said it generated US$2.6 million in cash from operating activities during the quarter and had US$9.1 million in cash at the end of the first quarter.

• China Great Wall Computer Shenzhen Company announced plans to pay HK$1.1 billion (US$140.7 million) for a 10.2 percent stake in Taiwan's TPV Technology Ltd, the world's largest computer screen maker by unit sales. China Great Wall said in a statement to the Shenzhen stock exchange that its acquisition of the stake would generate cost savings. The company also sees the acquisition as helping it fulfill its “international growth strategy." The stake acquisition still needs approval from China Great Wall's shareholders and relevant regulatory authorities.

Telecommunications

• Huawei Technologies announced its decision to form a joint venture with UK-based marine engineering company Global Marine Systems Limited. Huawei said the two companies have signed a memorandum of understanding [MOU] for the joint venture with the aim to "become the leader in providing submarine solutions and services globally.” Global Marine Systems operates the world's largest fleet of cable ships and subsea vehicles and is the market leader in marine cable installation and maintenance for telecommunications, as well as scientific research, oil, gas, utilities and renewable energy. Details about the venture are still to be finalized. Industry analysts said that setting up of the joint venture comes at a time when the investment on high-bandwidth undersea fiber optic cable networks is on the rise.

Ventures/Investments

• Electronics retailer Gome announced plans to raise US$800 million in a bid to consolidate its position in the Chinese market. Industry observers said this marks the first large scale fund raising for the company following its merger with Yongle in 2006. The president of the company said Gome will use all funds raised to upgrade their software and hardware facilities to further increase their core competitiveness. The company also said that most of the money will be spent on improving the settlement conditions with suppliers, boosting their profit-making capacities and competitiveness, with the remaining to be utilized for building regional logistics centers and upgrading the existing ERP system. The company said it looks to using the fund for the acquisition of some stores as well as the renovation of the current stores. Gome said that with the acquisition of Yongle, Gome's net profit in the first quarter of this year climbed by 75 percent to 169 million yuan (US$22 million).

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