Chinese Tech Stock Weekly Summary

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 |  Includes: CDCAQ, HRAY, KZ, LTON, NINE, NTES, SNDA, VIMC
by: IRG Ltd

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

Internet

• Jinan Yinquan Technology Co., Ltd., a wholly owned subsidiary of China VoIP & Digital Telecom Inc., announced that the CEPREI Certification Body has given it an ISO9000 Certification. The certification provides Jinan Yinquan the ability to provide customers with products and services that match stringent International quality standards. As an international standard in quality management system established by the International Standardization Organization [ISO], ISO 9000 has become one of the basic requirements for a technology firm entering new markets and earning customer confidence. The company's proprietary NP Soft Switch IP telephone system enables users to access Voice over the Internet Protocol (VoIP) services allowing customers to use the system to make telephone calls to anyone in the world at a much lower cost than standard telephone rates. China VoIP & Digital Telecom Inc. offers VoIP services in the People's Republic of China through its wholly owned subsidiary Jinan Yinquan Technology Co. Ltd.

• NetEase.com (NASDAQ:NTES) reported unaudited financial results for the quarter ended March 31, 2007, with the company posting total revenues of 554.6 million yuan (US$72.4 million), compared to 540.3 million yuan (US$70.6 million) and 529.8 million yuan (US$69.2 million) for the fourth and first quarters of 2006, respectively. The company said its revenues from online games went up to 481.9 million yuan (US$63 million) for the first quarter of 2007, compared to 451.6 million yuan (US$59 million) and 450.6 million yuan (US$58.8 million) for the fourth and first quarters of 2006, respectively. It posted revenues from advertising services of 56.2 million yuan (US$7.3 million) for the first quarter of 2007. NetEase said its net profit for the quarter was 301.5 million yuan (US$39.3 million), compared to 320.2 million yuan (US$41.8 million) and 293.7 million yuan (US$38.3 million) for the fourth and first quarters of 2006, respectively.

Media, Entertainment and Gaming

• CDC Games, a business unit of CDC Corporation (NASDAQ:CHINA) announced its completion of the previously announced strategic investment in MGame Corporation, one of South Korea's leading developers of online games. CDC Games is a pioneer of the "free-to-play, pay-for-merchandise" model for online games in China, a very popular licensed free-to-play game in China. Through this equity investment, CDC Games said it has expanded its relationship from being not just a licensee to MGame's largest external shareholder and has obtained exclusive distribution rights in China for MGame's next Massive Multiplayer Online Role Playing Game [MMORPG] titled Wind Forest Fire Mountain [WFFM]. In addition to the acquisition of the exclusive distribution rights for WFFM in China, CDC Games has extended the license of Yulgang to 2010. The company said this latest investment is part of its previously announced CDC Games Studio, a wholly owned subsidiary of CDC Games supported by up to US$100 million in investment funding. This investment in MGame is also the latest in a series of steps taken by CDC Games to strengthen CDC's set of jointly owned games. The CDC family of companies includes CDC Software, which is focused on enterprise software applications and services, CDC Mobile, which is focused on mobile applications, CDC Games, which is focused on online games, and China.com, which is focused on portals for the greaterChina markets. CDC Games is one of the market leaders of online and mobile games in China with over 50 million registered users.

• Officials from leading Chinese online publisher The9 Limited (NASDAQ:NINE) announced that the company has received an equity investment by Electronic Arts (ERTS). The two companies also disclosed that a licensing agreement that will enable The9 to become the exclusive publisher for soccer title FIFA Online in mainland China. Sources said the equity investment is placed at about US$67 million, and will see Electronic Arts acquire around 15 percent of the common shares of The9. With the deal, industry observers said it is not clear how this Electronic Arts’ equity investment is going to affect The9’s relationship with Vivendi, whose World of WarCraft currently represents the vast majority of the company’s business. In a related development, The9 Limited announced that its wholly owned subsidiary has entered into an agreement with G10 Entertainment Korea Corp (G10), an online game developer in Korea, for an exclusive license to operate Audition 2, an advanced casual dancing online game, in mainland China. The term of the license is for three years from the commercial launch date of the game in mainland China. The9 also has the exclusive right of first refusal for the license of Audition 3 and two other developed online games owned or distributed by G10. Audition 2 is the sequel to Audition, a 3D leisure dancing online competition game with rich music elements.

• PacificNet, Inc., a leading provider of gaming technology, e-commerce, and Customer Relationship Management [CRM] in China, reported unaudited results for the first quarter ended March 31, 2007, with the company stating that about 19 percent of the total revenues were generated from its new gaming technology division. The company said its quarterly gross profit was US$2.5 million, an increase of 87.8 percent as compared to US$1.3 million from the first quarter of 2006. The company reported a quarterly operating profit of US$800,000, an increase of 1,190.3% as compared to US$62,000 from Q1 2006. The company expects its net income for the second quarter to continue growing, due to delivery of gaming machines and collection of account receivables. PacificNet also revealed its strategy in 2007 of streamlining its operation.

• According to the China Association for Standardization, it has approved and issued the China Digital Multimedia Broadcast mobile TV handset standard as the association standard. The body said the new standard is based on DAB, a recommended standard of the radio, film and TV department and AVS, a national standard released by the Standardization Administration of China. Industry sources said a decision will be handed down in a few months.

• Shanda (NASDAQ:SNDA), the Chinese online game provider, announced a 13.1 percent climb quarter-overquarter in its total net revenues and a growth of 55.9 percent year-over-year to 532.3 million yuan (US$69.5 million) as part of its unaudited financial results for the first quarter ended March 31, 2007. The Chinese online game provider ascribed the surge to online game revenues hitting a record high, with its online game revenues in the first quarter of 2007 posting a 12.2 percent increase quarter- over-quarter to 505 million yuan (US$66 million). Revenues from MMORPGs in the first quarter of 2007 grew 9.5 percent quarter- over-quarter to 414 million yuan (US$54.1 million), which stands also for 77.8 percent of its total revenues. The company declared a gross profit of 347 million yuan (US$45.3 million). Shanda said its net income for the first quarter of 2007 surged by 86.8 percent to 448.8 million yuan (US$58.6 million) from 240.3 million yuan (US$31.4 million) in the fourth quarter of 2006.

Mobile/Wireless

• Hurray! (HRAY), a mobile value-added services company, announced a 2.2 percent quarter-overquarter decline in its revenues to US$16.6 million, as part of its unaudited financial results forthe first quarter ended March 31, 2007. The company posted total wireless value-added services revenues of US$14.9 million for the first quarter of 2007, a decline of 1.1 percent from US$15.1 million in the previous quarter. Recorded music revenues, which represent revenues of the company's controlled music companies Hurray! Freeland and Huayi Brothers Music, were down 15.9 percent to US$1.5 million, from US$1.8 million in the previous quarter. Total gross profit was US$5.4 million for the first quarter of 2007, representing growth of 2.6 percent as compared with US$5.3 million for the previous quarter and a decline of 10.2 percent as compared with US$6.1 million for the first quarter of 2006. It posted a net income of US$1 million for the first quarter of 2007, a drop of 38.9 percent as compared to US$1.6 million for the previous quarter.

• Linktone (NASDAQ:LTON), a mobile value-added services firm, reported its unaudited financial results for the first quarter ended March 31, 2007, indicating revenues of US$14.2 million, compared with US$14 million in the fourth quarter of 2006 and US$23 million in the first quarter of 2006. The company also declared a GAAP net loss of US$3.4 million, compared with a net income of US$0.4 million in the fourth quarter of 2006 and US$2.3 million in the first quarter of 2006.

• KongZhong (KONG), a wireless value-added services firm, reported a 28 percent decline in its total revenues for the first quarter to US$20.1 million. The company said revenues from its 2.5G services, which include services delivering using wireless application protocol, multimedia messaging, and Java technologies, went down 48 percent from the same period in 2006, but up sequentially to US$9.2 million. Revenues from its 2G services, including short messaging service, interactive voice response, and color ring back tone, posted an 8 percent year-over-year growth to US$10.7 million in the first quarter of 2007. KongZhong ascribed about 24 percent of its total first quarter revenues to the aggregate revenues from China Unicom (NYSE:CHU), China Telecom (NYSE:CHA) and China Netcom (NYSEARCA:CN). It reported a sequential growth in its total mobile advertising revenues to US$116,000, which were mainly generated from KongZhong's wireless Internet portal Kong.net. Total operating expenses in the first quarter of 2007 hit US$9.8 million.

Software

• Software Products company Synaptris, which offers reporting and analysis solutions, has announced its expansion into Hong Kong as part of its APAC (Asia Pacific) growth plans. The company, which offers reporting and analysis solutions, has a strong presence in North America and Europe and is increasing its focus on the APAC market this year. As part of this expansion, Synaptris has entered into a partnership with Hong Kong-based Gee Kay Systems, a company that specializes in providing financial management solutions, to market, support and implement Synaptris' flexible reporting and analysis solutions in that country. Synaptris' solutions enable users to derive greater business value from their information and make highly informed decisions in their business environments. Synaptris has over 2,200 customers and 200,000 licensed users spread across 60 countries. Under the deal, Gee Kay Systems will dedicate an exclusive team to provide complete sales, product evaluation and post-sales support to its customers for Synaptris' products.

• Symantec (NASDAQ:SYMC) and China's Huawei Technologies announced forming of a joint venture company to develop and distribute security and storage appliances to global telecommunications carriers and enterprises. Following required regulatory and governmental approvals, the joint venture is seen as closing late in the calendar year. Under the deal, Symantec will also contribute US$150 million toward the joint venture's growth and expansion. In the new company, Huawei will own 51 percent of the joint venture and Symantec 49 percent. Huawei will contribute its telecommunications storage and security businesses including its integrated supply chain and integrated product development management practices. With the agreement, the new company will have access to Huawei's intellectual property licenses, research and development capabilities, manufacturing expertise and engineering talent.

Hardware

• Microsoft (NASDAQ:MSFT) China and Vimicro (NASDAQ:VIMC) announced signing of a memorandum of understanding [MOU] that extends their cooperation into the digital multimedia sector. Industry sources said the cooperation will include cooperation in the field of mobile and home appliance multimedia. Under the MOU, the companies are seen as increasing their investment to promote the integration of their products and technology as well as to work on mobile phone service and home appliance multimedia. No details about the funds that will come from each other have been released.

• Alvarion (NASDAQ:ALVR), a company that manufactures WiMax, announced that it has secured a strategic agreement with Digital China, a development that makes the company its first mainland China agent. According to Digital China, the agreement covers video monitors and applications. The two companies said their renewal of their cooperation depends also when the country’s WiMax policy is clarified. With more than 2 million units deployed in 130 countries, Alvarion is a worldwide leader in wireless broadband providing systems to carriers, ISPs and private network operators, as well as full GSM and CDMA specialized network solutions.

Ventures/Investments

• IBM (NYSE:IBM) disclosed plans to set up an IBM China Channel University, which is aimed at giving channel training service for its partners in China, with IBM indicating that it would invest about U$10 million this year as support of the University’s operation. At present, IBM has recruited more than 1,300 partners from 300 cities in China. IBM China Channel University will consist of six academies. The president of the University and directors for each of the academies will be selected from IBM Greater China's top management, with the courses that will include basic technology, sales, marketing skills and managerial and leadership skills.

• ViewSonic, the world's second largest display producer, announced plans to set up its global service center to Wuhan, Hubei Province, the company stated that it will have its formal operations within a month. The move marks the first time ViewSonic has set up a global business center outside the U.S. ViewSonic's Wuhan global service center will handle the processing of the orders from all markets, providing logistics and information system support.

Information Technology

• DarwinSuzsoft, the American IT outsourcing services leader in China, reported achieving record growth in 2007, as it becomes the partner-of-choice for many leading commercial software providers. Its China-based development capabilities coupled with American-based processes and controls give technology companies what they need most: to accelerate market launch, make efficient use of capital and deliver high-quality products. New clients include Airprint Networks, Network Engines and NuView Systems. DarwinSuzsoft is a leading provider of software engineering, information technology [IT] and communication services, combining 20 years of consulting experience with a deep engineering presence in China.

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