Chinese Tech Stock Weekly Summary

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

Internet

• Baidu.com (BIDU) issued a denial about the news that it has plans to expand into Europe, with the company calling the rumors “groundless.” Earlier, media sources in Europe indicated that Baidu’s CFO has planned to announce details of a European expansion. Though Baidu’s business is concentrated in China, the company has launched a Japanese search engine, which marks its entry into the international market. With the launch, Baidu also stated its plan to spend some US$15 million on its Japanese site in 2007.

• Amazon (AMZN) announced its plans to up its investment in Joyo.com, one of China's leading online shopping web sites. Following Amazon’s acquisition of Joyo for US$75 million, the Chinese company has been registering faster growth even as it still lags behind its main rival, Dangdang.com. The first quarter of 2007 showed Dangdang grabbing about 18 percent of the country’s B2C Internet Retailing market, compared with Joyo’s 12 percent share. At present, Amazon generates 54 percent of its sales outside the U.S. According to Analysys International, China’s B2C market hit 1 billion yuan (US$133 million) in the first quarter, compared with the 854.3 million yuan (US$111.6 million) it posted a year earlier.

• According to media sources, Tom Group (TOCOF.PK) and Tom Online (TOMO) have jointly announced plans to postpone a special court meeting and a shareholder meeting scheduled to tackle the privatization of Tom Online. The reports described the postponement as an effort on the part of the company to give its shareholders more time to think about the privatization move. In March this year, Tom Group divulged plans to have Tom Online privatized. The same plans were approved through a privatization resolution that received a 99.3 percent approval from the company's shareholders at a special meeting.

Mobile/Wireless

• Following the announced cuts of more than three thousand employees worldwide earlier this year, Motorola (MOT) has announced plans to cut some 4,000 more jobs globally. The decision to do so, according to the company, is aimed at improving its overall operation. The report did not indicate if the workers will be affected in China, although it indicated that Motorola China might feel the impact of the staff reduction overseas. The director of Motorola China's Communications and Public Affairs Department explained the move as part of the company’s strategy to meet the need for business adjustment. The official said Motorola China is committed to the Chinese market for the long term, with the company indicating that its investment in China will even be increased.

• PacificNet, Inc. (PACT), a leading provider of gaming and mobile game technology, e- commerce and Customer Relationship Management [CRM] in China, says that it will launch a new mobile Mahjong game for the 2007 World Series of Mahjong. PacificNet's newly launched Mahjong Mobile Pact is a java-based mobile game designed to help players better understand the rules of the game and to allow them to practice their Mahjong skills anywhere on a Java-enabled mobile phone. PacificNet said it will work closely with the World Series of Mahjong and other partners to promote the game of Mahjong via the Internet and mobile internet portals. According to industry forecasts, mobile online games will become vastly more popular with the advent of 3G networks inChina. PacificNet Games Limited (PacGames), is a leading provider of Asian multi- player electronic gaming machines, gaming technology solutions, gaming related maintenance, IT and distribution services for the leading hotel, casino and slot hall operators based in Macau, China and other Asian gaming markets. Pacific Solutions Technology is a CMM Level 3 certified software development center with over 200 software programmers located in Shenzhen, China.

• Fetion, a mobile chat service provided by China Mobile (CHL), announced the beginning of its commercial operations. With Fetion, China Mobile plans to offer the service free of charge, and target about 25 million users for it within this year. China Mobile has made Fetion one of the group's three main projects of this year, seeing it as the link between the Internet and the telecom networks. It is also part of China Mobile’s strategy to market Fetion as a complete comprehensive communications service that will focus on wireless communications.

• China Yahoo (YHOO) announced its plan to launch oneSearch, a mobile phone based search service. Earlier, the company went through a significant name change from Yahoo China to China Yahoo. The search service was first introduced in North America at the beginning of 2007 and later brought to Europe in May. Industry analysts consider oneSearch to be one of the biggest programs of Yahoo.

Software

• IBM(IBM) and Lehman Brothers (LEH)announced that they have agreed to buy a small stake of software company Kingdee (KGDEF.PK), a move that is seen as ushering in an alliance intended to help the U.S. firm boost its presence in a domestic market valued at US$10 billion. The acquisition is also viewed as strengthening Kingdee’s global ambitions. Under the terms of the agreement, IBM will help Kingdee re-design its products to suit an international marketplace. In return, IBM will get 3.8 percent of Kingdee and gain access to a market dominated by SAP, Oracle and UFIDA Software. According to IDC IT consultancy, China's software market is projected to post a growth of about 10 percent annually and account for almost a quarter of Asian IT spending estimated at US$48.3 billion by 2010, excluding Japan. Sources said IBM and Lehman agreed to pay HK$132 million (US$16.9 million) for 7.7 percent of Kingdee.

• CDC Corporation (CHINA) announced that, for its financial results for the quarter ending March 31, 2007, it posted a 41.4 percent rise in its total quarterly revenue to US$91.3 million from the US$64.6 million it posted in the first quarter of 2006. Even as it noted some challenges it has faced, like the expected seasonal slowdown faced by software companies, it described the revenues for this quarter as its “best ever” as it cited the more than 41 percent growth.

Hardware

• Motorola announced that it has secured a distribution agreement with Dragon Technology Distribution in China in response to the rising demand for open, standards-based AdvancedTCA and MicroTCATM-based products in China. The agreement also covers the distribution of Motorola's broad portfolio of CompactPCI and VMEbus products. With the agreement, industry experts see network equipment providers and manufacturers in China's industrial automation and aerospace industry as gaining easier access to Motorola's range of products, which include standards-based blades, modules, shelves, application-ready platforms and communication servers.

Ventures/Investments

• Ctrip.com (CTRP), an online travel service provider, revealed its plans to set up a travel agency in Beijing. Called the Beijing Ctrip Travel Agency, Ctrip's new company is expected to compete directlywith traditional travel agencies. The company said it aims to launch overseas group tour products in a bid to grab a share of the high-end tourist market expected to yield higher profits.

Telecommunications

• Guangzhou Global Telecom announced that it has signed a Letter of Intent with Zhengzhou Wangtian Electronic Technology, a move that will enable it to acquire a 60 percent equity interest in Wangtian via the issuance of common stock. Wangtian is a service provider that provides system integration services to telecom operators, government institutes, education organizations and enterprises. For 2006, it posted unaudited revenue of about US$1 million, with net profit of US$100,000. Industry sources indicated that the number of mobile phone users in Zhengzhou reached about 4.5 million at end of September 2006, which accounts for an estimated 63 percent of total population of the city. The coverage of mobile users in Zhengzhou, however, remains only at 63 percent, compared to 93 percent in other major cities of the country.

• According to the chairman of China Netcom (CN), the company is targeting about 50 percent of its capital expenditure in 2007 on broadband services and upgrades. For its 2006 fiscal year report, China Netcom posted a 34.9 percent rise in its broadband revenue at 10.5 billion yuan (US$1.3 billion), and by the end of 2006, the broadband user base rose 31.4 percent to hit 15 million. Industry estimates placed China Netcom's capital expenditure in 2007 at about 21 billion yuan (US$2.7 billion). These figures are significant when placed in the context of forecasts that, by April 2007, China would have 57.2 million broadband users.

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