Chinese Tech Stock Weekly Summary

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

Internet

• 9you.com, an online gaming portal, announced that it secured an approval for listing on the Osaka Stock Exchange Market. Under the plan, 9you.com said it is aiming to issue 97,000 shares of stock in Japan, including 46,000 for IPO, and 51,000 for the second offering. Earlier, 9you.com said it was targeting to get a NASDAQ listing until it shifted its focus to Japan. Observers note that many Chinese companies appear to favor UK or Japan for listing as the said destinations provide lower barriers.

• According to sources close to deal, Google.com (GOOG) has won its bid to secure a coveted Internet Content Provider license in China. The license is given by the country’s Ministry of Information Industry, which is seen as adding legitimacy to Google’s presence in China and gives it more opportunity to get bigger advertising contracts. Google lags behind Baidu, which remains the top search engine in China.

Media, Entertainment and Gaming

• CDC Games, a business unit of CDC Corporation (CHINA), announced the launching of Special Force, the first free-to-play, pay-for-merchandise FPS (first person shooter) game in China for general commercial availability. The company, a pioneer of the free-to-play, pay for merchandise model for online games in the country, said the launch follows a highly successful open beta in which 1.6 million users registered to play the game during this testing phase. Special Force, which was developed by Dragonfly, was recently ranked as the top online game in South Korean Internet cafes for more than 50 consecutive weeks and provides CDC Games with first-mover advantage in the FPS category of online gaming in China. CDC Games is one of the market leaders of online and mobile games in China with 50 million registered users. In March 2007, the company announced the formation of CDC Games Studio, funded by up to US$100 million, to establish strategic relationships with selected games development partners to accelerate the development of new, original online games for China and other targeted global geographies. The CDC family of companies includes CDC Software focused on enterprise software applications and services, CDC Mobile focused on mobile applications, CDC Games focused on online games, and China.com focused on portals for the greater China markets.

• Shanghai Media Group [SMG] announced entering into a strategic cooperation agreement with Microsoft (MSFT) on entertainment applications for PCs, television and mobile phones. Under the agreement, SMG would be an entertainment content and service provider and Microsoft, a technology and platform supplier, would integrate their content, technology and electronic products to offer more entertainment service for the consumers. Back in 2000, Microsoft and SMG also worked jointly on Windows Media, MSN and other digital media technologies.

Mobile/Wireless

• Linktone (LTON), the wireless value-added services firm, announced that it has entered into an agreement with eChinaCash to acquire a 49 percent equity stake in its subsidiary eChinaMobile. With Linktone and eChinaCash becoming joint owners of eChinaMobile, the twocompanies will work in cross-selling promotional opportunities by leveraging each company's extensive customer resources. eChinaCash manages customer loyalty affinity programs and payment card programs for large corporations and financial institutions which include Chinese blue chip companies such as Sinopec and Air China.

• Sony Ericsson announced setting up of a new factory in Beijing, a move that the company described as part of the plan to make the Chinese capital its global manufacturing base. The company said the factory will be used for manufacturing mobile phones and printed circuit boards. For Sony Ericsson, China remains the only country where it maintains a whole range of services that cover production, outsourcing, development to design, sales and market promotion.

• Glu Mobile, a mobile games publisher, announced the opening of its development studio in Beijing. According to its CEO, establishing a local presence in these key regions is critical to its strategy as it will allow the company to “deepen relationships within each market.” For Glu Mobile, establishing Glu's third development studio in Beijing will allow the company to boost its internal development and porting capabilities and create content for both the western and Asian markets. The Beijing studio will be headed by Kim Daniel Arthur, formerly the head of Glu's studio in London.

Software

• Industry sources indicated that Shanghai-based software website Runsn has been selected by Microsoft as its first partner and dealer in China for its Groove 2007. Microsoft's Groove 2007 is described as a kind of P2P-based coordination software designed to provide more flexible coordination for smaller enterprises. The Office Groove platform includes both decentralized client software for information worker productivity and centralized services for traversing network boundaries efficiently. According to Microsoft, it has plans to make Groove one of its key products and is working on the software’s integration with the other Office products.

Hardware

• Industry sources said Avnet's (AVT) Asian subsidiary and Chinese electronics company ASUS have inked an agreement to distribute ASUS' AMD-based motherboards in China. Under the deal, Avnet will market and distribute ASUS's AMD-based motherboards in Mainland China, concentrating on specific customer segments including value-added resellers, system builders and PC assemblers.

• Suning, an electronics retailer, announced that it has entered into a strategic partnership with IBM, with the two companies working together to create what was dubbed the Dark Blue Program. Under the agreement, Suning will invest some 300 million yuan (US$39.3 million) in the next five years to work with IBM on enterprise management, work flow reforms, application system development and IT management.

Information Technology

• Euronet (EEFT), a global electronic payments provider, disclosed the widening of its ATM outsourcing agreement with China Postal Savings Bank. Under the agreement, Euronet will set up an additional 721 ATMs for China Postal Bank in Beijing, Shanghai and the Guangdong province. Euronet China expects to complete the deployment of the new ATMs for China Postal within the next 12 to 18 months. China Postal Savings Bank is the fifth largest financial institution in China and maintains a network of 7,780 ATMs, which includes the 90 ATMs deployed by Euronet over the last year.

Telecommunications

• Ericsson (ERIC) announced entering into an agreement with China Unicom (CHU) to assist the telecom upgrade of its GSM network in 6 Chinese provinces. Earlier, Ericsson signed a GSM deal valued at US$1 billion with China Mobile (CHL) for upgrading the GSM network of the telecom's operations in 19 Chinese provinces. Under the agreement, Ericsson will provide solutions for the network deployment mobile exchange in Jilin, Henan, Jiangsu, Yunnan, Hainan and Liaoning Provinces, a move that is expected to bring in over 4 million in user capacity to China Unicom. The financial details of the deal were not disclosed.

• Media sources said Datang Telecom is a recipient of a loan worth 30 billion yuan (US$4 billion) following its signing of a cooperation agreement with China Development Bank. Industry analysts see the loan grant as helping solve the fund shortage that Datang is currently experiencing. Under the deal, the two sides will combine each of their advantages, with China Development Bank providing a full range of financial services to Datang Telecom to support the company's scaled TD-SCDMA construction over the long term.

Ventures/Investments

• Industry sources indicated that Microsoft has acquired a “small stake” in the country’s Sichuan Changhong Electric Company, a move that analysts see as the software giant’s move to make its presence bigger in China. Sources said the companies have signed a letter of intent for Microsoft to acquire 15 million Changhong shares in a deal valued at 94 million yuan (US$12.3 million). Changhong's stock is currently traded on the Shanghai Stock Exchange. Microsoft's purchase corresponds to less than one percent of the total outstanding shares for Changhong. Under the deal, the two companies will initiate a project dubbed Media Galaxy, under which they will focus on tapping the power of the Internet to boost consumer electronics.

• Yangtze Telecom announced that it will acquire a 50 percent equity interest in Beijing Haidian Cable Television Network Information Company [HDCTV] in a deal valued at 42.8 million yuan (US$5.6 million). According to the president of Yangtze, HDCTV presents “an unprecedented opportunity for Yangtze to enter this digital TV business in China, a market usually with few openings because of its high barrier to entry and tremendous growth potential." Industry information shows HDCTV to be the owner of all the requisite licenses for the broadband ISP business, digital cable TV and broadcasting in Haidian district of Beijing. The area is noted for being the site of universities, research institutes as well as Zhongguancun, considered the Silicon Valley area of China. Yangtze Telecom also disclosed that it is set to putting up additional funds for capital expenditures of about US$10 million in the twenty-four months following the completion of the acquisition.

• China Telecom Corp Ltd. (CHA) announced that it has agreed to buy telecom-related assets from its State-owned parent in a bid to boost its stock appeal. Under the deal, the company said it would pay 1.4 billion yuan (US$183.6 million) in cash for a 100 percent stake in China Telecom (Hong Kong) International Ltd., China Telecom System Integration Co Ltd., and China Telecom [USA] Corp., all of which are fully owned subsidiaries of China Telecommunications Corp. China Telecom said it has been lobbying the government to secure a license to offer mobile phone services to counter the slowdown of its fixed-line business.

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