Chinese Tech Stock Weekly Summary

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

Internet
• China Post announced the unveiling of its third-party e-payment platform that comes in the form of Wang Hui Tong card. Made to pay for online gaming, the card is being marketed at some 3,000 booths all over Beijing. The card is described as different from other e-payment platforms like those created by 99bill and Alipay because the Wang Hui Tong card can be used to add value at post offices in Beijing. An official of Wang Hui Tong says the service marks the entry of China Post into the online game market. The official said the company is looking for more alliances with game operators in the future.

• Baidu.com (BIDU) posted a 109.4 percent surge in its total revenues for the second quarter ended June 30, 2007 to 401.3 million yuan (US$53 million) from the same period in 2006. The Internet search engine said its net income in the second quarter of 2007 has gone up 142.7 percent to 141.9 million yuan (US$18.7 million) from the same period in 2006. Baidu said traffic acquisition costs, which form part of the cost of revenues posted an 11.2 percent growth to 44.9 million yuan (US$6 million), compared to the 9.2 percent it has posted in the same period in 2006. The company’s operating profit went up 122.4 percent to129 million yuan (US$17 million) from the corresponding period in 2006. As of June 30, 2007, Baidu reported cash, cash equivalents and short-term investments worth 1.3 billion yuan (US$172 million).

• China.com announced that it has entered into a strategic partnership with real estate web site SouFun. Under the agreement, SouFun will acquire exclusive rights for one year to sell advertisements on the real estate channel of China.com, a Hong Kong listed subsidiary of CDC Corporation (CHINA). The agreement will allow Soufun to set up marketing events for advertisers across China. The agreement gives SouFun the option to extend the contract beyond the initial one-year term. SouFun is a 51 percent owned company of Telstra (TLSYY.PK), Australia's leading telecommunications and information services company. SouFun.com boasts over 44 million user visits and 1.3 billion page views each month.

• AsiaInfo announced that it has secured an agreement with China Mobile (CHL) to service the deployment of its next-generation IP infrastructure. Under the contract, AsiaInfo will provide advanced professional services to the project, including making technical specifications, supervising integration, network design, network traffic analysis, as well as network performance evaluation and optimization. AsiaInfo is considered a pioneer in China’s Internet development. In a separate development, AsiaInfo posted a 40 percent year-over-year rise to US$26.6 million for its net revenue for the second quarter ended June 30, 2007. The company said its net income from continuing operations for the second quarter of 2007 was US$2.5 million, compared to the US$1.1 million it posted in the same period a year ago.

• Tom Online (TOMO), an Internet portal and wireless value-added services firm, reported a 30.4 percent decline in its total revenues to US$34.3 million for the second quarter ended June 30, 2007 from the same period last year and a decrease of 2.1 percent from the last quarter. The company said its net loss included a goodwill impairment charge of US$6.8 million attributed to its wireless Internet business and losses ascribed to its share in the Tom Eachnet Joint Venture worth some US$3.9 million. The results included a 5 percent quarterly decline its mobile revenue. Tom Online reported a net loss of US$9.5 million compared to the net income of US$11.7 million it posted in 2006 and net income of US$0.1 million reported in the first quarter of 2007. Its wireless Internet service revenues, which make up 87.9 percent of the company’s total quarterly revenues, went down 32.9 percent to US$30.2 million. Online advertising revenues, contributing 9.8 percent of the company’s total quarterly revenues, saw a 13.2 percent rise to US$3.3 million, which represents also a 27 percent rise from the previous quarter.

Media, Entertainment and Gaming
• Perfect World (PWRD), a Chinese online game developer, announced its entry into share trading by way of the NASDAQ, with an IPO of 11.8 million American Depositary Shares at US$16 per ADS. The offering is part of an IPO of 9 million ADSs by Perfect World and an additional offering of 2.8 million ADSs by certain shareholders of Perfect World as stated in the prospectus. Morgan Stanley and Credit Suisse are the joint book runners for this offering and have the option to acquire an additional 1.7 million ADSs from existing shareholders of the company at the IPO price less the underwriting discounts and commissions.

Mobile/Wireless
• SkyCross, a provider of antenna-centric, radio-frequency [RF] solutions, announced its plan to open additional design centers in Shanghai, China and Gumi, South Korea, in order to meet increasing demand. Gartner Group has cited the strong growth of mobile phone sales in Asia-Pacific and Japan in the first-quarter of 2007, which pushed worldwide sales up by 14 percent compared with the same period in 2006. The company said the new facilities are expected to complement the existing ones, and enhance SkyCross’ ability to work in-region with customers to obtain early feedback on the industrial designs. SkyCross designs and makes antennas for a wide range of wireless applications, including cellular phones, wireless broadband [UWB], wireless LANs, and global positioning systems [GPS].

Hardware
• A top official of Dell (DELL) revealed company plans for a large expansion that will bring Dell to the fourth and fifth tier cities in China. The company was so specific it even marked the country’s National Day holiday this year as the beginning of that expansion. The official said the company is not moving away from its direct-selling pattern even as it expands its coverage. Dell, according to the official, is also seeking more partners.

Ventures/Investments
• According to the country’s Ministry of Science and Technology, the signing ceremony for the Cooperation Agreement on Venture Capital Fund in Shanxi Province has been held in Taiyuan. The fund is valued at 800 million yuan (US$105.8 million) and is forecast to draw in some 2 billion yuan (US$264.5 million) of domestic and overseas organizations with plans to set up sub-funds. China Development Bank and Shanxi Science and Technology Department contributed each 400 million yuan (US$53 million). The fund is the first steering fund set up by China Development Bank and the provincial government of Shanxi. The fund has been earmarked for startups and the growth of science and technology projects in the area.

• Following the completion of its comprehensive strategic plan, Merix Corporation (MERX) revealed its plans to expand the capacity and technological capabilities of its Huiyang factory. The company said the expansion will come in two phases spread over 18 months and is aimed at boosting the inner layer capacity of the Huiyang facilities and raising its capabilities to produce higher layer count printed circuit boards. The company said the first phase will be done with the infusion of some US$2 million of equipment in the facility. The second phase will see the construction of a larger facility with state-of-the art equipment to produce high-tech products, a project valued at about US$13 million. Merix is a leading manufacturer of circuit boards with facilities in the U.S. and Asia.