Chinese Tech Stock Weekly Summary

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

Internet
• Media sources said the founder and CEO of Alibaba had confirmed for the first time to company employees the decision that Alibaba's B2B business will initiate its IPO procedure in Hong Kong. The official said that Alibaba has indeed submitted an application to Hong Kong Joint Stock Exchange Market. This confirms what has been perceived as a rumor for a long time. The company will reportedly raise about HK$7.8 billion (US$996.3 million) through this public offering, with the proceeds to be used for its global expansion and B2B platform improvements.

• Sohu.com (SOHU) reported for the second quarter ended June 30, 2007 a non-GAAP net income of US$5.7 million, down from non-GAAP US$8.4 million it posted in the second quarter of 2006. The company said advertising revenues grew 38 percent to US$26.6 million, with its non-advertising revenue declining by 6 percent to US$10.6 million. Sohu’s total revenues went up 14 percent to US$39 million. For second quarter of 2007, Sohu reported operating expenses hitting US$18.7 million. Its non-GAAP operating expenses totaled US$16.7 million, an increase of 22 percent from the previous quarter. Sohu estimates total revenues for third quarter 2007 to be between US$45 million to US$47 million, with advertising revenues forecast to hit between US$30 million to US$31 million, and its non-advertising revenues predicted to be between US$15 million US$16 million. The company looks to its brand advertising revenues for the third quarter of 2007 to be between US$28.5 million to US$29.5 million.

Media, Entertainment and Gaming
• The9 Limited (NCTY), a leading online game operator in China, announced that it has entered into an agreement with Yedang Entertainment Co., Ltd, a leading entertainment business publisher in South Korea, and T3 Entertainment Co. Ltd., a leading online game developer in South Korea. The agreement will allow The9 to have an exclusive license to operate Audition in mainland China, Hong Kong and Macau. Under the agreement, The9’s exclusive license of Audition will be good for commercial launch date of the game in mainland China, Hong Kong and Macau. The deal will see The9 paying a milestone-based license fee in the amount of US$8 million and a royalty equal to 30 percent of the game revenues provided that the minimum royalty payable over the license period shall be no less than US$35 million. Audition is an advanced casual dancing online game and is currently one of the most popular casual games in mainland China. The agreement reflects The9's recognition of Audition's high game quality, and the game's publisher and developer's confidence in The9's track record as a leading online game operator in China. The game is expected to continue its success story in China. Earlier in May this year, The9 also obtained the exclusive license to operate Audition 2, the sequel to Audition, in mainland China.

• Publicis Groupe (PUB) announced its acquisition of China's Communication Central Group [CCG], one of the largest independent interactive marketing agencies in the country. CCG retains some 200 employees in Shanghai, Hong Kong, Beijing and Shenzhen and is one of the region's only digital agencies to offer a complete range of in-house services, from creative design to complex technology integration. Once the acquisition is closed, the privately owned CCG will be named Digitas Greater China. No details of the financial deal were disclosed. Publicis Groupe has about 3,000 employees in more than 100 offices throughout Greater China.

Mobile/Wireless
• Industry sources said Nokia (NOK) has formalized the commercialization of its mobile phone payment service in Beijing, Guangzhou and Xiamen. The company said the mobile phone payment service is based on Near Field Communication, an upgraded technology of RFID, which enables mobile phones to realize e-payment and data downloading services. The service is expected to enable mobile phone users to pay their transportation fees, film tickets and food. Software

• According to China’s Ministry of Information Industry, the country’s software is still expanding in the first half of this year, with its income posting a 23 percent rise from the previous year and bringing the amount beyond 260 billion yuan (US$34 billion). The report noted how sectors involving software services, system integration and IC design have posted faster growth. The ministry said 4 municipalities and provinces namely Beijing, Jiangsu, Guangdong and Shanghai posted respective software industry revenue all going beyond US$20 billion yuan (US$2.6 billion).

• Industry sources said Microsoft China has signed a memorandum of understanding on a global strategic partnership with Bright Oceans Corporation Communications [BOCO]. The agreement has been described as allowing the parties to work jointly on training, solution development, Microsoft (MSFT) product deployment as well as joint marketing. BOCO Communications is a company into telecom operation support systems, information security products, value-added services and transportation.

Hardware
• Lenovo Group (LNVGY.PK) reported a 13 percent climb in its consolidated revenue to US$3.9 billion for its first fiscal quarter of 2007 to 2008, ended June 30, 2007. Excluding restructuring charges made in the first quarter, pre-tax income registered a 258 percent surge to US$123 million. The company said its net cash reserves as of June 30, 2007 totaled US$1.3 billion. Lenovo said its worldwide PC shipments posted a growth of more than 22 percent in the quarter, results which are ahead of the industry average growth of approximately 13 percent.

Semiconductors
• Semiconductor Manufacturing International Corporation (SMI) disclosed for the quarter ended June 30, 2007 a net loss of US$2.1 million, compared to a net income of US$8.8 million it posted in the first quarter. The company said revenues grew 3.7 percent to US$374.8 million from the second quarter in 2006 even as it went down by 3.5 percent from US$388.3 million sequentially.

Ventures/Investments

• Oracle China, which is also registered as Oracle Beijing Software Systems Co., Ltd., disclosed its decision to continue its commitment to make ongoing investments that drive economic growth, IT adoption and innovation in China. The company said its new key investment and business initiatives in China include setting up of new offices to meet growing demands in high- growth cities; investing in additional R&Ds as well as technical support facilities to address customer and partner requirements; partnering with government ministries to support regional economic development plans; and, the launch of new leading-edge software solutions and education programs to build competitive businesses and a skilled workforce.