What’s the Bull Case For Chinese Wireless Firm KongZong?

With nearly $3.50 per share in cash, cell phone content provider KongZong (KONG), which operates out of Beijing, is moving beyond the bear case that’s pushed its stock down by some 62% this year, or so says W. R. Hambrecht analyst James Lee following the company’s earnings report Tuesday morning in which it met analysts’ estimates for $17 million in sales and beat estimates for 2 cents per share in earnings by a penny.

Mind you, sales dropped nearly in half year-over-year.

Lee’s upgrading the stock to Hold from Sell, saying the cash should prop up the shares. That said, he’s got narry a bullish thing to say about the mighty Kong. KongZong’s business is one of providing SMS text messaging and WAP content, a sort of baby version of HTML, for display on mobile phones in China. China Mobile (CHL), the country’s dominant cell phone operator, places onerous restrictions on companies such as KongZong and competitor Tom Online (TOMO), such as preventing the firms from allowing people to follow hyperlinks that lead to other sites (aren’t hyperlinks what Web content is all about?).

Those restrictions were largely responsible for a drastic 16% drop in revenue, notes Lee. What’s more, the company’s operating profit margin went negative for the first time since Kong’s been public.