Chinese Tech Stock Weekly Summary

Includes: EFUT, PCNTF, SMI
by: IRG Ltd

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


Pacific Internet Limited (PCNTF) announced that the Ministry of Information Industry [MII] of the People's Republic of China has approved the grant of a cross-provincial license to the equity joint venture [EJV] entity to be set up between PacNet and its China partner Zhong Ren Telecom (Zhong Ren), to provide certain value-added services in Mainland China. The MII license covers three Value Added Services [VAS], namely Internet data centre; Internet access; and "store-and-forward" services. According to a PacNet Hong Kong official, Zhong Ren has secured an IP-VPN license for Guangdong province, and has done well in establishing its presence in southern China. Pacific Internet Limited or PacNet is the largest telco-independent Internet Communications Service Provider by geographic reach in the Asia Pacific region. The Company has a direct presence in Singapore, Hong Kong, the Philippines, Australia, India, Thailand and Malaysia. PacNet delivers a comprehensive suite of data, voice and video services to both corporate business and consumer customers. announced plans to cancel its listing in Japan. Earlier, the company had talked about its plans to list but later announced the suspension of that listing following the media reports about the company’s conflict with two South Korean companies – T3 and Yedang. said that the cancellation of the IPO would not affect its operations and, after the problem is settled, it would still reconsider an IPO. Before the cancellation of the listing by, T3 and Yedang announced through the South Korean media that they would terminate their cooperation with 9you. The reason for the dispute: allegedly paid too little commission for using Audition and even went on to plagiarize their other games.

Media sources are quoting a Google (NASDAQ:GOOG) representative saying that the company has already completed the acquisition of 60 percent of Other sources, however, are claiming that Google still does not own a majority stake in the Chinese company. Amidst the conflicting news, Google and announced that they are launching a new service called Wen Da (Ask and Answer), which Google claimed earlier represented a strategic cooperation between the parties. Founded in 1999, is an online community with about 20 million registered users.

The Online Copyright Alliance of Internet Society of China [ISC] announced that it will set up a copyright information bulletin platform with the aim of giving better protection to online copyrights. The platform is also seen as hastening the popularization of Internet applications. The present conditions describe online copyright information as opaque, which gives few chances for Internet companies to buy copyrights from the original creators. Industry observes see this situation as bringing about a number of fraud cases and even impeding the development of Internet services in the country. According to ISC, the new platform will help in the circulation of legal works and carry out certification on the copyright of relevant copyright owners. ISC said it will also set up a copyright dispute intercession center to coordinate and solve the disputes between copyright owners and Internet companies.

Media, Entertainment and Gaming

According to its spokesperson, Founder Group, a Beijing-based software company has filed a lawsuit against the creator of the World of Warcraft and the game's local operator for allegedly using its Chinese character fonts illegally. The lawsuit, which was filed in June but was only disclosed recently, seeks US$13.2 million in damages. Founder said the Chinese version of World of Warcraft, run by Shanghai-based The9 Ltd., uses five Chinese character fonts developed by Founder without authorization. The report said Founder staff stumbled upon the alleged violations while playing the game. World of Warcraft, created by Vivendi SA's Blizzard Entertainment Inc., is the world's most popular online game and boasts of more than 3.5 million subscribers in China. Founder Group is a software company and computer maker founded in 1986 with an investment from Peking University.


RedHat (NYSE:RHT), one of the world's largest open source providers and Linux software providers, announced its entry into Chengdu by way of Sofmit, the largest outsourcing software company in Sichuan Province. RedHat and Sofmit announced that they have established a RedHat Southwest SOA Solution Center and China SOA Service Center in Chengdu, which is considered by observers as the biggest strategic move that RedHat has taken since it entered the Chinese market in 2000. The two companies said following the set up of the two centers, RedHat, Sofmit and Chengdu Tianfu Platform Software Outsourcing Company will work with other learning institutions to train talent for the development of high quality and low-cost Linux system and open source solutions. The value of the investment was not disclosed.

According to media sources, Microsoft (NASDAQ:MSFT) has asked Jiangmin, Kingsoft and Rising, Chinese domestic anti-virus software companies, to start advocating the importance of online security. The three rivals jointly called on the users to up their anti-virus awareness as they also develop the habits appropriate to creating safe online behavior. The companies have also worked out six principles for online security.

e-Future Information Technology Inc. (NASDAQ:EFUT), a leading Chinese front supply chain management software and service company, announced its unaudited financial results for the six months ended June 30, 2007, with the company reporting a 21.5 percent rise in its total to 19.1 million yuan (US$2.5 million) over the first half of 2006. The company said software revenues increased 51.7 percent to US$1.7 million over the first half 2006. Its net income went down to US$0.3 million due largely to expenses and amortization associated with a US$10 million private placement in March 2007 as well as three strategic acquisitions in the first half of the year. As of June 30, 2007, the company had cash, cash equivalents of 112 million yuan (US$14.7 million). e-Future is a leading provider of integrated software and professional services for manufacturers, distributors, wholesalers, logistics companies and retailers in China's supply chain market.


Media sources reported Dell’s (NASDAQ:DELL) opening of a direct sales store in Beijing's Zhongguancun area to sell a variety of Dell laptop computers and to provide Dell's standard after-sales service. The opening of a direct sales store is not anymore unusual for Dell but the choice of a key IT zone of Zhongguancun is considered significant by observers. The company has been working on setting up its distribution services globally.

Industry sources reported the tripartite cooperation among Suning, Siemens (SI) and Sony (NYSE:SNE). The three parties have formed a 3S Alliance, with the S indicating the initial letter of the three parties. Under the agreement, the three companies will work on a range of businesses ranging from product development, marketing and after-sales service to jointly increase their capacity in serving high-end consumers in China. The three parties also revealed their areas of priority, where they will first form a medium and high-end product R&D platform to develop value-added products for individual consumers. The companies will then set up a marketing alliance, after which they will jointly offer new service experiences to consumers. Under the agreement, Siemens and Sony aim to provide their latest products to Suning and offer discounts to consumers who buy a whole set of Siemens or Sony electrical appliances.


Qimonda (QI) and Semiconductor Manufacturing International Corporation (NYSE:SMI) announced entering into an agreement to widen their existing cooperation on the production of standard memory chips, which are also called DRAMs. The agreement will see Qimonda transferring its 80nm DRAM trench technology to SMIC's 300mm facility in Beijing. The deal will also enable SMIC to manufacture DRAMs for computing applications in this technology exclusively for Qimonda. The agreement includes the option to transfer Qimonda's 75nm technology to SMIC in the future.


Superconductor Technologies Inc. [STI] (NASDAQ:SCON), a leading provider of high performance infrastructure products for wireless voice and data applications, announced that it has entered into an agreement with Hunchun BaoLi Communication Co. Ltd. [BAOLI] under which BAOLI has agreed to invest US$15 million. The report said the investment will be made in four installments: US$1 million by August 31, 2007, US$3 million by September 30, 2007, US$2 million by October 22, 2007, and US$9 million by December 30, 2007. Superconductor Technologies Inc. is headquartered in California. STI's SuperLink solution increases capacity utilization; lower dropped and blocked calls, extends coverage, and enables faster wireless data rates. Hunchun BaoLi Communication Co. Ltd. [BAOLI] is a wholly owned subsidiary of the BaoLi Group, headquartered in China. The BaoLi Group operates a wide range of business entities including real estate development, financial services, and wireless communications in both the network infrastructure and handset areas. The BaoLi Group has facilities in the Hong Kong, Shenzhen, and Jin Lin provinces.

Changhong, a Sichuan-based TV manufacturer, announced its investment of 1.9 billion yuan (US$251 million) to produce plasma televisions. The company said it also plans to issue no more than 400 million A shares in a bid to generate 2.8 million yuan (US$370,000), with the plan to spend some 1.9 million yuan (US$251,000) in the acquisition of 75 percent of the stake of Sterope Investments B.V. With shares in Sterope, Changhong will then hold the shares of South Korea's Orion PDP, which is the only Multi-PDP manufacturer in the world. The South Korean firm is the holder of about 67 patent applications, 193 invention patents, 47 new and applicable patents and a dedicated development team as well as an extensive marketing network. Following the acquisition, Changhong will become the first Chinese television maker with the capacity of producing plasma screens even as some industry observers are not sure about the capability of the firm to produce plasma screen in large quantities by 2008 and how it will respond to the declining price of plasma TV.

Nokia-Siemens, a joint venture company between Nokia (NYSE:NOK) and Siemens (SI), announced plans to boost the development capacity of their R&D center in Chengdu, with the aim to transform it into one of their largest R&D centers in the world. The expansion of the R&D center in Chengdu is part of Nokia-Siemens' strategic plan in China. Media sources reported that the R&D center in Chengdu is expected to meet the needs of both telecom industry clients and local partners.


Industry sources reported that the China Securities Regulatory Commission has fined Datang Telecom for including more than 37.1 million yuan (US$5 million) as additional profit in its 2004 annual results. According to Datang Telecom, there were indeed big mistakes in their 2004 annual financial report as the appendix of the financial report did not disclose much detail about the convertible net value of the stock. The company said it has also fined or warned the concerned staff.

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