Chinese Tech Stock Weekly Summary

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

Internet

• According to the CEO of Alibaba Group, the company plans to spend some 10 billion yuan (US$1.3 billion) in the coming three to five years in e-commerce industry supply chain services. Industry observers see the investment in e-commerce supply chains as part of the company’s desire to be more competitive in the international market. The CEO said that Alibaba looks to transforming the company into a new system that combines technology, finance, information and logistics.

• BBSpace, an online business portal announced that it has secured US$11 million in venture funding from an investment group led by IDG. As part of China’s enterprise software maker SuperData, BBSpace provides online magazines aimed at the business communities.

Media, Entertainment and Gaming

• China Finance Online Co. Ltd. [CF] (JRJC), announced its to acquisition of Daily Growth Investment [DG], a securities brokerage firm. Under the definitive agreements, CFO will pay approximately US$3 million in exchange for 85% of the equity of SG, and the exact payment will be determined on the basis of the net asset value as at the date of completion. CFO has the right to acquire the remaining 15% of equity of DG within 5 years from the completion date.

• According to market sources, Skyline Media, the majority shareholder of China-based online games operator, Shanda Interactive Entertainment, has raised US$157.4 million from a placement of secondary shares in the company. Skyline Media sold 4.5 million ADR shares in the US-listed company at a price of US$34.4. UBS was the sole arranger of the deal.

• There are rumors circulating that Shanda (SNDA) is trying to set up a unit that will mark its entry into the in-game advertising [IGA] business. Media sources said that some prominent advertising executives have already joined the IGA team. According to Pearl Research, IGA may provide significant revenues for Shanda since all of the company’s games are currently free-to-play and have accrued many players. Analysts see IGA as enabling the company to generate revenues from other non-paying customers.

• According to industry sources, Zhengtu, a Chinese online games company, has secured US$100 million in equity investment, with individual investors and venture capital funds as some of those joining this round of financing. In a related development, Zhengtu said it has submitted an SEC application to list on the U.S. market. Zhengtu’s MMORPG Zhengtu reported having more than 1 million peak concurrent users.

Mobile/Wireless

• Sina.com (SINA) announced that it is sponsoring Nokia’s mobile multiplayer games competition, a move indicating the Chinese Internet portal’s backing of the search for new game developer in the Chinese market. Under the competition, selected concepts are to be based on SNAP Mobile, a platform developed by Nokia. The winning concepts will be given free development support and preparation for market deployment.

• According to industry media sources, Shanghai Jiading New Town is going to be the first pilot wireless zone in China. The town is one of the three main new towns in Shanghai identified in the city’s 11th Five-Year Plan Period. Under the wireless city concept, Jiading New Town will be created into a wireless city through scheduled and phase construction. Currently, out of the 520,000 residents in Jiading, about 300,000 have been identified as Internet users and about 110,000 as broadband users.

• KongZhong (KONG), a Chinese wireless value-added services company, and the National Basketball Association [NBA] announced jointly their launching of the official NBA Chinese mobile web site. Under the agreement, KongZhong will operate the official NBA Chinese mobile website which users can visit on their mobile phones. The offering will see the mobile website showing live selected NBA games in their entirety and giving video clips of NBA game highlights, the latest news, scores, game and player updates, player interviews, blogs, TV schedules, wallpaper, ring tones, and more. The parnetship will also allow KongZhong to develop and market NBA-related wireless value-added products. KongZhong said it expects to generate mobile advertising revenues and wireless valueadded revenues, as well as to increase the popularity of Kong.net.

Software

• Microsoft (MSFT) disclosed the resignation of Timothy Chen as head of Microsoft Greater China Region. The report also stated that the company has already initiated a global search for a person to take his place. In the interim, Ya-Qin Zhang, corporate vice president and chairman of Microsoft's China Research & Development Group, will lead the business as the region's acting chief executive officer. Zhang will be supported by the Microsoft GCR leadership team. In a separate development, Microsoft China announced that its R&D Group has formally initiated their ShenzhenPark. According to the chairman of the Microsoft China R&D Group, the company aims to increase its investment in the development and research of mobile Internet and general hardware in Shenzhen and carry out close cooperation with the relevant industries. Microsoft China R&D Group Shenzhen Park is made up of Microsoft Asia Hardware Center and the Microsoft Mobile Internet Technology R&D Center.

• According to media sources, construction has begun on the Dalian Tiandi Software, which is the second phase of Dalian Software Park. The new facility is estimated to be worth some 15 billion yuan (US$2 billion). Dalian Tiandi Software Park is jointly developed by Hong Kong-based Shui On Group's affiliates Shui On Real Estate and Shui On Construction, and Dalian Yida Group. The park is envisioned to be a multi-functional park that combines software development, living areas, educational installations, and leisure facilities. Market sources placed Dalian’s total software output value at 14.5 billion yuan (US$1.9 billion).

Hardware

• Jiangsu Dongyuan Electrical Group Co. Ltd. [JDEG] announced that it has plans to acquire an 87.3 percent interest in Suzhou Tianli Electric Equipment Co. Ltd. [STEE], an apparatus manufacturer in a deal valued at 30 million yuan (US$3.9 million) in cash. The transaction was approved by the board of directors. STEE, founded in 2002, manufactures electrical equipment for internal combustion engines. JDEG manufactures semiconductors, high- and low-voltage switches for mechanical, electrical, and power departments.

• TCL Computer announced the acquisition of 50 million yuan (US$6.6 million) credit loan from TCL Group, a development that is expected to boost TCL Computer’s standing in the industry. With the acquisition, the company also issued clarifications regarding its staff reduction which will be no more than 15 percent, and not 50 percent, as earlier reported and that the company would not sell its computer business, with an official describing the business as one of the most important components of the company’s strategy. TCL Computer is the fourth-largest PC maker in China.

• According to Chinese sources, Hisense, one of the biggest TV manufacturers in China, has formally initiated Chinese color TV industry's first LCD production line in the company. The production line put into operation this time features an annual capacity of 500,000 liquid crystal modules ranging from 15 inches to 42 inches. The company’s general manager said that the company looks to setting up five more of the same production lines with a total investment of 700 million yuan (US$93.3 million) by 2009. The company said it aims to generate an annual capacity of 3 million TVs. Hisense has established more than 20 companies at home and abroad with net assets totaling 5.8 billion yuan (US$773.1 million).

Telecommunications

• According to market sources, China Telecom Corporation Limited (CHA) has plans to acquire all the assets of its parent company in Beijing, which is valued at 4 billion yuan (US$533.2 million). China Telecom disclosed that the company's branches in the ten provinces in northern China have posted total revenue of about 5 billion yuan (US$666.5 million) in 2006, of which 1.7 billion yuan (US$226.6 million) was contributed by China Telecom Group (Beijing).

Information Technology

• Magellan, a U.S.-based GPS company, and Zenitron Corporation, a distributor of semiconductor, electric component, and consumer electronics in China announced entering into a business partnership to bring Magellan auto navigation devices to the Chinese market. Under the agreement, Zenitron will market and distribute Magellan GPS products, starting with the introduction of three new products, the Magellan Maestro 3200C, 8200C and 8250C. The partnership will also see Zenitron providing a variety of marketing services to support the distribution and retail sales of Magellan products, as well as service and support for Magellan customers. The companies said Magellan GPS devices can be found starting in October in major cities throughout China including Beijing, Shanghai, Guanghzhou and Shengzen. According to Canalys, China is expected to represent 3.9 million personal navigation device units in 2010, up from just 400,000 units expected to be sold by the end of 2007.

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