Chinese Tech Stock Weekly Summary

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

Internet

• Giant Interactive (GA), a Chinese online gaming company Giant went public and closed at closing at $18.23 a share on the New York Stock Exchange, up from its IPO price of $15.50 a share. A total of 57.2 million American depositary shares were sold and placed the gross proceeds from the sale of ADSs at approximately US$886.6 million. Giant said it aims to use the net proceeds from the IPO for general corporate purposes, including capital expenditures and funding possible future acquisitions. Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Investment Bank were the joint global coordinators and joint book runners for this offering.

• Cisco (CSCO) announced that it has signed a memorandum of understanding with Alibaba Group to look into ways to jointly offer collaboration and business management solutions to small and medium businesses. Under the terms of the MOU, the two companies agreed to work in several areas, including provision of SMB-focused web collaboration services; joint marketing of SMB focused web-based business applications developed by WebEx and its technology partners; cooperation in expanding Alibaba Group's overseas market; strategic business development initiatives to enable software-as-a-service capabilities.

• Chinese online payment provider 99Bill, a Chinese online payment provider, announced that it has entered into a strategic alliance with Perfect World Network (PWRD), a Chinese gaming company, to jointly promote online game and online payment markets. Under the alliance, 99Bill will provide PW Network with integrated B2B and B2C payment solutions covering debit cards, credit cards and prepaid refilling cards to all game titles. Industry observers see the newly forged alliance between 99Bill and Perfect World Network as coming at a time when the country’s gaming authority is giving strong support to locally developed games. China’s online gaming industry is expected to generate 9.7 billion yuan (US$1.3 billion) this year.

• Sohu.com (SOHU) reported third quarter earnings, total revenues amounting to US$51.5 million, compared to revenues of US$39 million in second quarter ended June 30, 2007. Sohu said its net income for third quarter of 2007 was US$9.7 million. The company’s advertising revenues reported 11 percent quarter-on-quarter rise and a 32 percent year-on-year growth to US$31.5 million. For the third quarter of 2007, Sohu's non-advertising revenues, which are attributed mainly from online games and wireless value-added services, were US$20 million. The non-advertising revenues contributed 39 percent of total revenues. In third quarter of 2007, Sohu disposed its equity interest in an associated company for US$0.6 million. Sohu looks to generating total revenues between US$53.5 million to US$55.5 million for the fourth quarter 2007.

• According to media sources, Facebook and Myspace are looking to China as their main target for global expansion. The firms are two of the most popular networking web sites in the U.S. Facebook hit the news lately after it received a US$240 million investment from Microsoft, and now is planning an entry into the Chinese market. Facebook is expected to be in China this December, with its entry seen as happening via a series of acquisitions. A survey firm eMarketer predicts that Facebook will generate US$125 million in advertisement income in 2007.

• According to market sources, Alibaba was able to raise US$1.5 billion in the second-biggest IPO of an Internet company following that of Google (GOOG). Industry observers see the sale by Alibaba, the biggest by a Chinese Internet company, as an index of the growth potential in China. The IPO was 266 times oversubscribed with buyers ordered HK$453 billion (US$58.4 billion) of stock, 266 times the available to them.

Media, Entertainment and Gaming

• Tianjin Broadcast & TV Network Company announced its selection of NDS VideoGuard conditional access to protect its new digital cable service. With an existing network of more than 2 million analog subscribers in Tianjin, the company looks to the digital technology from NDS to support its Pay-TV business and security needs. Industry observers see NDS technology as enabling Tianjin Broadcast & TV Network to develop an industry leading digital platform capable of securely delivering enhanced, value added services to cable viewers.

Mobile/Wireless

• China Mobile (CHL) announced that it has started its consultation with TD mobile phone manufacturers, with the company indicating its plans to set the bidding for TD-SCDMA mobile phones in November. Media sources said that China Mobile will spend a total of about 3 billion yuan (US$402.3 million) to 4 billion yuan (US$536.5 million) buying about 2 million to 3 million TD mobile phones, which will cover all the three class categories (high-end, middle-end and low-end).

• Guangdong Mobile announced a service that will provide a free and unlimited capacity mobile e-mail service for its users. Available to all users of Guangdong Mobile, the free and unlimited capacity mobile email service carries the advantages of both e-mail and mobile phones. To access the service, consumers can log onto Guangdong Mobile's website or mail.139.com, and enter their mobile email box to receive, send or manage their emails.

• TCL Communication Technology Holdings announced its plans to re-launch Alcatel-branded handsets in the China market before the end of this year. With Alcatel-Lucent (ALU) recently signing a cooperation agreement with RIM (Research in Motion), (RIMM) the upcoming Alcatel-branded handsets will include a Blackberry-enabled model. TCL reported a 30 percent growth on year in its handset shipments to 3.6 million units in the third quarter this year. The shipments include the 1.2 million sent to the EMEA (Europe, the Middle East and Africa) markets. LTC looks to a 44 percent sequential growth in the fourth quarter.

Software

• Intel (INTC) announced that its global investment business entity will invest US$10.5 million into Zhejiang Supcon Technology Company to provide optimized solutions for China. Intel said the investment will be coursed through its global investment business entity. Under the agreement, the two companies will work together to develop and promote innovative industrial automatization solutions based on Intel's technology in China. In addition, Intel will help Supcon build some channels out of China as well business relations with companies from other industries.

• China TransInfo Technology (CTFO.OB) announced that it has entered into a solution partnership with Oracle (ORCL). Under the alliance, Oracle is expected to provide China TransInfo with all Oracle products at discount price and technical support. Part of the agreement will see the two companies periodically conducting transportation segment channel conferences to discuss share market and client resources. According to Chin TransInfo, the solution partnership is seen as boosting its brand recognition and profile in the industry at the same time helping them both to enter the GIS marketplace in the country.

• AsiaInfo (ASIA) reported for the third quarter period ended September 30, 2007, a 17 percent growth in its revenue to US$32.4 million. The company said its total operating expenses for the third quarter of 2007 went up 19 percent year-over-year to US$13 million. As of September 30, 2007, AsiaInfo had cash and cash equivalents, restricted cash and short term investments totaling US$174.4 million.

Hardware

• Amoi reported a total loss of 109.9 million yuan (US$14.7 million) in the third quarter, compared to the 13 million yuan (US$1.7 million) profit it posted in the same period of last year. Amoi attributed the results to intense competition in the market and among the different brands. Given this performance and even as it looks to an improvement of the operations in the fourth quarter, Amoi forecasts a net loss of profit for the full year of 2007.

• For the second fiscal quarter ended Sept. 30, 2007, Lenovo Group (LNVGY.PK) reported a 20 percent rise in its consolidated revenue, year over year, to US$4.4 billion. Lenovo PC said that for the third consecutive quarter, its PC shipments posted a year-over-year growth of 23 percent, which is beyond the industry's average growth rate of 15.7 percent. Lenovo Greater China posted a year-to-year 26.5 percent to US$1.8 billion in consolidated revenue in the second quarter. Lenovo said its China business accounted for 41 percent of total revenue in the quarter. As of Sept. 30, 2007, Lenovo’s net cash reserves totaled US$1.7 billion.

• Suning, a Chinese electronics retailer, revealed its decision to enter into a strategic partnership with Acer for the computer manufacturer to bring its products to about 200 Suning stores in Chinese mainland before the end of this year. Under the alliance, Acer said it will work with Suning to explore China's PC market. Acer said it aims to sell 150,000 Acer computers through Suning stores next year. As part of the agreement, Acer has given Suning the exclusive rights to sell Acer's Exttensa series in China.

Telecommunications

• China Netcom (CN), one of the leading telecommunication service providers in China, announced the opening of its European operation in London. China Netcom’s senior vice president called the European office as “a window for future cooperation” with its European partners. Before its European branch was opened in London, China Netcom has set up its branches in Hong Kong, the U.S., Germany and Japan.

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