Chinese Tech Stock Weekly Summary

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

Internet

• The9 Limited (NCTY) reported that its chief financial officer and senior vice president Hannah Lee will resign at the end of February 2008. The Chinese Internet gaming operator said it has initiated a search for an individual to assume the position about to be vacated by Lee. The9 is expected also to announce the appointment of an acting chief financial officer while no person has yet assumed the position.

• Microsoft (MSFT) MSN announced the launch of the Chinese-version of its Live Map search in a bid to further promote its Live Search Internet strategy in China. Microsoft's Map Search is a response to the demands from the market, and contains information on 114 Chinese cities, with a focus on bus transfer routes during the initial period. The senior director of Microsoft's Virtual Earth team and person in charge of Microsoft's local search service said that Microsoft's success in local search relied on complete localization of the content, localized development and application, as well as close cooperation with local business partners. According to the China Network Economy Research Center, the market value of China's map search will hit 500 million yuan (US$69.3 million) in 2008 and is seen as reaching 1.5 billion yuan (US$208 million) in 2010.

• Baidu.com Inc. (BIDU) announced that it has initiated the offering of Japanese-language services, marking the first overseas venture of the China’s leading Internet search company. Baidu’s market share in China is about 70 percent, surpassing No. 2 Google (GOOG), with an advertisement driven business model. Baidu said it is in talks with Japanese businesses in the mobile phone industry. The company’s CEO, however, did not give specific company names. Industry analysts see Baidu as facing difficulties in getting a significant piece of the Japanese market, citing the factor of popularity as one limitation. A senior analyst at Japan Research Institute quoted that it is important for Baidu to raise its brand awareness and the need for Baidu to form a relationship with content providers to succeed in Japan and that Baidu must specify targets and create content for them in order for the company to be seen as different from the other search engine firms.

Media, Entertainment and Gaming

• According to media sources, Dentsu, the largest advertisement company in Japan, is seeking to cooperate with Focus Media of China (FMCN) to establish an online advertising firm in the country. Sources said the joint venture is going to be named Dian Zhong Digital. The joint venture is expected to be set up in Beijing at the end of March with a total registered capital of US$9 million. Under the agreement, Dentsu will take 67 percent of the stake in the new company and Focus Media's affiliate Huaguang Advertising (Hong Kong) the remaining 33 percent. The agreement will also see Dentsu appointing a president for the company to which it will also integrate its existing online advertising service in Beijing and Shanghai. The venture is expected to generate US$46.8 million in business revenue in the first year.

• CDC Games announced the promotion of John Huen to chief operating officer of CDC Games. CDC Games is a business unit of CDC Corporation (CHINA). Before assuming the position, Huen served as COO and general manager of Optic Communications, a subsidiary of CDC Games. Optic Communications was acquired by CDC Games in July 2007 and operates game titles including Shaiya Online, EVE Online, Shine Online and MIR III. With the position, Huen was responsible for the launch and operation of Special Force, one of the first free-to-play, pay for merchandise first person shooter games in China.

• ROK Entertainment announced its acquisition of a strategic stake in Matchday Entertainment Limited, a China-based subsidiary of Asia Poker Limited, to deploy the first 3D online poker in China. Matchday's 3D service is tailored specifically to the Chinese market, with only players from China allowed to participate on this platform. Local customer service personnel will also be available to provide full player assistance.

• China Finance Online Co., Limited [CFO] (JRJC), a leading financial information, data and analytics provider in China, announced its entering into an alliance agreement with China Telecom (CHA), the largest wireline telecommunications and broadband services provider in China. The agreement is aimed at making available a variety of financial information services to more than 40 million broadband users across China Telecom's Internet platform and offline distribution network. Under the agreement, CFO and China Telecom will establish and maintain a co-branded financial channel on China Telecom's broadband portal Vnet, one of the most visited websites in China, that also serves as the payment platform for China Telecom's broadband subscribers. CFO will provide accurate, timely and comprehensive financial content to JRJC-Vnet Finance, the co-branded finance channel, and develop subscription-based financial information and analytical products dedicated to China Telecom's broadband subscribers. The agreement will see the two companies sharing the revenues according to the agreed-upon scheme under the alliance agreement.

Mobile/Wireless

• Shanghai announced that it has entered into a wireless city agreement with Jiading District. Dubbed the Shanghai Jiading Wireless City Cooperation Agreement, the agreement is considered the first wireless city program signed by the government. It also marks the formal launch of Shanghai’s program to become a wireless city. Under the deal, China Comm will be responsible for the construction of about 200-300 Wi-Fi base stations around the district. Other cities – Beijing, Tianjin, Wuhan, Hangzhou and Shenzhen – have expressed their plans to build their own city-wide Wi-Fi networks.

Software

• RedHat (RHT), one of the leading open source solution providers, announced its opening of an R&D center in China, and of the Open SystemC Initiative, the company’s new program. The company said it looks to the R&D Center in China as participating in the company's global open source programs as well as serving as an important platform to promote China's open source environment. As part of the initiative, RedHat will offer support to the research of independent software vendors and development of enterprise level application solutions in China.

Hardware

• IBM and Lehman Brothers jointly announced that they have invested some US$20 million in VeriSilicon, a Shanghai-based original equipment manufacturer for integrated circuit design. The companies said the investment will be done through the China Investment Fund, a commercial alliance co-established by IBM and Lehman Brothers in October 2006 to promote Chinese enterprises' financial and business shift through innovative services and technologies. VeriSilicon will utilize the funds to speed up the development of its system on chip platform and expand its special IC turn-key service.

• Intel announced that it has entered into an agreement with Shenzhen-based Founder Microelectronics on equipment sales and technology transfer. Under the agreement, Intel will provide the second-phase manufacturing equipment and technology to Founder's round silicon chip factory located in Shenzhen. The company will also provide training to Founder's manufacturing and project designers. The agreement includes a technology transfer agreement that involves the transferring and procedure permission of many of Intel's technologies, which can be used for making highly reliable micro-controllers, CMOS (complementary metal oxide semiconductor) and BiCMOS (the integration of bipolar junction transistors and CMOS technology). The companies did not disclose the details about the funds involved in the agreement.

• Some 300 electronics manufacturers announced their setting up of an alliance at the same time, jointly issuing a call for upgrades in the electronics manufacturing industry. The alliance includes Foxconn (FXCNF), Huawei and ZTE. The alliance is aimed at providing a series of preferential policies for member companies. According to the deputy director of the China Electronics Enterprise Association, the alliance will work on making an industry standard, a unified catalog, and a quality control procedure to push and test the technology innovation of the industry. Members of the alliance will use a unified logo in a bid to project a trustworthy image for consumers.

Telecommunications

• China Telecom announced that for the year 2008, it aims to organize a series of organizational reforms. The reforms will begin with the review and approval of an agreement regarding its merger with 20 wholly-owned companies. The announcement also said that China Telecom’s affiliate North Telecom Co., Ltd will be changed into North Telecom Business Department under China Telecom's direct control. The company said it also plans to restructure its marketing department with the aim of widening the function of the department. This restructuring, according to the company, will be followed by the formation of a government and enterprise client department to focus on the following: a comprehensive information service, an Internet and value-added service department and a marketing department.

• ZTE Corp. announced that it will issue 4 billion yuan (US$555 million) worth of convertible bonds in a bid to raise funds for 11 projects. The projects include the development and production of TD-SCDMA equipment. With the plan, ZTE will offer 40 million five-year bonds, each with a nominal value of 100 yuan (US$13.8), to existing A-share holders, and will offer warrants to bond subscribers. The Chinese telecom equipment manufacturer said the proceeds from the proposed issuance of convertible bonds will be used to fund the R&D and production of TD-SCDMA highspeed downlink packet access [HSDPA] system equipment and TD-SCDMA terminal products, as well as the commercialization of TD-SCDMA upgrade technology and RFID (radio frequency identification) systems, the development of handset platforms, the construction of next-generation wireless broadband software radio platforms, the industrialization of next-generation IPbased multi-media service networks and the industrialization of next-generation optical network transmission equipment. The announcement placed the total amount needed for these projects as reaching 6.5 billion yuan (US$908.9 million).

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

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[User 145021:]

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2008 Jan 30 09:46 AM