Chinese Tech Stock Weekly Summary

by: IRG Ltd

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


Google Inc. (NASDAQ:GOOG) aims to become a market leader in China's Internet-search market in about five years. Google also is exploring investments in Chinese companies that focus on social networking and mobile Internet as part of its strategy to expand in China. Google has gained share and overtaken Alibaba Group's Yahoo China (OTC:ALBCF) but continues to lag behind (NASDAQ:BIDU). Google, based in Mountain View, California, will eventually become the leader in China. Google accounted for 26 percent of China's Internet-search revenue in the fourth quarter, up from 17 percent a year earlier. Market leader's share of the market rose to 60 percent from 58 percent.

Market hearsay goes that plans to set foot in online game operation, and will soon launch several game products. The search engine reportedly will make full use of its platform and online game channel to co-manage online game services with a NASDAQ-listed Chinese online game company. Baidu’s participation will set great influence on the online game market, supported by its high market coverage rate, rich resources and advanced promotion competence. Scale of China’s online game market amounted to 12.8 billion yuan (US$2 billion). It is expected to expand more than 20 percent annually in the following four to five years to hit 40.1 billion yuan (US$6 billion) in 2011.


Cisco Systems (NASDAQ:CSCO) appointed Jim Sherriff, senior VP of global operations, to the newly created position of chairman of Cisco China, and launched new public-private collaborative programs in the fast-growing nation. In his new role, Sherriff is responsible for implementing the company's China strategy, which includes research and development, education, procurement, investment, and training. Sheriff and Randy Pond, executive VP of global operations, will co-chair the Cisco China Strategy Board. Other board members include Owen Chan, president of Cisco Asia Pacific, and Thomas Lam, president of Cisco China. The announcement was held at a Beijing news conference, where the CEO also announced an expansion of agreements with the Chinese government.

Walt Mayo, Dell's (NASDAQ:DELL) global vice president and general manager of its Asia Pacific Region's Consumption Business Department, confirmed that the company will join hands with Hisap High Technology Corporation to enter the retail market. To this end, Hisap will introduce a series of high-quality Dell notebooks and desktops with higher price-to-performance ratio and lower prices during the May Labor Day holiday period.

Dell Inc., the world's second largest personal computer manufacturer, will expand sales partnership with Suning Appliance Co., China's second-largest retailer, in addition to its previous exclusive tie-up with Gome Electrical Appliances Holding (OTC:GMELF), in a bid to boost earnings outside the U.S amid domestic economic recession. Dell will sell laptops and desktops through Suning stores, said its global operating manager Michael Tatelman, adding that the company also plans to team up with several small-sized Chinese retail chains in a short term to enhance a fleet of 12,000 stores in the world's second-largest PC market. Dell began selling products through Gome stores last year. It is eying to more than double the number of Gome stores to 900 this year, aims more than 50 percent of sales from outside the U.S.

HP (NYSE:HPQ) has launched a large range of commercially-used printing solutions to help medium and small enterprises in China to improve their marketing efficiency, increase their production and more efficiently manage their printing environment. HP has launched more than 25 kinds of brand-new network printing tool based solutions, and these optimized printers are suitable for making any kinds of marketing materials, business sponsorship documents and daily documents in a fast and cost-effective manner.

Mobile/ Wireless

GrenTech Corp. Ltd. (NASDAQ:GRRF) recorded a net profit of 82.5 million yuan (US$11.3 million) for 2007, tumbling 44.6 percent on an annual basis. The annual revenue was 979.3 million yuan (US$134.3 million), growing 17.59 percent year-on-year. A 39.9 percent increase in costs was behind the drop in net profit, which was driven primarily by a large sales volume with a decreased average selling price for wireless coverage products in 2007. Contracts with China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) increased revenue significantly due to the operators' wireless coverage expansion, while China Telecom and China Netcom reduced their PHS (personal handyphone system) network coverage expenditures, which had a negative impact on the company's revenue in 2007.

Chinese handset manufacturers Gionee and K-Touch unveiled several analog TV mobile phones at a conference in Shenzhen, while an analyst from Sino Market Research Ltd. said that the analog TV function will become a major selling point for mobile phones in China this year. Gionee plans to launch several more models of analog TV mobile phones this year, including the A11, A12 and A16, he said. They will all have large-sized screens, and the A16 will have a stylish design to target women users. The A10, powered by Telegent Systems' single-chip mobile TV receiver, will be sold through Acorn International's (NYSE:ATV) TV shopping platform at the end of this month at 1,680 yuan (US$240.30) for retail.

Gionee Communication Equipment Co. Ltd. plans to launch several "quasi-3G" mobile phone models with video chat functionality this year. These mobile phones will allow users to chat while seeing each other's video images, like they do using Tencent's (TCEHF.PK) QQ instant messaging tool. Initially we will allow users to type messages, and later on we will provide a voice chat function. China Mobile, the largest mobile operator in China, launched commercial trials of 3G services in eight cities utilizing China's homegrown TD-SCDMA standard on April 1. Six TD-SCDMA mobile phone models, supplied by ZTE, Samsung, LG, New Postcom, Lenovo and Hisense, are now available for sale. Video telephony is a typical function provided by these 3G phones.

Mobile phone users in Shenzhen city urges the domestic (China's homegrown 3G technology) network to connect with Hong Kong's 3G network as soon as possible. The difference in 3G systems makes Hong Kong's 3G mobile phones inapplicable in Shenzhen and vice versa. Hong Kong and Shenzhen users expect the two networks to connect soon in order to satisfy daily communication demand. Although China Mobile has launched TD-SCDMA business in Shenzhen on trial basis, most users are not eager to buy 3G mobile phones due to instable technologies and high fees.

Chinese handset manufacturer Beijing Tianyu Communication Equipment Co. Ltd., also known as K-Touch, shipped 14 million mobile phones to distributors last year. In addition to selling mobile phones in China, K-Touch also exports its products to countries in Southeast Asia, South Asia, Eastern Europe and Central Europe through partnerships with distributors in those countries. Overseas markets accounted for approximately 10 percent of K-Touch's revenues in 2007, and the company aims to increase the percentage to 20 percent this year. Because China Mobile will not have wide TD-SCDMA 3G network coverage in China 2008, K-Touch received a license for the production of GSM and CDMA mobile phones from the government. It launched mobile phones for its own brand K-Touch.

Mainland set-top box manufacturers are scrambling to deliver advanced products domestically, as demand for higher-performance digital television broadcast services heats up before the Beijing Olympic Games. The country's rapid conversion from analogue to digital broadcasting has led set-top-box makers to increase production to meet the requirements of service providers across the mainland. The mainland's cable television broadcasters had made implementation of high-end digital cable set-top boxes a priority in anticipation of existing and newly signed domestic subscribers watching the Games this August on digital television sets. Beijing-based CCID Consulting estimated there were 27 million new digital mainland television users last year, of whom 12 million were cable digital television subscribers.

Media, Entertainment and Gaming

Giant Interactive (NYSE:GA) has launched its much-hyped new game Giant Online. The success of the offering will be critical to the future of the company. The game took 21 months to develop with a team of close to 200 developers. So far, US$5 million had been spent, said Eric He, chief financial officer of Giant, and a further US$5 million to US$10 million would be invested in the next five years to enhance the game. Giant shares surged 22 percent in the two trading days after the game was launched on March 28. The game is free to play, but taking shortcuts to gain skills and experience costs cash. Essentially, players pay to cheat. That helped Giant boast a net margin of 74 percent last year.

Growing mainland consumption has become a good enough reason for retailers, investors and media firms to consider expanding into television home shopping. But building trust between customers and retailers is crucial to whether television shopping succeeds or fails. Still in its developing stage, television shopping only makes gross sales of less than 7.02 billion yuan (US$1 billion) per year, compared with the annual retail sales of 8 trillion yuan last year.

Chinese online game developer Inc. (NASDAQ:SOHU) was to start an open beta test of Tian Long Ba Bu (TLBB) in Hong Kong and Taiwan on April 16, 2008. Some Taiwan players have participated in a previous closed beta test of the martial art massive multiplayer online RPG. TLBB was launched as a proprietary online game of Sohu on May 9, 2007. Since November 1 2007, when the second expansion pack of the game was released, its peak concurrent players have topped 500,000, surging 20 percent from earlier. Online market research expert iResearch points out that martial art is popular in Taiwan and Hong Kong, so TLBB is very likely to be warmly welcomed in the area.


Ninetowns Internet Technology (NASDAQ:NINE) announced that in conjunction with its annual testing for the impairment of long-lived assets and goodwill in accordance with relevant accounting standards, the Company expects to record a non-cash impairment charge of up to 197 million yuan (US$42 million) against its long-lived assets and goodwill. Of this impairment, a significant amount is expected to be charged against goodwill that was derived from the acquisition of minority interests in the Company's business-to-government ("B2G") business during its pre-IPO restructuring in June 2004. The Company is now in the process of finalizing the annual testing with its advisors, including an independent third-party valuation specialist.


China Unicom’s subscriber base stood at 167 million at the end of March, up 1.63 million from end-February. Subscribers for its global system for mobile (NASDAQ:GSM) services rose 1.32 million over the month to 124 million. Subscribers for its code division multiple access (OTCPK:CDMA) service totaled 42.8 million at the end of March, up 301,000 over the previous month.

The China Communications Standards Association [CCSA] announced it is developing standards for integrating different communications channels into unified platforms, an official from the industry association said. CCSA has shifted its focus from traditional telecom services to Internet-related convergent services. Currently, the company is researching standards for unified communications. Unified communications refers to the integration of communication channels, including telephone, mobile phone, fax, PDA and others, to provide users with a unified interface and experience.

ZTE Corporation of China (ZTEOF.PK), an advanced telecommunication systems and equipment company, is actively promoting its WiMAX products in both developed and emerging markets. The company's WiMAX product line global marketing director Yuan Wei predicts WiMAX revenue would be close to those of CDMA products in 3 years. WiMAX product application readiness is 4 to 5 years ahead of those of Long Term Evolution so many WiMAX end-products will be ready for commercial use in 2009. According to Mr. Wei, currently the market does not understand WiMAX very well but the global WiMAX market is expected to reach US$10 billion in 2009, in which equipment accounts for US$4 billion, and market value is expected to rise to US$32 billion and equipment to increase to US$16 billion in 2012.

China Mobile (CHL) chairman and CEO Wang Jianzhou say Apple Computer (NASDAQ:AAPL) of the U.S. is strongly interested in introducing the handset iPhone to the market of China, but both sides need to discuss more cooperation details such as operation mode. On China Mobile's foreign expansion, the company tends to own international mobile operators as a small equity shareholder to gain related experience. Although taking over another company by way of shareholding could lead to fast expansions, China mobile prefers a steady pace. Also the takeover costs of mobile communication operators of world fame may be too high for the company.

MediaG3, Inc. announced that it is entered a partnership with Academy of Broadcasting Science [ABS], a division of China central government State Administration of Radio, Film and Television [SARFT]. The two entities plan to roll out mg3 wireless for interactive TV coverage and high speed Internet China. Broadband wireless technology has tremendous market potential in China, especially in vast regions where cable coverage is not feasible.

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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