Chinese Tech Stock Weekly Summary (6/16 - 6/22)

by: IRG Ltd

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

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  • (NASDAQ:SOHU) announced that it had got the Internet broadcasting right of the 2008 Beijing Olympic Games under a cooperative agreement with China Central television [CCTV], the official broadcaster of the Olympics. Sohu has by far been the first Chinese Internet portal that has gained the broadcasting right. It will broadcast the opening ceremony and all games of the Olympics in the form of live broadcast and video on demand. During the course of the Olympics, it will broadcast 3,800 hours of video programs with the aid of
  • said online advertising revenue growth may slow in 2009 to half this year's pace as sales ease after the Olympic Games, which start in August. Sales of online display ads are expected to increase 20 percent to 30 percent in 2009, compared with a projected growth rate of more than 40 percent this year. Sohu shares have more than tripled in the past year as the company's sponsorship of the Beijing Olympics attracted higher advertising spending from customers including Samsung Electronics Co. and Adidas AG. The Beijing-based business's ``Tian Long Ba Bu'' online game also helped bolster earnings.
  • Registrations for Internet addresses ending in China's ".cn" have surpassed those for the global ".net," showing the continued rapid rise in Internet use in the communist nation. A study by VeriSign (NASDAQ:VRSN), which runs the ".net" databases and other core directories for helping computers find web sites and route email, found that ".cn" overtook ".net" sometime in the first quarter of 2008. VeriSign did not provide registration breakdowns but said ".cn" registrations grew 23% from the previous quarter and were triple those in the same period in 2007. The organization that runs Germany's ".de" domain pegged ".cn" registrations at 11.8 million and ".net" at 11.6 million as of May. The findings come as China reported that the number of Internet users there has soared to 221 million, by some measures tying the US online population as largest in the world.


  • Mobile-phone sales in China grew the slowest in four years as consumers donated to relief efforts for the Sichuan earthquake. Sales gained 8.7 percent in May from a year earlier, the slowest rate since 2004 and less than half the 18.4 percent increase recorded for the first four months of this year. The impact of the Sichuan earthquake may continue to hurt sales into July. Demand may not recover until September, after the Beijing Olympics.


  • SingTel is in talks with operators in China about investing in the world's biggest telecoms market, which is being overhauled and opened to foreign investors. The restructure opens the door to foreign investors who have been restricted to taking small stakes, such as Vodafone's (NASDAQ:VOD) 3.3 percent investment in China Mobile Ltd. (NYSE:CHL). China has about 575 million mobile subscribers, and adds some 4 million new users every month. Mobile penetration stands at slightly above 40 percent. SingTel was considering investing in fixed-line operator China Telecom (NYSE:CHA) although there have been no formal talks. China Unicom (NYSE:CHU) early this month paid US$24 billion for a fixed-line rival and sold a network for almost US$16 billion as part of the industry reshuffle.
  • Telefonica (NYSE:TEF) announced its plans to acquire a 10 percent stake in wireless operator China Unicom, one of the two mobile phone operators in China after the country's telecom restructuring. The company presently owns a 7.2 percent stake in fixed-line operator China Netcom (CN-OLD), which will be diluted to about 3 percent once China Unicom acquires China Netcom for US$24 billion this year. Fixed line operator China Telecom will acquire Unicom's mobile-phone assets based on CDMA technology for more than US$15 billion. Last month, China announced a telecom restructuring plan which will result in three groups based around China Mobile, China Telecom, and China Netcom in the world's largest telecom market.
  • Huawei Technologies said it expects its contract sales in Asia Pacific, excluding China, to hit US$3.9 billion this year as regional operators upgrade their networks. Shenzhen-based Huawei, which competes with cross-town rival ZTE Corp. Its contract sales in the region rose to US$2.5 billion in 2007, versus US$2 billion the previous year. In addition, Huawei is looking for a buyer for its growing terminal business. Carriers AT&T (NYSE:T) and Vodafone (VOD) and private equity firms including Blackstone (NYSE:BX), TPG and Kohlberg Kravis Roberts have been reported as possible buyers of a 50% stake in the handset business. Meddy Lu, director of Huawei’s terminal division, said the company had appointed Morgan Stanley (NYSE:MS) to handle the possible sale of the group. The handset business was in good health, accounting for about 10% of Huawei’s total revenues. Huawei shipped 30 million handsets and terminal cards up to May 2008, generating revenues of US$1.8 billion. Last year the Chinese vendor sold 40 million handsets and modem cards, worth US$2.6 billion.
  • China's TD-SCDMA Industry Alliance revealed that 38 TD-SCDMA terminals have obtained network access licences from the Ministry of Industry and Information. The 38 TD-SCDMA terminals come from 21 companies. Apart from domestic telecommunications firms like Datang, Lenovo (OTCPK:LNVGY) and Huawei, three cell phone models from Motorola (MOT) and Samsung have also obtained licences.
  • Alcatel-Lucent (ALU) announced that its Chinese subsidiary Alcatel Shanghai Bell Co., Ltd. has signed a cooperation framework agreement for 2008 with China Mobile on mobile communications equipment and services with contractual value of US$1 billion. Alcatel-Lucent will offer China Mobile mobile core network equipment, wireless network equipment, TD-SCDMA equipment, application platforms, transmission equipment, IP routers and the relevant specialized services.
  • Datang Mobile Communications Equipment Co., Ltd. put up for sale on the China Beijing Equity Exchange the 32.11 percent stake that it holds in Beijing T3G Technology Co., Ltd. for 122 million yuan (US$17.7 million). With a registered capital of US$42.01 million, T3G Technology mainly develops and manufactures multi-mode chip sets and associated software, however the company has been incurring huge losses for some time now. Apart from Datang Mobile Communications Equipment, the company's other shareholders are NXP Semiconductors with a 42.7%, Samsung Electronics with a 16.91% stake and Motorola with 8.28% equity.
  • China Telecom (CHA) kicked off a bidding fight for 574,000 IPTV (Internet Protocol Television) terminals on June 13, 2008. China Telecom will procure 536,000 standard definition terminals and 38,000 high-definition terminals, both of which are coded with H. 264. Under the framework agreement signed by China Telecom and suppliers, China Telecom's provincial branches will purchase the devices in accordance with their demands. The bidders should be terminal providers that took part in China Telecom's ongoing IPTV V2.0 platform test and their products should support the IPTV V2.0 platform. The fight is part of its efforts to unify the standards of terminal providers and system operators and stir competition among terminal manufacturers so as to cut cost.
  • Telecom Group, parent of China Telecom, is seeking to offload 30 percent of its wholly owned hotel subsidiary as it sets about acquiring a mobile network from China Unicom Group for 66.2 billion yuan (US$10 million). The mainland's largest fixed-line operator is putting up a 30 percent stake in Tong Mao Hotel Holdings for sale with an asking price of 731 million yuan (US$106.2 million). Tong Mao is involved in hotel and property management with net assets of 1.843 billion yuan (US$268 million) and operating 11 hotels in seven provinces as of last year. Of the Tong Mao hotels, six are of four stars in Shanghai, Nanjing, Yangzhou, Jiejiang, Hefei and Guangxi, three are of three stars in Jiejiang and Shaanxi, and two are of five stars in the Xinjiang Autonomous Region.
  • China Mobile decided to strengthen its promotion on the TD terminals before the opening of the 2008 Beijing Olympic Games. In line with that, sources at ZTE Corporation disclosed that China Mobile has increased the volume of its second-phase TD terminal tender from 100,000 to 200,000 units. On February 18th, 2008, China Mobile invited tenders for 60,000 TD mobile phones and 15,000 data cards as the first phase of this project. After TD mobile phones went in commercial use on April 1st, the company has already put six mobile phones and two data cards on the market.
  • China Unicom released its user data for May. Data shows that the company's GSM mobile phone users increased by 1.1 million units in the month, binging the total to 126.5 million users, and that the newly-added CDMA users stood at 55,000, pushing the total up to 43.15 million users. The company estimates that its GSM users will increase by 6.0 million in 2008, with the contract and pre-paid users accounting for 65.2 million and 61.3 million respectively, while its CDMA users will expand by 1.226 million, with the contract and pre-paid users to make up 39.9 million and 3.3 million respectively.

Media, Entertainment and Gaming

  • Shanda Interactive Entertainment (NASDAQ:SNDA) recently purchased 1,200 servers from IBM and HP. Shanda is one of China's first and largest internet service providers of Dynamic DNS servers. The company has so far set up almost 20,000 servers in China, with the internet trunk bandwidth at 80GB and the total investment at 400 million yuan (US$58.1 million).
  • The Administration believes that the Olympic Games will be a major factor behind the development of the field and that the total number of users will reach and even exceed 10 million in 2008. By the end of 2007, China's mobile television users had soared from less than 1 million in 2006 to 8 million, shows the 2008 China Broadcasting, Film and Television Industry Development Report released by the Development Research Center of the State Administration of Radio, Film and Television. introduced mobile television programs on December 11th, 2006, with the registered users from China Mobile and China Unicom totaling 4 million at the end of 2007.
  • Zhang Miao, chairman of Beijing Gehua CATV Network Co., said that the company will focus on expanding its network in 2008 and plans to lay 500km of underground optical cables. This will be used to establish new and re-construct its bi-directional network for 500,000 households and to introduce digital televisions to 700,000 households so that it may bring its total up to 1.9 million households. In addition, the company will establish a digital television interactive application and support platform and will start testing it soon. Gehua CATV Network's optical nodes in Beijing have now exceeded 10,000, soaring by more than 200 percent over 2006.
  • The9 Limited (NASDAQ:NCTY), the licensed operator of World of Warcraft [WoW] in Mainland China, will issue and promote WoW-themed co-branded credit cards in partnership with China Merchants Bank Co., Ltd. The9 announced the news with CMB, and Blizzard Entertainment, the developer of the massive multiplayer online RPG, saying that the three parties would cooperate in brand and marketing, to attract more players on the strength of their own brand reach. A set of credit card, including four pieces, features images of different characters in the game, and can be collected by players, or used to purchase, charge, and recharge their top-up cards. With preferential derivative products and automatic account recharge function, such credit cards are an extension of CMB's All in One Net service, providing convenience for players.
  • Hurray! Holding Co. (HRAY) announced that its President, Chief Operating Officer, and acting Chief Financial Officer Sean Wang will, effective June 20, 2008, resign from his position. Following his resignation, Ms. Xiaoqing Guo, current Vice President and Financial Controller of the company, will assume the role of acting Chief Financial Officer of the company.


  • Hewlett-Packard (NYSE:HPQ) opened a global testing service centre in the Xiyong Micro-electronics Industrial Park in China's city of Chongqing, Sichuan Province. Robb Rasmussen, vice president of HP, said this centre will hire 2,000 test engineers in three years to provide non-stop and comprehensive software testing service to customers. The software development unit of this centre will have around 5,000 staff by 2012. The centre will become HP's base to attract Chinese and international software professionals.
  • China may be about to see the opening of its first official Apple Store as the firm prepares to launch the iPhone in the country. Apple (NASDAQ:AAPL) currently distributes its products in China through a network of several hundred licensed dealers. Some other products, such as the original iPhone, are widely available as unofficial grey market imports. An Apple dealer in Beijing told local news service Sina that Apple plans to open a 1,000 square metre store on three floors in a central Beijing shopping centre and office development. While the dealer did not provide an opening date, other businesses in the new building are expected to open during July and August.