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Matthew Burlage is the founder and Chief Executive Officer of IRG and has primary responsibility for the firm’s strategy and financial advisory business across the Asia Pacific region, including Japan. Matt is also responsible for the firm's proprietary investments. Matt has spent the last... More
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  • IRG Technology, Media and Telecommunications Weekly Market Review (Week of 25 – 31 Jan 2010)
    Japan
    Internet
    •         Rakuten Inc. will launch a virtual shopping mall targeting Chinese consumers through a joint venture with Baidu Inc. The major Japanese electronic commerce firm will team with Baidu to set up a joint venture in Beijing as soon as they receive government approval. The joint venture will be 51 percent owned by Rakuten and the rest by Baidu. The Internet shopping mall is expected to open for business in the second half of this year, signing up online merchants ranging from individuals to major brands. While the primary target is Chinese consumers, the virtual shopping center will likely link up with Rakuten's online mall in Japan. This will enable domestic merchants to sell goods to both Chinese and Japanese consumers perusing the Chinese virtual mall. The Chinese Internet population reached around 384 million, more than triple that in Japan, at the end of 2009.
    •         Yahoo Japan Corp. had a 9 percent rise in group net profit for the fiscal third quarter ended December, helped by revenue growth in its business services segment. For the October-December period, its net profit climbed to 20.86 billion yen (US$231 million) due to sales growth boosted by a year-end sales campaign on Yahoo! Shopping. Its operating profit for the three months also boosted to 36.44 billion yen (US$404 million). The company expects net profit to range to Y82.47 billion. The firm's earnings are based on Japanese accounting standards.

    Mobile/ Wireless
    •         Willcom Inc. will likely file for bankruptcy as part of a restructuring set to involve investment from a state-backed fund and Softbank Corp. Willcom, majority owned by U.S. buyout firm Carlyle, has been weighed down by heavy debts and has been struggling to expand its subscriber base in the country' saturated and fiercely competitive wirelss market. The company is in the final stages of talks on the plan with the state-backed Enterprise Turnaround Initiative Corp (ETIC) and could file for court protection from creditors next month. The ETIC and Softbank would then follow the filing with an announcement of their interest to assist Willcom in its restructuring. The contents of the report were not something it had announced and that it has been in negotiations on a debt restructuring method known as alternative dispute resolution.
    Semiconductor    
    •         Hitachi Ltd.'s semiconductor-related subsidiaries rebounded in the April-December term on better-than-expected orders, while its medical equipment unit was hurt by sluggish sales in the key U.S. and European markets. Hitachi High-Technologies Corp. expects its group net loss to total 5.3 billion yen (US$59.1 million) for the full year ending March 31. The upgrade was prompted by a sharp rise in orders from leading Taiwanese manufacturers for semiconductor analysis equipment. The firm logged an operating profit in the October-December period, its first black ink in three quarters.
    •         NEC Electronics Corp. had a quarterly net loss that was 29 percent smaller than a year earlier, as the struggling chipmaker cut spending on research and production. With better demand for microcontrollers used in cars, orders are gradually improving after sliding amid the global economic slowdown, although they are still expected to fall short of their April-September 2008 levels. NEC Electronics makes chips for Toyota Motor's Lexus car and Nintendo's Wii game console. NEC Electronics had a 14.3 billion yen (US$160 million) net loss in October-December. Its quarterly operating loss was 41 percent. The company switched to Japanese accounting standards last month -- a move which has meant that analysts have yet to issue revised earnings estimates for the company. NEC Electronics has been struggling with its cutting-edge domestic factory running at roughly 50 percent capacity, but the usage rate will likely rise to 75 percent in January-March.
    •         Elpida Memory Inc. had its first net profit in nine quarters on a surge in DRAM prices. Elpida, which received an injection of public money last year, is scrambling to migrate to advanced chips to keep up to output hikes by bigger rivals Samsung Electronics Co. and Hynix Semiconductor Inc. The PC memory maker did not give an outlook, but expected its output in terms of memory capacity to stay flat or rise by up to 5 percent in the current quarter from October-December. It sprang back to a net profit of 21.05 billion yen (US$233 million) in October-December. Elpida also kept its capital spending plan at 60 billion yen for the year to March.
    •         Toshiba Corp. had a smaller-than-expected operating profit as rising materials costs and tumbling PC and TV prices outweighed the benefits of a chip price recovery. Toshiba, the world's No.2 maker of NAND-type flash memory chips after Samsung Electronics Co., earned an operating profit of 10.22 billion yen (US$113.6 million) in October-December. Toshiba, which supplies chips to Apple, kept its annual operating profit outlook at 100 billion yen (US$1.1 billion). Toshiba, which also owns U.S. nuclear firm Westinghouse, is fighting to clinch nuclear power plant orders, while it tries to expand in lithium-ion batteries and power grids to counter chip price volatility.

    Telecommunications
    •         Verizon Business has completed the latest Trans-Pacific Express submarine cable landing, in Shin Maruyama, Japan. This will allow Verizon's enterprise customers to take advantage of increased network capacity and additional diversity for their IP, data and voice communications needs. The newest landing is the sixth TPE submarine cable landing site on the 18,000 kilometre network system, which connects Japan to South Korea, Taiwan, Mainland China and the US. Verizon is the landing party for the US. This new link will enhance Verizon Business capabilities to reroute Asia-Pacific network traffic in the event of a major event, like an earthquake or typhoon, which could damage multiple undersea cables. Verizon Business was the first service provider to deploy seven-way diversity across the Pacific and will expand its current six-way mesh network to Japan to a seven-way mesh network.
    •         KDDI Corp.’s net profit for the fiscal third quarter was down 35 percent on year due to the introduction of discount packages for mobile phone handset users. Japan's second-largest mobile phone service operator by subscriber after NTT DoCoMo Inc. generated a net profit of 67.4 billion yen (US$747 million). The operator of au brand mobile phone services booked revenue of 862.2 billion yen (US$9.6 billion) for the three months. It gained a net 842,800 mobile phone subscribers during the just-ended quarter, bringing its total as of Dec. 31 to 31.39 million. But KDDI's discount packages caused a 6.8 percent on-year decline in average revenue per user. The company lowered its net profit outlook to 225 billion yen (US$2.5 billion) due to a special loss of 55 billion yen (US$609 billion) related to reforms and to writing off fixed line facilities.
    •         NTT DoCoMo’s revenues for its fiscal third quarter to December was down from 1.3 percent from a year earlier. Operating profit improved to 217.4 billion yen (US$2.4 billion), and net profit came in at 134.6 billion yen (US$1.5 billion). Wireless service revenues boosted 0.4 percent, while equipment sales were down 12.2 percent. The operator finished December with 55.436 million customers. Churn was at 0.45 percent for the quarter, versus 0.44 a year earlier. ARPU declined 4.5 percent year-on-year while minutes of use were roughly stable at 138 per customer. For the first nine months of the fiscal year, DoCoMo spent 484.5 billion yen (US$5.4 billion) on capital equipment. Operating cash flow was also down 5.7 percent.
     
    Korea
    Telecommunications
    •         SK Telecom missed market forecasts for its fourth-quarter income given higher marketing fees and a one-off loss from stake sales. The company is targeting higher annual sales of 13 trillion won (US$11.284 billion) this year, compared with 12.1 trillion won last year, with annual profit target also slightly higher than 2009. SK Telecom had its net profit reached 244.24 billion won (US$210.1 million) in the three months to December. SK Telecom may invest in Chinese entertainment Web site iFensi.com. SK Telecom is South Korea's largest telecom operator. Its Chinese investment subsidiary, SK Telecom (China) Holding Co. Ltd., has previously invested in the software, online gaming and media sectors.
    •         KT Corp.’s net profit increased 14.8 percent in 2009 from a year earlier to 516.5 billion won (US$448.6 million). Sales boosted 35 percent on-year over the cited period. Operating profit plunged 45 percent from a year ago, due to an increase in its personnel expenditure. KT went through a 16-percent job cut at the end of 2009. The company was aiming for a 30 percent rise in operating income for all of 2009. KT cut 5,992 jobs through a voluntary retirement scheme after accepting applications from employees who have worked for more than 15 years. The decision marks the largest job cut the company has made..
    Semiconductors
    •         Samsung SDI Co. missed analyst estimates for its net profit after prices declined and a stronger won eroded the value of its overseas sales. Fourth-quarter net income was 15.4 billion won (US$13.4 million). The company was projected to report profit of 58.4 billion won (US$50.3 million). Average prices of SDI’s rechargeable batteries probably declined 9.7 percent in the fourth quarter, while a 1.9 percent gain in the Korean won during the period reduced repatriated earnings from overseas sales. SDI will have its biggest annual profit since 2004 this year as demand for batteries used in notebook computers and mobile phones increases and its plasma screen business returns to profit.
    •         Creditors of Hynix Semiconductor Inc. have drawn no bidders for the company prompting them to consider other measures to sell their controlling stake in the company. The creditors put their 28 percent stake up for sale this month for the second time after a previous attempt to sell the stake declined through. Hyosung Group, the sole bidder for Hynix, dropped its bid in November 2009. 
    Wireless/Mobile
    ·          The demand for smartphones in the domestic market is expected to reach 4 million units in this year with bigger local carriers and handset vendors revising up their sales targets, the Korea Times reports. This represents an eight-fold rise from last year's 500,000 units. The local smartphone market share will reach 17 percent of the total in this year. Meanwhile, the mobile phone market volume for this year is likely to remain unchanged from last year at 23 million. The latest prediction is in sharp contrast from previous expectations. The local demand for smartphones in this year would be around 2 million at the most. The upbeat forecast is plausible, in light of the bullish market mood. SK Telecom aims to sell over 2 million smartphones in the country this year capitalising on those equipped with open-based and Google-powered Android models.
    Software
    •      South Korea and India plan to expand economic tie-ups in the information technology (IT) and software sectors to improve the global competitiveness of both countries. South Korean officials accompanying President Lee Myung-bak in India pointed out that Seoul's strength in IT-related hardware and New Delhi's leading position in the world's software industry can create positive synergy for future growth. South Korean companies such as Samsung Electronics Co. and LG Electronics Inc. are top competitors in the global IT sector, while the country's high-speed internet infrastructure is one of the best in the would. India is a software powerhouse, leading research and development in areas such as embedded software, and with companies like NASSCOM and Infosys making headway into the global IT business arena. The country is also a favorite outsourcing destination for multinational online companies seeking software support.
    •      LG Electronics Inc.’s operating profit in the fourth quarter of last year boosted sharply due to strong demand for its products. But its share value declined on concerns about decreasing profits in its handset business and its weak smartphone line-up could be outweighed by LG's expected increase in its global flat-screen TV market share. Operating profit came in at 446.7 billion won (US$382 million) in the three months to December, up more than four-fold from 101 billion won (US$86 million) a year earlier. Sales were up 6.8 percent from last year. The figures were consolidated, meaning they included the financial results of the company's overseas units. LG had its profits from flat-screen TV sales offset slow handset sales. Global shipments of liquid crystal display (LCD) TVs boosted 52 percent on-year to 5.5 million units on rising demand from developed countries.
     
    China
    Internet
    •         Oak Pacific Interactive's social networking site Renren.com had nearly 5 million daily mobile users in 2009, while mobile users uploaded 10 million photos and more than 200 million entries via Renren.com's wireless application protocol platform in 2009. Renren.com had more than 100 million registered users overall.
    •         Alibaba's online payment tool Alipay had a total of 270 million users by late 2009. Alipay had surpassed 200 million users by July and reached daily transaction volume of 1.21 billion yuan (US$177 million.
    Software
    •         Kingdee paid 20 million yuan (US$2.9 million) to purchase Jama IT. Jama IT has nearly 100 real estate clients, like Beijing Capital Development Holding Group and Shenzhen Huaqiang Holdings. This is Kingdee's eighth acquisition since it listed on Hong Kong's main board in 2005.
    Mobile/Wireless
    •         China's total users of third-generation mobile technology, which allows fast Internet access from mobile devices, reached 13.25 million at the end of last year. That included 5.51 million users of the locally developed 3G technology TD-SCDMA. China Mobile had 3.41 million users of the TD standard at the end of last year. Total TD users had exceeded 5 million at the end of last year. MIIT's data also imply China Telecom which doesn't publicly disclose a figure, had 5.0 million 3G users at the end of December. China Unicom had 2.74 million 3G users at the end of last year.
    •         According to a new report from Pyramid Research, China has a booming video gaming industry with mobile gaming revenue predicted to grow at a 51.5 percent CAGR between 2009 and 2014, reaching US$2.5 billion in revenue despite current market barriers. Apart from the growing game download business, the biggest opportunities in China reside in online multiplayer and casual mobile gaming, notes Luis Portela, author of the report; however, mobile gaming market development has so far been hindered by handset capabilities and data access costs. "Pyramid Research believes, however, that to meet demand and live up to its potential, mobile gaming in China needs more affordable data access, wider 3G coverage, and better handset gaming capabilities," says Portela.
    Telecommunications
    •         The users of China Telecom's CDMA services had topped 50 million by the end of 2009, doubling the figure over a year before. Terminals were originally the bottleneck that China Telecom faced after it replaced China Unicom as the CDMA network operator at the end of 2008. China's CDMA mobile phone sales topped 30 million, boosting 315 percent from 2008. The CDMA terminal market share meanwhile reached 22.7 percent. China Telecom will conclude in 2010 its subsidy to low-end CDMA mobile phones priced below 1,000 yuan and rather emphasize its promotion of mid-grade CDMA phones priced at 1,000-2,000 yuan. China Telecom will promote 3G Internet 4 channel mobile phones in the near term and explore the mid- to high-end market.
    •         China Unicom Ltd. expects its 2009 net profit to more than halve because a one-off disposal gain boosted its 2008 results significantly. China Unicom sold its code division multiple access mobile operations to China Telecom Corp. in October 2008, which generated an after-tax gain of 27.57 billion yuan (US$4 billion) for 2008. China Unicom had its 2009 results were hurt by high costs and expenses for its new third-generation mobile business.
    •         China Mobile has rolled out business-to-business services to corporate customers based on its electronic purchase platform. The telecom operator's active construction of an e-commerce platform suggests that e-commerce means a lot for carriers' future development. Such platforms indicate a company is capable of transforming from a basic telecom operator to a comprehensive information service provider; e-commerce could become the most profitable service of carriers in future. Take China Mobile as an example. The carrier has established a centralized purchase system within the group. By the end of 2009, the expenditure of China Mobile on procurement via tenders reached 251.2 billion yuan (US$36.8 billion). Meanwhile, it constructed an advanced B2B e-commerce system, which connects with over 300 partners, and has conducted online procurement of over 75 billion yuan.
    •         China's telecommunication industry generated 842.43 billion yuan (US$123 billion) in main business revenue in 2009, up 3.9 percent year on year. Wireless telecommunications contributed 60.43 percent of the revenue, while 27.77 percent of the revenue was from fixed-line business and 11.8 percent from data communications. The number of new mobile phone subscribers in 2009 surpassed 106 million, bringing total subscriber number to 747 million.
    •         The number of China's 3G users is expected to hit 170 million in 2010. The Chinese government issued 3G licenses to the country's top three telecom operators in January 2009. China Mobile, the country's largest telecom operator, was authorized to offer 3G services based on the home-grown TD-SCDMA standard. China Telecom runs 3G services based the U.S.-developed CDMA2000 standard across the country, while China Unicom has launched 3G services based on Europe's WCDMA standards. The three telecom operators have invested a total of RMB 160.9 billion in the 3G network in the past year, and built 325,000 base stations during the period.
    Media, Entertainment and Gaming
    ·          The Chinese online game operator Giant Interactive supported its star R&D team's consideration of setting up a subsidiary in the future. The team, which launched closed beta testing for its 3D web game "Longhun", belongs to Giant's southwest R&D center, which has sister R&D centers in Shanghai and Zhuhai. The move represents Giant's heightened efforts to launch new games to boost revenues. The company has been suffering diminishing revenues from its pillar game ZT Online, prompting it to seek out supplementary earnings elsewhere.
    Alternative Energy
    •      JA Solar assigned Dr. Peng Fang as chief executive officer as Baofang Jin, who will continue in his role as JA Solar chairman stepped down form the position. Peng Fang was the president of Best Solar, wholly owned by LDK Solar Chairman and CEO Xiaofeng Peng and LDK New Energy, LDK Solar's controlling shareholder. Fang was also at the semiconductor foundry Huahong NEC and Applied Materials.


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  • IRG Technology, Media and Telecommunications Weekly Market Review (Week of 18 – 24 Jan 2010)
    Japan
    Hardware
    •         Fujitsu Ltd. has appointed the head of its system products business as its next president, after months of deadlock that halted restructuring. Masami Yamamoto will take the helm of the firm starting in April. Fujitsu needs to cut costs further if it is keep pace with heavyweights IBM, Hewlett-Packard and Dell. Fujitsu, despite efforts to expand abroad in IT outsourcing services, remains tied to a sluggish market in Japan. Chairman Michiyoshi Mazuka has been running Fujitsu ever since former President Kuniaki Nozoe abruptly stepped down in September, citing illness. Mazuka's provisional status weakened his ability to cut money-losing operations or pursue mergers to boost sales in IT services. The delay may be costly in the rapidly transforming IT services sector, where hardware, software, and services firms are coming together to become more competitive.
    •         Canon Inc.'s group operating profit appears to have topped initial forecasts and hit 215 billion yen (US$2.4 billion) for the year ended December due to robust camera demand. That would mark an increase of about 25 billion yen (US$280 million) from initial forecasts, although it would represent a decline of nearly 60 percent from the year ended in December 2008. Sales were down 20 percent as net profit was also down about 60 percent. The company's single-lens reflex digital cameras fared particularly well, spearheaded by sales in China and other parts of Asia. Canon, which also makes photocopiers, is expected to report roughly 90 billion yen (US$983 million) in operating profit for the October-December period, its third straight quarter-on-quarter gain. Its office equipment business performed poorly, however, as companies cut costs and curbed investments.
    Semiconductor    
    •         Orders for Japanese equipment used to make semiconductors quadrupled in December from a dismal showing the same month a year earlier, as the biggest chipmakers are now rushing to invest in new equipment. Orders for Japanese chip-making equipment were around 90 billion yen (US$983 million). Monthly sales also rose as the semiconductor sector emerged from a prolonged slump, with sales of chip gear up 23 percent from a year earlier in December, and up 2 percent from the previous month. Samsung Electronics and TSMC and UMC have placed orders for new equipment with Japan's Tokyo Electron. Hynix Semiconductor also said it was ready to outrun the 40 to 50 percent growth seen for the entire dynamic random access memory industry, on a surge in demand for smaller PCs in emerging economies.
    Business Process Outsourcing
    •         Japanese call center administrator Transcosmos Inc. has entered a partnership with KT Corp. through subsidiary Transcosmos Korea Inc. Transcosmos this month began subcontracting part of the KT group's call center operations at two locations in Seoul and Pusan. The two call centers have a combined 900 positions and are responsible for fielding inquiries from customers regarding the KT group's mobile phone and Internet access businesses. By subcontracting call center work from the South Korean firm, Transcosmos hopes to boost sales in South Korea by 20 percent this year by 25 billion won (US$22.15 million). It is looking to expand its South Korea business into one of its core overseas operations, alongside China. The companies will utilize KT's communications infrastructure and Transcosmos' expertise to jointly develop business subcontracting services utilizing information technology.
    Telecommunications
    •         NTT Communications will launch a multi-point video conferencing service in Japan. The solution will combine a cloud-based multipoint control unit with NTT Com’s VPN offering, Arcstar IP VPN and e-VLAN, NTT said. The new solution is expected to alleviate the heavy investment required for high quality video conferencing systems for companies with geographically dispersed locations within Japan.
    •         NTT Communications had its further expansion in China with the opening of a new branch office in Wuhan, Hubei Province in February and the launch of a new point of presence (POP) for its Arcstar Global IP-VPN managed network services in Guangdong Province. The Wuhan office is a milestone for NTT Com as the first branch office of a global telecommunications company in the city. Wuhan is home to many specially designated zones for economic and technological development. The central China region comprising Hubei, Henan and Hunan provinces has been enjoying high GDP growth rates, attracting Japanese and other multinational companies to set up business hubs and capitalize on the region’s growing middle class. Economic development is expected to be further stimulated by a high-speed railway opened between Wuhan and Guangzhou in December 2009. NTT Com currently operates branches mainly near China’s coast, including Dalian, Tianjin, Beijing, Shanghai, Suzhou and Guangzhou. The Wuhan branch will enhance NTT Com’s provision of ICT solutions, including fast support for operation and maintenance, in central China.
    •         eAccess and mobile operator Emobile are still working towards a merger. In December, the companies entered into a memorandum of understanding on a business combination by way of a share exchange between the two companies, through which Emobile will become a wholly-owned subsidiary of eAccess. The board of directors of eAccess has established an independent committee consisting of independent directors which will ensure the fairness and transparency of the process, together with external financial and legal advisers which have been appointed. The company has extended the review process for a definitive agreement, which was originally scheduled for mid-January this year. eAccess did not disclose a new timetable for the process.
     
    Korea
    Telecommunications
    •         KT Corp. expects revenue and capital spending to increase this year as the company steps up efforts to seek out new growth engines amid a saturated telecommunications market. The company expects revenue to increase 2.8 percent to 19.5 trillion won (US$17.3 billion) this year. It will boost capital spending by 8 percent. The figures are based on the assumption that KT absorbed its KT Freetel wireless unit. The company will try to achieve the higher sales target by focusing on its Internet TV business and by cutting costs. It merged its wireless affiliate into the company and together the two companies plan to beef up product offerings and boost wireless data services to compete with SK Telecom.
    •         SK Telecom confirmed that it would make no further investment in S-Fone, putting the underperforming mobile service provider on life support. Plagued by low profits and low subscription rates since it was launched in 2001, as a US$230 million business cooperation contract (BCC) between SK Telecom and Sai Gon Post and Telecommunications Corporation (SPT), S-Fone was only able to sign up about 7.3 million subscribers to its CDMA network, a market share of less than 10 percent. S-Fone had revealed that SK Telecom and SPT had inked a memorandum of understanding to change the form of their investment from a BCC to joint venture. SK Telecom w3as not effectively pulling the plug on S-Fone, saying instead that it was now engaging SPT in discussions on future operations and other ideas that might be of mutual benefit.
    •         South Korea grabbed the top spot in a ranking of broadband connection speeds globally last year, while the gap separating first and second place finishers widened from the year before. Broadband connection speeds in South Korea in the third quarter of 2009 were the fastest among 226 countries at 14.6 megabits per second. The speed was also 16 percent faster than a year ago and marked a 29 percent on-quarter increase. Akami's State of the Internet report also said that Japan placed a distant second with average broadband service at 7.9 Mbps, followed by Hong Kong and Romania at 7.6 Mbps and 6.2 Mbps, respectively. The U.S. was ranked 18th in Internet connection speeds.
    Media, Gaming and Entertainment
    •         The Korean government has earmarked approximately 138 billion won (US$122 million) in investment funds to support the production of cinema, computer graphics and other entertainment content over the next three years. The fund from the ministry's budget will be run by a venture capital firm that, based on the government seed money, will draw additional investments from the private sector and select beneficiaries of the loans. This funding aims to not only increase capital available for the entertainment industry, but also bolster investment sentiment for it.
    Semiconductors
    •         Hynix Semiconductor Inc. will repay more than 1 trillion won (US$888 million) in debt this year as a shortage in the industry may help the company post its biggest profit in four years. Lower debt and higher earnings may make Hynix more attractive to potential bidders as creditors are attempting for the second time to part with their Hynix holdings after Hyosung Corp. dropped its offer in November. The chipmaker is projected to post its biggest annual profit since 2006 this year as demand for personal computers improves. Hynix creditors may help finance an acquisition as they try to sell all or part of their combined 28 percent stake.
    •         Hynix Semiconductor Inc. posted a second straight quarter of net profit in the fourth quarter of 2009 after seven consecutive quarterly losses thanks to a rise in memory chip prices. The company also gave a rosy outlook for the first quarter of this year as strong demand for personal computers and a rapid growth of the smartphone market is expected to lift shipments of dynamic random access memory (DRAM) chips and NAND flash memory. The semiconductor industry is on its way to a recovery from a severe slowdown in 2008, with analysts anticipating the rebound to pick up pace as PC demand is expected to lift memory chip sales in the first half of this year. Net profit reached 657 billion won (US$578 million) in the October-December period. The company's fourth-quarter net income nearly tripled from the previous quarter. Sales surged 85 percent on-year in the cited period.
    Hardware
    •      Samsung Electronics Co. agreed to pay US$900 million to end a legal dispute between Rambus over computer-memory technology. The agreement ends litigation that began in 2005 after efforts to renew an expired license failed. Samsung, based in Suwon. The agreement may prompt other chipmakers to end their disputes with Rambus and begin paying royalties. Samsung will invest US$200 million in Rambus stock, make an additional payment of US$200 million and then pay US$25 million a quarter for the next five years. The companies will focus on graphics and mobile memory and review a possible collaboration on server and high-speed Nand flash memories.
     
    China
    Internet
    •         Approximately 500 million yuan (US$73.2 million) will be pumped into the Internet field in the southern Chinese boomtown of Shenzhen in the future seven years. The city's Internet market hit about 16 billion yuan (US$2.3 billion) in 2008, accounting for 11.5 percent of the nation's total. Its e-commerce transaction volume was 6.25 percent of the total. The e-commerce has grown rapidly in recent years in Shenzhen, and the city has been approved to build the nation's first e-commerce city here. The city's Internet market will be 12.5 times the figure in 2008. Upon the above plan, the city will see an Internet growth of 50 percent yearly from 2009 to 2012.
    •         Baidu’s chief technology officer resigned for personal reasons. Li Yinan was appointed as Baidu's CTO in 2008, before which he was in a similar role with Huawei Technologies. The announcement of Li's resignation coincides with a management change announced earlier this month.
    •         Alibaba Group will increase its global work force this year after hiring 6,480 new employees in 2009. Alibaba Group and Alibaba.com Ltd. will increase staff at home and overseas. The company will kick off an overseas recruitment campaign in the U.S. soon where Alibaba Group has been ramping up its operations. Alibaba hasn't finalized the number of staff it will recruit for 2010, the person said. At the end of 2009, Alibaba Group's total work force stood at 17,500. Most of these workers are employed in China. Alibaba Group workers below senior executive level will receive salary increases this year, and the company will give out year-end bonuses for 2009.
    •         China's Internet economic scale in 2009 increased 30.7 percent to 74.3 billion yuan (US$10.9 billion). In comparison to the approximately 8 percent GDP growth, the Internet is still the most active industry of China in 2009. Of specific sectors of the Internet industry, revenues of online shopping and online payment would enjoy the fastest growth on year, rising nearly 100 percent. E-commerce becomes the new driving force for the development of Internet. The growth rate slides in comparison with the previous year's 52.6 percent, but is still much higher than the approximate 8 percent GDP growth of China, showing unique vigor of new economy. China's economy keeps growing, with the GDP in 2010 touching 9 percent. The rate of development of tertiary industry exceeds that of the primary and secondary industries, and becomes the driving force of China's economy.
     
     
    Mobile/Wireless
    •         KongZhong has entered into an amendment to the share purchase agreement with Shanghai Dacheng Network Technology Co., Ltd. and its shareholders, which includes the entering into certain business cooperation agreements among Dacheng, its shareholders and one of Company's wholly-owned subsidiaries. Pursuant to these businesses’ cooperation agreements, Company will obtain control of Dacheng and expects to be able to consolidate Dacheng's financial results into Company's financial statements beginning no later than February 10, 2010. The other major terms contained in the share purchase agreement remain.
    Telecommunications
    •         The number of Internet users in China, already the largest in the world, rose to 384 million by the end of 2009. Users accessing the Internet with mobile phones jumped by 120 million last year to 233 million, with the fast expansion of the country's 3G network, allowing high-speed transmission of images and video. Chinese web users are most interested in music, news and search engine services. China's spiraling online population has turned the Internet into a forum for citizens to express their opinions in a way rarely seen in a country where the traditional media is under strict government control. The growing strength and influence of the web population has prompted concern in Beijing about the Internet's potential as a tool for generating social unrest, and authorities have stepped up surveillance in recent years.
    •         Huawei Technologies Co., Ltd. had participated in the first-round bidding for Motorola’s broadband & mobile network division. The first round of bidding has come to an end. Potential buyers offered a price range between US$3 billion and US$4 billion, which is still lower than the mobile phone maker's expectation of US$4.5 billion. Motorola was rumored seeking buyers for the broadband and mobile network division at a price of US$4.5 billion as early as November 2009. Investing banks, including Goldman Sachs, JPMorgan, as well as Centerview Partners, offer suggestion for the deal. At least, two companies participated in the first-round bidding, with a market value of US$1.4 billion or so, ARRIS probably teamed up with private equity firms.
    •         ZTE shipped 3 million TD-SCDMA handsets last year, 1,100 percent more than a year earlier. The firm's TD-SCDMA handset market share last year rose 20 percent year on year. In addition, ZTE released four new TD-SCDMA handset models, the U720, U600, U230 and U215. The U600 and U215 are also customized handsets for China Mobile. ZTE released over 30 TD-SCDMA terminal models in 2009, and will release more than 30 this year. Handsets and wireless wireline terminals each accounted for about 40 percent of ZTE's total TD-SCDMA terminal shipments last year, while data cards accounted for the remaining 20 percent.
    •         China Unicom’s transaction volume on its online network surpassed 4 billion yuan (US$585 million) in 2009, and that average daily transaction volume has currently hit 30 million yuan (US$4.3 million). China Unicom launched a network for its online business in April 2008. Unicom expects to offer a video phone service between fixed-line and mobile phone users in some provinces or cities around the end of the first quarter. The service will initially be limited to fixed-line and 3G handset users, and it is still unclear whether the service will support cross-regional calls.
     
     
     
    Media, Entertainment and Gaming
    ·          NetDragon said its net profit for the 3 months ended and the year ended December 2009 may experience a very substantial decline although its revenue for the year ended 2009 is expected to increase compared with 2008. The expected decline in net profit is mainly due to the rise in development cost of new product and expansion of new businesses.
    ·          Shanda Games Limited said that Ms. Diana Li has resigned as the Company's chief executive officer and a member of the Board of Directors to pursue other interests. The Company's chairman, Mr. Qunzhao Tan, will assume the duties of both chairman of the board and CEO of the Company.
    ·          Sales of China's independently developed online games increased 50 percent year on year in 2009. The actual sales in 2009 generated direct income of 55.5 billion yuan (US$8.1 billion) for related industries; and the actual sales of mobile Internet games was registered at 640 million yuan. There were 64 online games developed by 29 Chinese companies entering the markets of over 40 overseas counties and regions, and realizing US$109 million. The number of online game users and pay online game users respectively grew 33.4 percent and 22.1 percent on year in 2009 to 65.87 million and 37.15 million. Industrial analysts held that the industry's continuous growth during the ongoing international financial crisis is contributed by accelerated increase of players of online games, particularly fee-based online games.
    ·          The number of online game players in China surged 33 percent to hit 66 million over the past year, said a report released at the annual conference of Chinese gaming industry. The revenue from online gaming industry in the country was 25.6 billion yuan (US$3.7 billion) in 2009. 64 Chinese games developed by 29 domestic companies had earned about US$109 million in overseas market. The online population in China had reached 384 million by 2009.
    ·          Storm Information Technology Co. Ltd has accomplished its second round of fundraising, securing US$20 million in total. Four investors participated in this round, said the CEO, adding that Shenzhen Fortune Venture Capital Co. Ltd was one of the investors. The financing exercise took 3 months to completed, and all funds have come in place. Walden International invested an undisclosed amount in Storm Entertainment. Storm Entertainment reached agreement with Shanda Interactive Entertainment Limited for joint operation. This year the firm will launch co-operative games with another two companies. 2010 is a crucial year for Storm Entertainment, adding that its performance in the second and third quarters will determine the execution of its listing plan next year. Storm Entertainment was founded in July of 2007 by William Zhu, using an elite class of online gaming players as its development team. By far it has released 5 games ranging from 2.5D MMORPG to web-games.
    ·          Hurray! has completed the merger with local online video portal Ku6. Ku6 has sold all of its outstanding shares to Hurray! in exchange for 723.68 million Hurray! shares. Ku6 will retain its brand name and is now a wholly-owned subsidiary of Hurray!. Following the completion of the merger, the company also appointed Danian Chen and Shanyou Li to the Hurray! board of directors, effective 19 January.
    ·          The market scale of online games in China reached 25.8 billion yuan (US$3.7 billion) in 2009, a 39.5 percent increase over the previous year, a white paper on online game development released by the Ministry of Culture. The domestic games' market size surged 41.9 percent last year to occupy 61.2 percent of the entire market. As of 2009, China had about 361 major online games which were either in operation or being tested. Among them, 115 were newcomers in the year. Tencent had replaced Shanda to become the largest online game operator in the country. The Chinese online games earned US$106 million from overseas market in 2009, a 47.2 percent increase from the previous year. 
    ·          Kingsoft will separate game operations and game development in 2010, and will focus on online games which promote core values of harmony and cooperation. Kingsoft will release more than ten new games this year including licensed Chinese fantasy 3D MMORPG Fei Tian Feng Yu and Yue Ying Chuan Shuo.
    Hardware
    •      Lenovo Group Ltd. has been green-lighted by its shareholders to repurchase 100 percent of Lenovo Mobile Communication Technology Ltd. for US$200 million in cash and stock. Lenovo sold the mobile phone maker Lenovo Mobile for US$100 million in March 2008 to some PE funds, including Hony Capital controlled by the Lenovo founder Liu Chuanzhi. Afterwards, the target company saw a surge in its business and gained a net profit of 3.04 million yuan (US$445,222) in the entire 2008. Lenovo's repurchase of the subsidiary represents its efforts to expand in the Chinese mobile Internet market, which is flying with the local 3G telecoms industry. Lenovo Mobile has launched a type of LePhone-branded smartphones equipped with the Android operating systems of Google Inc.
    Investments/ Ventures
    China will limit new loans to around 7.5 trillion yuan (US$1.1 trillion) in 2010. China issued 9.59 trillion yuan (US$1.4 trillion) in new RMB-denominated loans in 2009, 4.69 trillion yuan (US$686 trillion) more than in 2008. China set a guideline limit on 2010 credit at around 7.5 trillion yuan (US$1.09 trillion) during December's Central Economic Work Conference

    Disclosure: Director
    Jan 25 4:57 AM | Link | Comment!
  • IRG Technology, Media and Telecommunications Weekly Market Review (Week of 4 – 10 Jan 2010)
     
    Japan
    Semiconductor    
    •         Panasonic Corp. aims to generate 3 trillion yen (US$32 billion) in annual revenue from its battery and other energy businesses within a decade as the markets for electric cars and solar power expand. Panasonic will invest about 100 billion yen (US$1.1 billion) in Sanyo Electric Co.’s solar-cell operations over six years. Panasonic last month completed its US$4.3 billion purchase of a controlling stake in Sanyo as it shifts focus to solar-panels and energy-storage devices to drive growth. It also will boost sales of energy-saving home appliances. Panasonic expects to achieve an operating profit margin and a return on equity of at least 10 percent by the year ending March 2019. The company shall recover next fiscal year from back-to-back annual losses after it cut more than 29,000 jobs and reduced costs by 200 billion yen (US$2.2 billion).
    •         According to business newspaper Nikkei, Elpida Memory is seen returning to profits in the current fiscal year for the first time in three years, with rival Toshiba's chip division also recovering to break even. Rising demand for high-tech products, such as flat panel televisions, personal computers and mobile phones, has led to higher semiconductor prices, helping recoup earnings at chipmakers. Elpida is now likely to post an operating profit of about 50 billion yen (US$535 million) for the second half of the year ending in March and a profit for the full year. The company incurred an operating loss of 41.4 billion yen (US$447.2 million) in the first half of the year.
    Media, Entertainment and Gaming
    •         Sony Corp. will start selling 3-D televisions and Blu-ray disc players this summer, part of a plan by Chief Executive Officer Howard Stringer to go “all out” to seize control of the market. The company will sell nine 3-D models of Bravia televisions and a Blu-ray player in mid-2010. Stringer is betting that 3-D products will generate more than 1 trillion yen (US$11 billion) in the year ending March 2013, not counting content. Samsung will sell similar products this year. Samsung will begin selling 3-D TVs and Blu-ray players starting this year.
    •         The Japanese market for game hardware and software shrank 6.9 per cent to 542.6 billion yen (US$5.9 billion), according to Enterbrain Inc. Sales continued to decline since marking an all-time high in 2007 on the success of Nintendo's DS hand-held system. Hardware sales fell 13.6 per cent to 216.4 billion yen (US$2.3 billion). New hits were few, with the latest installments in popular series accounting for more than half of total sales. In the past, a relative lack of alternatives to dedicated game systems meant that sales recovered whenever a new console was launched. But this has changed with the explosion in games for cellular phones. People can now download games to their handsets for free or up to several hundred yen, and a framework now exists under which start-ups can develop games for Apple's iPhone or mobile-phone-based social networking services.
    Telecommunications
    •         Softbank Mobile Corp. maintained its top position in subscriptions among mobile phone operators in Japan for the second straight year in 2009, according to the Telecommunications Carriers Association. Softbank attracted subscribers thanks to Apple's iPhone it exclusively sells in Japan as well as new handset models released in June, analysts said. Softbank posted a net subscription increase of 1,667,400 last year, followed by NTT Docomo at 1,281,000, Emobile at 1,001,000, and KDDI at 842,800. The total of all cellphone carriers' contracts stood at 110.62 million at the end of 2009, up 4.5 percent over a year earlier.
    •         NTT Communications (NTT Com) plans to launch online educational services in Japan following its acquisition of a 29.7 percent stake in goFluent Group, a provider of online English-language instruction. Through the capital alliance, NTT Com intends to launch educational services in Japan that will combine the company's visual communication and other ICT solutions with goFluent's online English-training know-how. Specific services will include the online provision of English training for enterprises as well as individual customers of internet services offered by the NTT Com group, such as the OCN-brand service. Customers also will be targeted in collaboration with NTT Com's parent company, Nippon Telegraph and Telephone (NTT).
    Internet
    •         Experian has acquired a controlling stake in A-Care Systems, Inc., a Japanese e-mail marketing firm. Financial terms of the acquisition were not disclosed. The 88.5% stake acquired by the information services firm will allow it to incorporate A-Care into its Experian CheetahMail e-mail operations. The acquisition gives ExperianCheetahMail additional operations in the mobile marketing communications field.
    Hardware
    •         Toshiba believes 2010 will be the year of ultramobile PCs, just as 2009 was the year of netbooks. During 2009, sales of netbooks drove the PC market growth, as it targeted a segment of users that were looking for an economic and mobile solution, according to the company.
    •         The Samsung Group said that it has appointed the vice president of Samsung Mobile Display Co. to lead its Japanese unit. Yun Jin-hyuk, 56, the newly appointed head of Samsung Japan Corp., previously served as executive director of the Japanese division after working for 10 years starting in 1984 at Samsung Electronics Co.'s branch office in Tokyo.
    Data Centers
    •         The Japanese market for data centre services is expected to grow to JPY 1.32 trillion (US$14.5 billion) in 2013, growing by 70 percent from 2008, according to IDC Japan. The research forecasts a growing trend to shift in-house server rooms and computer centers to data centers to reduce costs and increase system stability
    Korea
    Hardware
    •      Samsung Electronics Co. turned to a profit in the fourth quarter from a loss a year earlier after prices increased and demand for televisions rose. Operating profit was about 3.7 trillion won (US$3.3 billion), plus or minus 200 billion won (US$148 million), compared with a loss of 740 billion won (US$660 million) a year earlier. Macquarie and CLSA Asia-Pacific Markets raised their share price estimates on Samsung this week, citing higher earnings prospects. The preliminary figures disclosed today are consolidated, meaning they include earnings from overseas affiliates. Revenue was between 38 trillion won (US$33.7 billion) and 40 trillion won (US$35.5 billion), Samsung said. The company began providing quarterly guidance in July. No breakdown was given of expected earnings among the company’s divisions.
    •      LG Electronics Inc. aims to increase global sales by around 10 percent this year to 59 trillion won (US$52 billion) as the South Korean consumer electronics maker moves to boost revenue from new businesses such as solar cells. The company will spend 3.6 trillion won (US$3.2 billion) on new investments this year, mostly in research and development, and facilities. The country's second-largest consumer electronics maker by revenue after Samsung Electronics Co. has been diversifying into new areas in a move to boost slowing growth. In October 2008, the electronics maker said it would invest a total of 220.2 billion won (US$195 million) by the end of 2010 to build two production lines producing solar cells and modules.
    Semiconductors
    •      Creditors of Hynix Semiconductor will encourage South Korean companies to make bids for a controlling stake in the chipmaker, according to some bank officials. The stake is estimated to be worth 3.58 trillion won (US$3.04 billion). The previous attempt to sell the stake fell through as Hyosung Group, the sole bidder for Hynix, dropped its bid in November.
    Media, Gaming and Entertainment
    •      Korea's Game Big 3 aims to achieve revenue of 1 trillion won (US$888.9 million) that would make them equivalent to the world's top 10. Nexon, which generated revenue of 450.8 billion won (US$400.9 million) in 2008, is predicted to achieve revenue of 700 billion won (US$622.6 million) in 2009. NC Soft will generate revenue of 600 billion won (US$533.7 million), much higher than last year's 346.6 billion won (US$308.3 million). In NHN, revenue also grew by 25 percent to 650 billion (US$578.2 million). This growth is likely to continue this year. These companies are adding new games to their game portfolio and restructuring the global operations. By the end of 2007, these companies generated revenue of 300 billion won (US$266.8 million), respectively. However, in just two years, these companies raised the revenue twice prompting market watchers to believe that revenues may reach 1 trillion won (US$888.9 million).
     
    China
    Internet
    •         Baidu would set up a new company and enter the online video market. Baidu will take a controlling stake in the new company. The new company has obtained US$60 million from a U.S. private equity fund, and will start operation in March 2010. CCTV established a national Internet TV station, Shanda Interactive Entertainment Ltd. acquired Ku6.com, and Youku.com kicked off another round of financing. A famous IT commentator points out that Baidu has considerable traffics and aims to turn them into profits through diversifying its operations.
    •         Baidu had several executive-level personnel changes, including the resignation of its chief operating officer. Peng Ye stepped down for personal reasons. The company appointed Haoyu Shen as senior vice president and Zhan Wang as vice president. They had been vice president of business operations and senior director of business products, respectively. Baidu, which has a commanding share of the Internet-search market in China, said in October its third-quarter earnings jumped 42 percent as it saw increased ad revenue from large customers, but the company projected fourth-quarter revenue much lower than Wall Street expected at the time.
    •         China was expected to top a Web shopper base of 100 million in 2009, 28.2% of the nation's Web users shopped on the Web, according to Analysys International, a leading advisor about the technology, media, and telecommunications (TMT) industries in China. The Chinese Web shopping retail sale will account for 3.5% of the overall market. China had had a Web user base of 360 million by the end of November 2009, with a 20.8% rise year on year, according to a media report by China's largest national television network China Central Television. The Ministry of Industry and Information Technology of China said that China saw its total broadband access user base top 100 million for the first time in October 2009. Chinese basic telecommunications carriers achieved a net broadband access user increase of 18.008 million in the first ten months of the year, and their broadband access user base climbed to 101 million.
    Telecommunications
    •         China Mobile Ltd. has no plans to acquire Tecent Holdings Ltd. China Mobile spokeswoman Rainie Lei said recent media reports that China Mobile is in talks with Tencent is groundless. Tencent led China's instant messaging market with its average daily users reaching 137.5 million. China Mobile launched its own instant messaging service, Fetion, in 2006, to attract more subscribers as part of an effort to increase its revenue. Fetion ranked the third among instant message programs after Tencent and Microsoft Corp.'s MSN. As well as the instant messaging service QQ, Tencent also operates various online platforms, including Web portal QQ.com, games portal QQ Game, and a mobile portal.
    •         Huawei Technologies Co. expects contract sales this year to increase to US$36 billion from more than US$30 billion in 2009 in a sign that demand for network equipment continues to pick up as the global economy recovers. The company said in an e-mail that its unaudited revenue in 2009 amounted to US$21.5 billion, up 17% from US$18.3 billion in 2008. But the growth was much slower than the 43% it saw in 2008. The company will release its audited figures in its annual report slated to be released in March. Contracts are recognized as revenue when projects are completed. Despite the slower growth in revenue, Huawei has still fared better than some of its Western rivals even amid the global economic crisis.
    •         China Mobile Ltd saw its 3G service users increase to total more than 5 million by the end of 2009, sources reported. China Mobile offers 266 telecom terminal devices, including 80 mobile phone models, said sources. The telecom giant has completed the construction of the third phase of its 3G network, which cost 58 billion yuan (US$8.5 billion), and now has more than 100,000 base stations. Its network, which is based on the home-grown TD-SCDMA standard, covers more than 70% of Chinese cities. China's top three telecom operators, China Mobile, China Unicom (Hong Kong) Ltd and China Telecom Corp Ltd, invested 80 billion yuan (US$11.7 billion) in the telecom industry in the first half of 2009 to boost their 3G networks. China Mobile had entered into an agreement to buy a 12% stake in Far EasTone Telecommunication for US$528 million. It was said that the deal would be approved early this year. In June, Taiwanese authorities opened up the island to mainland investors, relaxing investment rules in 100 categories including manufacturing, services and infrastructure.
    •         The release of 3G licenses in China is spurring a wireless data boom, with national revenues from such services rising by 18.9 percent in 2009 and nearly doubling from 2008 to 2013, according to a study by iSuppli. As the one-year anniversary of the issuance of 3G licenses in China approaches, wireless data revenue, including both messaging and non-messaging service, is set to rise to US$19.3 billion in 2009, up from US$16.3 billion in 2008. By 2013, data revenue will surge to US$31.5 billion, increasing at a CAGR of 14.1 percent from US$16.3 billion in 2008. Non-messaging revenues are expected to exceed messaging revenues as carriers expand mainstream adoption of 3G services and reach US$20 billion in 2013, up by a factor of three from US$6.8 billion in 2008.
    •         China Mobile has invested about 80 billion yuan (US$11.7 billion) in TD-SCDMA by the end of 2009 and has signed regional agreements to spend a total of 300 billion yuan (US$43.9 billion) on the TD-SCDMA industry. China's three telecom operators had invested a combined 102.3 billion yuan (US$14.9 billion) in 3G by the end of October. China Mobile has more than 5 million TD-SCDMA subscribers as at December 31.
    Alternative Energy
    •      Renesola failed to have local government approval for the acquisition of Dynamic Green Energy (DGE). ReneSola would instead acquire 100 percent of Dynamic Green Energy in exchange for 26.79 million newly issued ReneSola ordinary shares and US$10 million in a convertible promissory note.
    Software
    •      CDC Software Corp.made a bid to Chordiant Software, in which it holds approximately 1.3 percent equity interest, to acquire all outstanding shares of the company for a consideration of US$105.1 million in cash and shares. The company estimates its organic license revenue in the fourth quarter of 2009 will hit US$9.8 million, compared with an average of US$7.5 million in the first three quarters of 2009, the company reported January 5. CDC Software expects to generate an additional US$600,000 in license sales from its three recent acquisitions completed in the fourth quarter of 2009. The company had raised its full year 2009 profit guidance but kept its revenue guidance unchanged at between US$197 million and US$200 million.


    Disclosure: Director
    Jan 14 5:05 AM | Link | Comment!
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