Stephen Ngai

Shanda Interactive and the Importance of Guanxi (SNDA, DIS, CHL)

On the eve of ER of 2nd quarter, I am still betting on LONG on SNDA.

You have terrific products, but if you can't have good distribution channels or you can't get the Consent from all levels of governments, you can't sell your products effectively to the consumers.

Good Government Connection, Guanxi is extremely important if you want to do business in China. This is absolutely NO DOUBT. No Guanxi = Death to the Business.

For Shanda, they get the support from CNC (China Netcom) to have EZ POD to be bundled as CNC MAX Pod, this is a by-product of good Guanxi.

Do you know there are 7 education channels in EZ Pod now?

Do you know that ALL chinese parents want their children to be future STARS, to be fluent and to be good in English. All Chineses want their children to have TIER I education in those Ivy League Schools in USA. They won't care to spend for the education of their kids.

My opinion is these 7 education channels will help the EZ Pod / Max Pod to become more popular.

Hong Kong Disney's problem was created from the impotence of the MD of Disney of HK. It is an isolated case. We can mix this problem with Disney China & Shanda.

Disney is planning a new Park in Shanghai in future 5 years, Do you know that?

Disney's co-operation with SHANDA is to bring Disney's content to the young players of China Online Casual Game Market. They want to promote Disney Brand & their animated characters to all young Chinese People before the opening of Shanghai's Park. China have around 10 times population of USA. The Market for Disney's Park(s) in China is Huge. This is their (In Advance) Marketing Plan which involving minimal costs for Shanda is to develop, to distribute and to operate this new Disney content game on Shanda's platform.

Do you know Actoz will launch 3 new games at the end of the year? Shanda will have the first priority.

Do you know Archlord is doing very well?

Do you know DDO will have its open beta testing on 08/28/06? Do you know SNDA have the magic to stir the crowd to play their games?

The markets & variables have been changed in favour of Shanda. EZ Pod is the most critical point. EZ Pod is getting more respects from the consumers now especially after the addition of 7 education channels.

Finally, the leaving of those senior executives and other staffs is a good sign. Costs cutting is the only way to keep the Shanda to be financial sounded after their aggressive expansion.

Time will tell.

Stephen