Chinese Tech Stock Weekly Update

by: IRG Ltd

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


Orbit E-Commerce Inc. in a partnership with its major shareholder, PureNet.TV Canada Inc. announced the signing of an agreement with United Wireless Ltd. to form a joint venture for the purpose of delivering Internet Protocol Television [IPTV] products and services to United Wireless' 15 million subscribers in major cities across China. The new entity will have immediate access to approximately 15 million subscribers through its 3,000 corporate and institutional clients in China. United Wireless, a Zhejiang Company affiliate is a registered company with the Administration for Industry and Commerce of Shenzhen Municipality. Zhejiang is a twenty-year-old ISO9001 certified manufacturer of award winning high tech products and is recognized by the Ministry of Information Industry software enterprises and by the Science and Technology Department of Zhejiang Province for outstanding products. Orbit E-Commerce Inc. was established for the purpose of capitalizing on management's vision and expertise in the field of Internet-based communications systems, products, and services. PureNet.TV is a private company, incorporated in the Province of Ontario, Canada, formed to research and develop highly competitive IPTV technology and services.

Media, Entertainment and Gaming

Viacom (NYSE:VIA) announced its deal to provide television and music video content to Baidu (NASDAQ:BIDU), one of China’s biggest and fastest-growing Internet companies. The alliance between Viacom’s MTV Networks unit and, one of the world’s most trafficked web sites, is the biggest effort so far to introduce American television and entertainment programming into China. The deal comes two months after MTV Networks formed a similar alliance with Google to distribute advertising- supported video clips over the Internet. Under the agreement, MTV Networks will provide Baidu with 15,000 hours of original video and licensed music content, much of it dubbed and tailored for Chinese viewers. For instance, many of the videos will feature artists from China, Hong Kong and Taiwan, to avoid copyright issues with American music companies, most of the music available on Baidu’s site will come from Asia. Also, as part of the deal, Baidu said it would create the first branded area on its website, to be called the MTV Zone. Viewers will pay fees to download content, and will also see paid advertising. The report said MTV Networks and Baidu will share the revenues from downloads with music publishers.


China Unicom (NYSE:CHU) announced an additional 1.2 million users last month, bringing the total of its clients to 138.5 million. The company said its core business, the GSM network, added 894,000 users during the month, bringing the tally to 103.1 million. Its smaller CDMA network added 336,000 users in September, bringing its customer base to 35.4 million. According to data from the Ministry of Information Industry, China had 437.5 million mobile-phone subscribers, 367.9 million fixed-line users and 47.4 million broadband subscribers as of the end of August.

Linktone (NASDAQ:LTON) announced plans to set up a partnership with MTV China to operate WAP services for MTV China on China Unicom's platform. A top company official said that this is part of Linktone’s strategy to boost its WAP service portfolio and cater to the growing 2.5G WVAS market. The partnership also recognizes the popularity of MTV China among the youth market. Linktone said its goal is to widen the market for mobile interactive entertainment services. By working with Linktone, MTV indicated that it now has the capability to reach the country’s base of over 400 million mobile users.

Royal Philips Electronics (NYSE:PHG) announced the signing of a letter of intent aimed at turning over its remaining mobile phone activities to China Electronics Corporation [CEC]. Under the deal, CEC will take over the responsibility of Philip’s mobile phone business. The business has an annual turnover of some 400 million euros (US$504.4 million). Under the terms of the letter of intent, CEC will receive a global license to market and sell mobile phones under the Philips brand for the coming five years. The transaction awaits regulatory approvals and consents, all seen as being completed by the end of this year.


Insight Enterprises (NASDAQ:NSIT) announced the opening of a Shanghai office in a bid to provide a local service to its global clients. Earlier, the company got an accreditation with Microsoft's (NASDAQ:MSFT) Large Account Reseller status. Insight said it will leverage its strong links with Microsoft and other software publishers such as Adobe (NASDAQ:ADBE), Symantec (NASDAQ:SYMC), Citrix (NASDAQ:CTXS) and McAfee (MFE) to provide software-based solutions tailored to the particular needs of Chinese customers. The company’s top official for Asia Pacific noted that China’s IT growth rate of more than 20 percent year on year qualifies it as a rapidly maturing market for software services. Insight says China's commitment to end pirated software in the country, is boosting corporate demand for legitimate software licensing from trusted, global suppliers.


TCL Multimedia Technology Holdings and TCL Communication Technology Holdings announced that they have again become profitable even as their parent company TCL Corp predicted a full-year loss. TCL Multimedia, which owns the television brands TCL in Asia, Thomson in Europe and RCA in North America, posted net profit of HK$81 million (US$10.4 million), compared with a loss of HK$179 million (US$23 million) a year earlier. The company said however, turnover posted a decline of HK$6.9 billion (US$888.8 million) from HK$7.8 billion (US$1 billion). Its television sales went down by 14 percent to 5.5 million units from 6.4 million units. Television sales in Europe and North America fell 30 percent to 999,000 units while sales in China fell 11 percent to 2.02 million units. The company said it will restructure its European operations possibly over several months, with the details of the plan to be announced at the end of the month. In a separate development, TCL Communication said third-quarter net profit was HK$21 million (US$2.6 million) compared with a net loss of HK$460 million (US$59.1 million) a year ago. Total cell phone unit sales for the third quarter posted a 15 percent rise to 2.8 million units. Sales in China fell 38 percent to 558,000 units, while overseas sales jumped 48 percent to 2.2 million units. TCL Communication is 54.6 percent owned by TCL Corp., a Shenzhen-listed firm that also owns 38.7 percent of TCL Multimedia.


China Netcom (CN-OLD), the mainland's second-largest fixed-line operator, announced a 2 percent rise in its operating revenue for the three quarters to September to 63 billion yuan (US$8 billion) from the same period last year. The company said the number of its customers using its broadband service saw an additional 2.8 million to 14.2 million from the end of last year offsetting the slow fixed-line demand that saw the number of its subscribers grow by 3.6 percent from the end of last year to 119.4 million, resulting in a gain of 4.1 million customers. The company noted that more than 50 percent of its new customers came from its personal handy-phone system [PHS] business, a mobile phone-like service that operates within a limited area and competes with rivals China Mobile (NYSE:CHL) and China Unicom (CHU). The PHS service added a net 220,000 subscribers for the three months to September, down from the 1.5 million new users who signed up in the first quarter. China Netcom’s residential fixed-line business lost 512,000 customers over the same period. PHS short message service traffic jumped 46 percent in the third quarter to 5.9 billion messages. China Netcom's personalized connecting tone service posted an 84.5 percent growth to 12.5 million.

China Telecom (NYSE:CHA), Guangdong Telecom and Zhejiang Telecom announced a joint set-up of a new company called China Communications Service Holdings Company [CCSHC]. The new entity has an initial capitalization of 3.9 billion yuan (US$493.3 million). Under the deal, China Telecom will hold 91.5 percent stake, with Guangdom Telecom and Zhejiang Telecom holding the remaining 6.2 percent and 2.3 percent respectively. The new entity has been approved by the country’s State Administration of Industry and Commerce to focus on communications technology development, communications appliance manufacturing and investment, and technology consulting among others. China Telecom looks to list the company in Hong Kong by the end of 2006.


Gome Electrical Appliances Holdings, China's biggest electronics retailer, said that its takeover offer of HK$5.2 billion (US$657 million) was accepted by China Paradise Electronics Retail. The two firms in their statement to the Hong Kong Stock Exchage said that Paradise shareholders, representing 95.3 percent of the stock, accepted Gome's offer, surpassing the minimum acceptance condition of 90 percent. Earlier in July, Gome said that it would pay US$409 million in cash for Paradise and issue one new share for every three Paradise shares. After the takeover is completed, Paradise’s Hong Kong-traded shares will be delisted. The deal requires standard approval from China regulators. The merger is expected to give Gome 516 stores with combined sales of 30 billion yuan (US$3.7 billion). Chinese electronics retailers are stepping up acquisitions as rivals including Best Buy, the largest U.S. electronics retailer, enter the world's fastest-growing consumer market.