Asian Tech Stock Weekly Review (May 24 – 30, 2010)

by: IRG Ltd



Japan’s Rakuten Inc. (OTCPK:RKUNF) is buying Inc. for US$250 million as part of its global expansion. Rakuten runs an online mall plus auction, bookstore, Internet search, travel and stock trading sites with yearly sales of approximately US$3.2 billion. sells electronics, DVDs, CDs and some 60 million other products. About 35,000 merchants also use the site to sell their products. The company has yearly sales of approximately US$500 million. The deal marks the second time has been acquired all or in part by a Japanese company. In 1999, a group led by Softbank Corp. paid US$165 million for a stake in went public in 2000 and went private again in 2001. The company looked to go public again in 2005 but never did. Orange County native Scott Blum started the company in 1997 with a plan to sell products at a loss and offset that with online advertising revenue.


Elpida Memory Inc. (OTC:ELPDF) expects group operating profit to top 150 billion yen (US$1.67 billion) for the year ending in March 2011 if DRAM chip prices and currency rates stay stable. [you forgot to bold] The memory chipmaker has not disclosed earnings forecasts for the 2010/11 business year. It had a record 37.8 billion yen (US$414 million) operating profit in the January-March quarter. The company had no plan for now to raise funds from the market.


Nippon Telegraph & Telephone Corp.'s (NYSE:NTT) new technology to double the capacity of Internet protocol phone networks has been accepted overseas as a new global standard. The new technology to condense voice data will enable the IP phone network to accommodate twice as much phone calls compared to its current capacity. NTT has successfully pitched the new technology to Cisco Systems, Texas Instruments and China's Huawei Technologies as well as the International Telecommunication Union, a United Nations organization in charge of information and communication technology issues.

Softbank Corp. (OTCPK:SFTBF) is planning to acquire an additional 5.49 percent stake in, Inc., a U.S.-based interactive video broadcast platform to broadcast live video on the internet, for a consideration of US$10 million. The transaction is expected to close in June 2010. Following the transaction, Softbank’s share holding in Ustream will increase from 13.55 percent to 19.04 percent. Softbank has completed its initial investment of approximately US$20 million (investment ratio of 13.55 percent) in Ustream this January. Assuming all available options granted to Softbank to acquire additional shares are exercised by July 2011, Softbank's total investment is expected to be approximately US$75 million and will result in Softbank becoming Ustream's top shareholder.


According to Hitoshi Hayakawa, a Tokyo-based analyst at Credit Suisse, Softbank Corp. may overtake larger rival NTT DoCoMo Inc. (DCM) in operating profit in three years, helped by demand for the devices. The company may also replace KDDI Corp. (OTCPK:KDDIF) as the country's second biggest wireless carrier in the period. Hayakawa recommends buying Softbank and KDDI shares and advises holding DoCoMo's stock. Softbank plans record investment upgrading its network this year to handle growing data traffic as users flock to handsets that can surf the Internet and download music, movies and applications. DoCoMo and KDDI are introducing models running Google's (NASDAQ:GOOG) Android software to counter demand for the iPhone, Japan's most popular smartphone.


Media, Gaming and Entertainment

SK Telecom Co. (NYSE:SKM) and The Walt Disney Co. (NYSE:DIS) announced the intent to set up a joint broadcasting venture to launch Korean-language Disney-branded channels in South Korea. SK Telecom said it will own a 51 percent stake in the new venture, to be formed before July, with Disney Channel International holding the remaining stake. SK Telecom will bring to the partnership its expertise in mobile, IPTV and digital media platforms. The Walt Disney Company will provide its globally reputed portfolio of kids and family’s targeted content, marketing expertise and local-content production and acquisition support. The broadcast service will start in early 2011. This will mark Disney's first joint venture to broadcast content overseas. Disney operates its channels around the world but has never set up a local venture to do so. Foreign companies are not allowed to directly own a broadcasting channel in South Korea. Disney will be able to offer locally produced content or programs dubbed in the Korean language once they launch Disney-branded channels here.


SK Telecom Co. will acquire a 25.77 percent stake in Malaysia's Packet One Networks, a unit of Green Packet Bhd., for US$100 million. Packet One offers wireless broadband services in Malaysia. SK Telecom said in a statement that the Malaysian firm has strong growth potential and that the investment will give SK Telecom experience in wireless broadband operations in an emerging market.


Hynix Semiconductor Inc. sold 5-year bonds worth US$500 million abroad that could be converted into its shares at 34,580 won (US$28.93) apiece. Hynix would sell the bonds to refinance US$583 million in convertible bonds issued in 2007, for which early redemption calls are expected in June. Holders of the new bonds, which carry a coupon rate of 2.65 percent per annum, can exercise an option to request early repayment from three years after the issue, Hynix said in a filing with the Korea Exchange.


Samsung Electronics Co. (OTC:SSNLF) Chairman Lee Kun Hee and Sony Corp. (NYSE:SNE) Chief Executive Howard Stringer agreed to continue developing mutual business ties and also discussed business cooperation in the area of liquid crystal displays used in televisions and handsets. Industry sources said that the two sides exchanged opinions about their current business tie-up and agreed to continue their relationship. The two executives mainly discussed their partnership in LCDs used in televisions and handsets. The closed-door meeting between the two companies came just two months after Lee returned as chairman of Samsung Electronics in late March.



NetEase (NASDAQ:NTES) generated net income of 452.26 million yuan (US$66.2 million) and revenues of 1.19 billion yuan (US$174 million) for the first quarter of 2010. NetEase had. The company's online games business generated 1.09 billion yuan (US$158 million) in the quarter, while advertising revenues halved to 91.55 million yuan (US$13.4 million) but having doubled compared against 41.03 million yuan (US$6 million) in the first three months of 2009. The company had a foreign exchange loss of 39.5 million yuan (US$5.8 million) in the quarter. NetEase plans to launch an expansion of its 2.5D martial arts MMORPG Heroes of Tang Dynasty in the fourth quarter of 2010, as well as expansions for Westward Journey II and III in the third quarter.

eLong (NASDAQ:LONG) generated net income of 5.94 million yuan (US$869573) from January to March this year. eLong total revenues grew 30 percent year-on-year, with hotel revenues increasing 23 percent year-on-year, and air ticketing revenues up 38 percent year-on-year. The company attributed the growth in hotel revenues to a 32 percent year-on-year jump in room nights booked, partially offset by lower commission per room night as the company's hotel mix shifted towards budget hotels and as a result of its coupon program. Air ticketing revenue growth was driven by 29 percent year-on-year growth in booking volume and an 8 percent year-on-year increase in average ticket price.


The annual sales of smartphones in China will more than quadruple over the next five years, achieving a CAGR of more than 29 percent by the end of 2015. Coda Research Consultancy forecasts that sales in 2015 will total 97.6 million units. The 3G roll-out together with corresponding faster mobile internet access will be core drivers to China experiencing the largest growth in smartphone sales worldwide. Coda forecasts that 3G sales will grow at more than 72 percent CAGR, to reach 109 million in 2014. This is on the back of a combined investment of US$23 billion in 3G networks in 2009. In the first quarter of this year, China spent another US$880 million on these. Just under one third was spent on China Mobile's home-grown TD-SCDMA network. The shortage of affordable handsets compatible with the TD-SCDMA standard has been a significant hindrance to growth in advanced handset subscriber numbers.

KongZhong (KONG) saw its revenues and net income rise in the first quarter. Revenues were US$40.64 million, up from US$29.59 million in the year-ago quarter, beating the company's revised revenue guidance. Mobile VAS revenues stood at US$25.9 million, up 9 percent year-over-year. Although the bulk of the company's mobile VAS services, both 2G and 2.5G, were negatively impacted by various new mobile operator policies implemented during the quarter, its IVR services saw a strong seasonal increase due to the Chinese New Year holiday period. Total mobile game revenues were US$9.48 million, a 92 percent increase, while revenues from downloadable mobile games were US$8.95 million representing a 112 percent increase from the same period last year. Revenues from mobile multi-player online games were US$0.53 million, a decrease of 27 percent. KongZhong expects to stabilize its online mobile game revenues in the future.

China Techfaith Wireless Communication Technology's (CHTF) first-quarter revenues grew 25.1 percent to US$60.9 million. The results benefited from the acquisition of QIGI, which had revenues of US$5.2 million and a gross margin of 39.5 percent in Q1, led by higher margin brand name mobile phone products. Revenue from the ODP segment increased to US$54.43 million, brand name phone sales segment revenue was US$5.21 million and game segment revenue was US$1.25 million. Gross margin improved to 22 percent from 18.1 percent. Net profit attributable to Techfaith rose to US$6.9 million. Cash and cash equivalents amounted to US$162.42 million at the end of the quarter.


China's 3G service subscribers reached 18.08 million by March, and related applications such as 3G video call, mobile-phone video, residential gateway and video supervision have been spreading at fast speed, said Li Yizhong, Minister of the Industry and Information Technology (MIIT). To promote the development of 3G technology, China Mobile (NYSE:CHL) would allocate 15 billion yuan of subsidies to develop 3G applications in 2010. There were more than 1.09 billion phone users in China, including 780 million mobile phone users and 310 million fixed-phone users. 3G and TD-SCDMA achieved great progress, and the number of 3G users in China has touched 18.08 million.

China Mobile (CHL) had 5.33 million new subscribers in April to bring its total number of customers to 544.21 million. Its 3G network users reached 8.4 million by April 30. China Unicom (NYSE:CHU) added a net of 681,000 3G users and 733,000 2G users in April, to bring its respective 3G and 2G user totals to 5.51 million and 148 million subscribers. The company gained 596,000 broadband users in the month to reach 42.1 million, while fixed-line users fell by 201,000 to 101.64 million. China Telecom had a total of 183.03 million fixed-line subscribers by the end of April, after losing 1.2 million during the month, while the carrier's broadband subscriber base grew by 810,000 to 56.65 million by the end of April. The company's mobile user base increased by 3.03 million in April to reach a total of 68.48 million, including CDMA and PHS subscribers.

ZTE (OTCPK:ZTCOF) expects its revenues to grow by 30 percent over the next few years, boosted by the mobile handset business. ZTE expects mobile handset revenues to rise by 35 percent this year and account for half of the group's revenues in five years, the Shenzhen Daily reports citing He Shiyou, head of mobile terminals at ZTE. The mobile handset business is ZTE's fasted growing unit and it posted a 40 percent rise in sales in the first quarter. In five years, ZTE expects mobile handset revenues to make up 50 percent of group revenues.

China Mobile Ltd (CHL) saw the number of its 3G service subscribers increase by 700,000 to 8.4 million in April. The company's total mobile subscribers hit 544.2 million, added 5.3 million new users in April. China Mobile last week announced that it sees more than double the number of its 3G base stations to 200,000 this year in a push to expand its TD-SCDMA coverage nationwide. China Mobile's net profit in the first quarter of the year was 1.1 percent more than a year earlier. Revenue for the first three months grew 7.7 percent from a year earlier.

Shenzhen Wireless (OTC:SHZNF) and Mobile Streams have signed a content deal. The deal will see mobile handsets in China, Thailand, Malaysia, Vietnam and the Philippines embedded with content from Mobile Streams' catalogue. The newly manufactured handsets will be preinstalled with a range of content such as games, music, wallpapers, video and applications. The first batch of handsets will be available to customers in South East Asia before being rolled-out to other regions including Latin America, Middle-East and North Africa.

Media, Entertainment and Gaming

· Focus Media (NASDAQ:FMCN) generated revenues of US$124.88 million for the first quarter of 2010 but with net loss of US$954,000. LCD advertising had revenues of US$55.43 million. The company's poster frame network brought in US$27.41 million, while internet advertising made US$29.44 million. The company expects second quarter net revenues from its LCD display, in-store and poster frame networks to be at US$99 million to US$101.5 million and net revenues from its internet advertising and its movie theater and traditional outdoor billboard network of US$43 million to US$45 million.

· Digital pay-TV technology provider NDS (NNDS) plans to triple its investment in local people and infrastructure in China this year. The company will further increase the staff numbers, with local hires as well as the relocation of a percentage of existing NDS R&D resource from India and Israel. With this new investment, NDS will increase employee numbers at the R&D facility in Shenzhen as well as increasing its presence in locations that are close to customers, including in Beijing and Shanghai. NDS will partner with Chinese companies in the consumer electronics space, semiconductors, systems integration, and digital-TV applications markets. NDS has already partnered with Changhong to develop a range of applications for the Chinese market, targeted at convergence and the NGB initiative. NDS will market these applications to other regions. The company is also partnering with value-added TV service provider DOXTV, to bring DVR and push VoD functionality in China.

· merged with Hai Run Movies & TV Production to become the sole domestic online provider of Hai Run films and TV dramas. The site will launch a specific channel to house Hai Run's popular dramas and upcoming products, while Hai Run's performing artists will open official sites at The partners will also jointly produce an internet-based drama Tianya Ghost Talk ("Tianya Guihua"). has launched "Orange Box," its TV drama production project, and a talent management project, "No. 6 Warehouse". avoids accelerating costs of licensing video content, while also differentiating itself from other domestic video providers by becoming a producer. The company will release more than 500,000 yuan (US$73, 188) on each episode of its in-house produced dramas. The company received fifth-round funding of US$57 million in April.

· China Digital TV Holding Co., Ltd. (STV), a provider of conditional access systems to China's digital television market, announced that it has made a joint investment in OpenV China Holdings Co., a Chinese online video company, alongside one of OpenV’s existing shareholders. China Digital TV’s investment will be up to US$14.5 million, consisting of consideration for an initial equity investment, a convertible loan to OpenV and consideration payable upon the potential exercise of a warrant to purchase additional shares of OpenV. the full conversion of the convertible loan into OpenV’s shares and the full exercise of the warrant, China Digital TV’s equity interest in OpenV would be approximately 25% to 31%. The aggregate amount of the investment from both investors will be up to US$17 million in cash. OpenV currently has entered into cooperation agreements with more than 40 of China’s TV stations, including six strategic content partners, namely, CCTV, Beijing TV, Shanghai Media Group, Phoenix TV, Hunan TV and China Entertainment TV. OpenV offers 578 online TV channels and owns millions of hours of licensed video content. As of the end of 2009, OpenV’s daily average traffic reached more than 55 million page views, 40 million video views and 8 million unique visitors. Only three state-run companies have obtained government IPTV licenses, namely China Central Television's (CCTV) nationwide Internet TV station CNTV, as well as Shanghai Media Group and WASU Digital TV Media Group.

· Kingsoft announced plan to start limited alpha testing of its in-house developed 2.5D martial arts MMORPG Moon Online. The MMORPG is adapted from Kingsoft's game for PC with the same name and features family systems, pets and dungeons. Kingsoft announced plans to start second-round alpha testing of its licensed 3D Chinese fantasy MMORPG Feitian Fengyun in May.

· Kingsoft had net income of 89.74 million yuan (US$13.1 million) in the first quarter of 2009, down 26 percent quarter-on-quarter and 11 percent year-on-year. Revenues for the quarter decreased 18 percent sequentially and increased 4 percent annually, of which entertainment software business revenues declined 19 percent sequentially and 1 percent annually. The quarter-on-quarter decrease was primarily due to seasonality and the company's termination of its license for Shui Hu Q Zhuan.

· Amico Games Corp., an interactive entertainment media company specializing in developing multi-player networked mobile phone games that are played over the mobile internet in China, will be implementing a payment channel called YeePay. This new payment channel will enable the company's cell phone game subscribers to pay through Internet, Fixed Line Telephone, and Mobile phone conveniently, as well as decrease the company's payment channel costs from 5 percent to 1 percent. The company's cell phone game subscribers pay for cell phone games by Q-coin, short message, and mobile phone rechargeable card. Once YeePay is fully integrated into the company's payment system, subscribers will be able to pay for Amico's games through the Internet, their mobile phone, fixed-line telephone, and electric banking system. In the past, the company's subscribers mainly paid for games through message and mobile phone rechargeable cards, which charged 5 percent of payment channel costs to Amico, whereas the electric banking system only charges 1 percent as payment channel costs.

· Zynga, a U.S. social network game developer is scheduled to launch in Asia on May 20 through its acquisition of XPD Media. Facebook and Zynga entered a five-year strategic partnership for social gaming on Facebook. XPD Media currently has 40 employees and has received investment from True Ventures and Pilot Group. XPD Media CEO Robin Chan will become Zynga’s general manager of Asian business development, and XPD Media Co-Founder Andy Tian will lead Zynga's Beijing studio. Zygna sold US$180 million of its securities to Digital Sky Technologies, the Russian global internet investment group that received investment from Tencent last month. Tencent announced that it would invest approximately US$300 million for a 10.26 percent stake in DST.

· A group of publishers in China are looking to jump into the red-hot digital publishing market, with an aim to profit from the opportunities in the 3G era. China Publishing Group will deepen its cooperation with Oracle Corp. (NYSE:ORCL) for an expansion in digital publishing market. The partnership will enable the Chinese publisher to set up a digital publishing resource management platform with the general content management solution provided by Oracle. The China Publishing-Oracle alliance comes at a time when publishers across the country are gearing up for a footing in the e-reading market. Phoenix Publishing & Media Group has entered into a letter of intent with Taiwan-based Prime View International Co., Ltd. for the launch of products catering for the education market. Chongqing Publishing Group has joined forces with Hanwang Technology Co., Ltd. to create the biggest e-book production base in southwest China.

· Shanda Online Holdings agreed with Aurora Interactive to co-operate Aurora's in-house developed 3D fantasy MMORPG Aurora World from June. SDO will partially cover online operations and marketing expenses of the game. The game is currently in the alpha testing stage and is expected to enter closed beta testing. SDO previously has only co-operated games already in commercial play. Shanda Online shall start alpha testing of Ge Zi Ke.


Qualcomm (NASDAQ:QCOM) has opened a new, multi-million dollar R&D Centre in Shanghai. The R&D centre is part of Qualcomm's ongoing efforts to both utilize the growing pool of telecommunications engineering talent and enhance local R&D capabilities for the wireless communications market in China. The R&D centre will focus on advancing chipset products to address China's need for high quality and affordable 3G handsets with customized features and time-to-market advantages. The Shanghai centre is the second research and development facility of Qualcomm in China. Qualcomm already has an established CDMA R&D centre in Beijing, in addition to branch offices in Shanghai and Shenzhen.

Acorn International, Inc. (NYSE:ATV) announced its unaudited financial results for the quarter ended March 31, 2010. Net revenues were US$70.3 million, a decrease of 19.2 percent. Gross profit was US$30.9 million, a decrease of 27.2 percent. Gross margin was 44.0 percent, compared to 48.8 percent in the same period of 2009. Operating loss was US$0.5 million, compared to an operating income of US$8.1 million in the first quarter of 2009. Other income was US$1.8 million. Income from continuing operations was US$0.8 million. Net income from continuing operations attributable to Acorn was US$0.9 million. Share-based compensation expenses were US$0.1 million for the first quarter of 2010, compared to US$0.8 million for the same period last year.

Alternative Energy

Baoding Tianwei Baobian Electric subsidiary Tianwei Silicon plans to put its 2.7 billion yuan (US$395 million) polysilicon project into production in June 2010. The project has an annual production capacity of 3,000 metric tons (MT) and is expected to reach a capacity of 6,000MT by 2011. The company plans to add another 5,000MT of polysilicon capacity in the next five years. Baoding Tianwei Group agreed to invest 4 billion yuan (US$585 million) in a solar module project in Yangzhou, Jiangsu province.

Solarfun Power Holdings (SOLF) had net income of US$20.36 million in the first quarter of 2010. Net revenues for the quarter stood at US$216.21 million, an increase of 17.8 percent from the previous quarter and an increase of 115.7 percent annually. The company attributes the increase in revenues for the quarter to higher shipment volumes. Despite a 9.7 percent decline in average selling price to US$1.76 per watt during the quarter, the company's gross margin remained flat quarter-on-quarter at 18.5 percent.

China's Photovoltaics (PV) equipment manufacturers saw an increase in orders recently with inventories down and Germany's recent announcement to reduce PV subsidies. European PV producers are facing huge pressures and are moving production lines to China, for production cost is low here. China's silicon wafers are in tight supply. Producers are in a hurry to increase production. It is very hard to even buy wafer production equipment. It usually takes only three months for manufacturers to deliver crystal growth and slicing equipment. But this year, it is taking four or five months. The company saw no reduction of orders from Europe. Demand from new emerging markets including the Middle East, India, South Africa and Japan increased sharply, which is expected to offset possible losses in Europe.

Disclosure: No positions