Chinese Tech Stock Weekly Report

by: IRG Ltd

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


Industry sources said top U.S. online matchmakers are hoping to link up with Chinese partners to promote web-dating services, in an effort to explore new profit streams in emerging markets. Among these online services are eHarmony and IAC/InterActiveCorp (IACI), which owns, said it has already secured, one of China's biggest online dating service providers, as its main target for a potential stake purchase or business partnership. Sources said eHarmony,'s top rival in the U.S. market, is also looking at a number of potential partners in China, though eHarmony, which has over 12 million users globally, has yet to secure a specific target. and eHarmony compete with Yahoo Inc.’s (YHOO) Yahoo Personals in the U.S. Earlier in November, Inc., controlled by online software company CDC Corp., said it would team up with Meetic of France for business promotion. Meetic in July also launched a localized Chinese site called "Mi Tang," or "Sweetie" in English. Sources said a Meetic-led venture capital consortium is also expected to invest US$20 million in a controlling stake in Beijing-based online dating Web site iResearch said the country's online service market is expected to grow by some 60 percent annually to 653 million yuan (US$84.2 million) by 2008.

According to the Internet Society of China [ISC], the revenue of China's online game industry has reached 5.9 billion yuan (US$761.2 million) in 2006. ISC estimates that China's online game market is expected to post a 20.8 percent growth annually and reach 7.2 billion yuan (US$929 million) in 2007 and 9 billion yuan (US$1.1 billion) by 2008. Compared with ISC, IDC's statistics appear to be more optimistic about China's online game industry, with IDC estimating that from 2006 to 2011, China's online game industry will grow at a compound rate of 30.2 percent, with the whole market value hitting 24.4 billion yuan (US$3.1 billion) by 2011. (NASDAQ:BIDU) reported its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2006 showing total revenues in the fourth quarter 2006 posting a 136.1 percent growth to 271.3 million yuan (US$35 million) from the corresponding period in 2005. Total revenues in 2006 went up 162.5 percent to 837.8 million yuan (US$108.1 million) from 2005. Online marketing revenues for the fourth quarter were 269.8 million yuan (US$34.8 million), representing a 141.4 percent increase from the fourth quarter 2005, with the growth ascribed to the increases in both the number of active online marketing customers and revenue per customer. Baidu said it has registered more than 108,000 active online marketing customers in the fourth quarter of 2006, representing a 5.9 percent increase from the previous quarter. Research and development expenses went up 46.2 percent to 20.9 million yuan (US$2.6 million), from the corresponding period in 2005, the growth was attributed mainly to headcount increases. Baidu currently expects to generate total revenues ranging from 265 to 275 million yuan (US$34.1 to US$35.4 million) for the first quarter of 2007, representing a 95 to 103 percent rise from the corresponding period in 2006

SmartPay said it has unveiled the beta launch of, the company's platform made to centralize its mobile, telephone and Internet-based payment services for consumers in China. According to the CEO of SmartPay, the new platform is “a logical extension of the head start SmartPay has had in developing mobile and telephone-based payments.” SmartPay currently allows users to pay their phone bills, utility bills, buy lottery tickets, purchase air tickets and make other purchases, primarily using their mobile phones or fixed-line telephones. The platform is seen as giving a convenient, centralized source of information for these transactions, customer care, back office support and other necessary functions. In addition, will allow the SmartPay community to communicate and share services with one another, which include mobile-based peer-to-peer payments. Media, Entertainment and Gaming

The9 (NASDAQ:NCTY)announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2006, with the company posting a 21 percent increase in its net revenues to 282.7 million yuan (US$36.4 million) from the third quarter of 2006. For fiscal year 2006, Baidu said its net revenues surged by 112 percent to 985.8 million yuan (US$127.1 million) from 465 million yuan (US$60 million) in fiscal year 2005. The company explained the substantial year-over-year revenue increase as primarily attributable to The9 initiating commercial operation of Blizzard Entertainment's World of Warcraft game in mainland China in June 2005. For the fourth quarter and fiscal year 2006, net revenues attributable to the operations of WoW, including game playing time, merchandise sales and other related revenues, were 281.4 million yuan (US$36.3 million) and 977.6 million yuan (US$126.1 million), respectively. For the fourth quarter of 2006, online game services gross revenues went up 23 percent to 296.7 million yuan (US$38.2 million) from the third quarter of 2006.


China Mobile (NYSE:CHL) announced plans to build its TD network in the Chinese cities of Beijing, Shanghai, Shenyang, Tianjin, Qinhuangdao, Guangzhou, Shenzhen and Xiamen. Under the program, China Mobile plans to build 8,602 TD outdoor base stations and 3,772 set indoor distribution systems in these eight cities before October this year, of which 2,059 outdoor base stations and 1,015 indoor distribution systems will be built in Beijing. Upon completion, the network will cover the inner area of the Fifth Ring Road and may be extended to the outside of the Fifth Ring Road by 1-5 kilometers, covering a total of 900 square kilometers. China Mobile has already begun to build its TD-SCDMA experimental network in Beijing.

China Unicom (NYSE:CHU) and payment services provider SmartPay announced their launching of "China Unicom Mobile Wallet" in Guangdong Province, the largest province in China by number of mobile users and total mobile revenues. Guangdong-based China Unicom will offer users enjoy convenient mobile payment services using Unicom Mobile Wallet after a simple registration process. These services include mobile top-up, payment of utility bills, purchasing of lottery tickets, insurance and other multifunctional services. Guangdong Unicom users can settle these payments via mobile phones instead of cash and credit cards, anywhere and anytime. The first highlight of Guangdong Unicom's Mobile Wallet project will be promotions for Mobile Lottery Ticketing to welcome the Chinese New Year.

China Netcom Group Corp (CN-OLD), the mainland's No2 fixed-line operator, has expressed interest in acquiring the GSM mobile network of China Unicom through a share swap, a move that pushed up the value of its stocks. A top official of China Netcom said that the company was more interested in operating Unicom's GSM service, a European-based mobile service, than its U.S.-based CDMA service. The statement triggered speculations that Netcom might be awarded a Europeanbased WCDMA 3G mobile-telephone license. The mainland government is expected to issue at least three licenses for 3G networks this year, with two to be based on international technologies already in use overseas and one on the country's home-grown TD-SCDMA standard. According to analysts, China Telecom Corp, the country's larger fixed-line operator, might get a CDMA 2000 standard, with China Mobile promoting the TD-SCDMA standard.


e-Future Information Technology Inc. (NASDAQ:EFUT), a leading supply chain management software and services provider in China, announced that Samsung Networks China, a global provider of network and telecommunications solutions, selected e-Future to provide mobile point-of-sale [POS] solutions and services for retailers in China. According to the agreement, e-Future will develop POS solutions and services based on Samsung Networks's line of mobile POS equipment and devices. The partnership is expected to produce a widespread rollout of mobile POS systems for retailers in China. e-Future plans to introduce the solution from Samsung Networks to e-Future's current base of retail clients, with a focus on e- Future's top 100 department store and specialty store clients. e-Future is a leading provider of integrated software and professional services for manufacturers, distributors, wholesalers, logistics companies and retailers in China's supply chain market. Hardware

IDT International, a maker of consumer electronic products, announced a 49 percent rise in its profit in the fiscal third quarter to HK$30.1 million (US$3.8 million) last year from HK$20.2 million (US$2.5 million). The company, however, said its sales dropped 13 percent to HK$709 million (US$90.7 million). The company said its higher quarterly profit helped narrow its net loss to HK$10.5 million (US$1.3 million) for the nine months to December from HK$164 million (US$21 million) a year ago. As part of its restructuring, the company discontinued the MP3 player and digital camera businesses during the first quarter.


Industry sources said Spreadtrum Communications, a mainland mobile-phone chip designer, has filed its confidential documents with U.S. regulators paving the way for an IPO for of about US$200 million on the NASDAQ. The company makes baseband chips, a key mobile-phone component responsible for communication and handset commands. Its clients have been described as “highly cost-sensitive companies” that bundle the chips with other parts to sell to handset makers. Analysts are saying proceeds from the IPO would help the company boost its production. Spreadtrum Communications is part of a market valued at between US$1.8 billion and US$3.6 billion.


Sources from Taiwan Hon Hai Precision, the parent company of Foxconn, indicated that Foxconn will shell out more than US$1 billion to build two industrial parks in China's northeastern Liaoning Province. This is the first time that Foxconn made such a large investment in this part of China. The two parks will be located in Shenyang and Yingkou, respectively. The park in Shenyang will be mainly engaged in making precision and digital control machine tools and car parts, while the one at Yingkou will be involved in manufacturing electronics including printing circuit panels.


China Netcom announced that it is constructing a new base centered on a next generation broadband service application project lab. In order to facilitate the construction of the new lab, China Netcom is cooperating with other research institutions including the China Academy of Science, Peking University and Beijing University of Post and Telecommunications. In recent years, China Netcom has made dramatic headway in a series of new projects, which observers said have been widely acclaimed by the Chinese government.

Telecom Group's Orange Business Services of France and China Telecom announced entering into a commercial partnership to offer advanced Multi-Protocol Label Switching IP VPN services to multinational corporations in China. Under the alliance, Orange Business Services will further expand its network coverage through China Telecom's Next Generation Network to 200 additional cities, including Dongguan, Dalian, Guangzhou, Shenzhen and Xiamen. The extended network is seen as providing a variety of advanced IP services, including virtual private network and high-quality IP voice and video streaming. Under the agreement, Orange Business Services will also further increase its quality-of-service to multinational businesses in China, through managed IP services and high-quality customer access and management capabilities. Observers see the agreement as demonstrating Orange Business Services' commitment to being an integrated communications provider in China, providing total infrastructure and network management as well as integration and maintenance services. Launched in 2006, China Telecom's Next Generation Network is a commercial network that currently covers 200 cities in China with points of presence in London, Frankfurt, Hong Kong, Singapore, Los Angeles, San Jose and New York.

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