Chinese Tech Stock Weekly Summary

by: IRG Ltd

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


• Sina (NASDAQ:SINA) reported a 15 percent rise in its net revenues to US$64.3 million for the quarter ended Sept. 30, 2007. With its advertising revenues accounting for more than 70 percent of the Internet portal’s total revenues, Sina posted a 40 percent surge in its advertising revenues for the third quarter of 2007 to reach US$45.8 million from the same period last year, with advertising revenues in China by themselves rising 41 percent year over year or 11 percent quarter over quarter to US$44.9 million for the third quarter of 2007. Sina said its non-advertising revenues went down by 21 percent for the third quarter of 2007 to US$18.5 million from the same period last year and flat over the previous quarter. Its MVAS (Mobile Value-Added services) revenues also posted a 24 percent decline year over year to US$16.6 million in the third quarter of 2007. Sina said its revenues from SMS and IVR, which accounted for 74 percent of MVAS revenues in the third quarter of 2007, registered a 32 percent decline year over year, with the company ascribing the results to policy changes that have affected mobile operators in China. For the third quarter of 2005, the company reported operating expenses dropping by 3 percent to US$24.7 million, its net income posting a 60 percent climb to US$17.2million from the same period last year. As of September 30, 2007, Sina's cash, cash equivalents and short-term investments reached US$439.4 million, compared to US$362.8 million as of December 31, 2006.

• (NASDAQ:LONG) reported an operating loss of 9.3 million yuan (US$1.2 million) for the third quarter ended September 30, 2007, compared to an operating income of 1.7 million yuan (US$229,000) it posted in the third quarter of 2006. The company announced a 12 percent rise in its travel revenues, which is composed of hotel, air and other travel product and service revenues, before business tax and surcharges, to 80.9 million yuan (US$10.8 million) for the third quarter 2007 compared with the prior year period. The Internet travel provider posted a net loss of 7.4 million yuan (US$997,000) for the third quarter, compared with net income of 2.7 million yuan (US$364,000) for the third quarter of 2006.

• Industry sources indicate that (NASDAQ:BIDU) is working with some of China's leading telephone network operators on the new mobile search applications for the launch of 3G mobile telecommunications services in China. Baidu is already working with China Mobile and China Netcom Group on new services for the launch of 3G in China next year. Industry observers believe Google is preparing to dominate this sector. At present, Baidu remains as more popular than Google in China. According to a report by China Intelli Consulting [CIC] in September, Baidu held 69.5 percent of the search market in Beijing, Shanghai and Guangzhou, up 7.6 percent over last year. The same source said Google's share dropped 1.1 percent to 23 percent.

Media, Entertainment and Gaming

• The9 Limited (NASDAQ:NCTY), a leading online game operator in China, announced today its unaudited financial results for the third quarter ended September 30, 2007, with its net revenues for the third quarter of 2007 registering a 17 percent quarter-over-quarter and by 35 percent year-overyear to 316.0 million yuan (US$42.2 million). The company said its net revenues attributable to the operations of subscription-based games went up by 13 percent quarter- over-quarter and by 21 percent year-over-year to 278.9 million yuan (US$37.2 million) in the third quarter of 2007. Its net revenues attributable to the operations of item-sales based games, which included revenues from ingame item sales and installation package sales, increased by 97 percent quarter-over-quarter to 32 million yuan (US$4.3 million) in the third quarter of 2007. The9 posted a 25 percent decline in its net income for the third quarter of 2007 to 38.2 million yuan (US$5.1 million) from 50.6 million yuan (US$6.8 million) in the second quarter of 2007, and a 41 percent drop from 64.3 million yuan (US$8.6 million) in the third quarter of 2006.


• Beijing Unicom announced the launching of a new service called Enterprise Almightiness for enterprise users. The company described the new offering as giving more convenience, efficiency and economical communications services for enterprise clients. Under the service, clients belonging to a particular company and using China Unicom's (NYSE:CHU) mobile phone or its CDMA or GSM services will be able to form a group by connecting their mobile phones with that of the company's fixed telephones.

• Gome, an electronics retailer, announced that it has established its communications company through which it will enter the Chinese communications market. Gome said the new company is expected to integrate the company’s existing mobile phone channels together with the management of its mobile phone business in the stores of Gome and Yongle, which Gome acquired earlier. According to media sources, the Gome Communications Company is aiming to put up some 500 mobile phone outlets in cities all over the country in the coming year. The company said it aims to generate 19.8million mobile phone sales in 2008. Gome said it has plans of setting up independent mobile phone selling sites, TV shopping, online shopping and mobile phone maintenance service.

• According to the CEO of China Mobile (NYSE:CHL), the company is in talks with Apple (NASDAQ:AAPL) on bringing the computer maker's iPhone to the Chinese market. Sources indicate the introduction of the iPhone will happen in the early parts of next year. China Mobile said that at present, there are still threshing out issues about income distribution between the two companies. Industry observers are saying that China Mobile may attach the selling of iPhone with its own services once it becomes the agent for Apple. Earlier, Apple said it plans to launch the product in Asia next year, with the aim of generating a total sale of 10 million in the area in 2008. To achieve this target, Apple is also negotiating with other operators from Asia.


• China Netcom (CN-OLD) disclosed its plans to make an investment of about 15 billion yuan (US$2 billion) for the upgrading of its fiber cable. The project involves a fiber-to-the-home [FTTH] undertaking and is seen as being finished within five years. The company also said that by 2010, it aims to be the leading broadband communications and multi-media service provider in China by 2010. China Telecom has already begun testing FTTH on a trial basis in four Chinese cities of Beijing, Guangzhou, Wuhan and Shanghai.

• China Telecom (NYSE:CHA) reported an update on its digital music service and its work with eight music companies, which include Warner, EMI Music, UMG, Sony BMG Music Entertainment, Rock Music, Hurray!, Taihe Rye Music and Music Nation Group. China Telecom’s digital music is a combination of different music services, including ringtones, online trial listening, online downloads and search, and music services. Under the alliance, China Telecom and the music companies announced the launch of a new music brand called Love Music. China Telecom says it has already successfully launched the service in 21 provinces in southern China.


• According to the country’s Ministry of Information Industry Software and Integrated Circuit Promotion Center, it has signed an agreement with Xiyong Park to set up a branch in Chongqing. The ministry said this will be the first branch of MII ever set up in the middle and western parts of China. The announcement said the construction will begin soon and will include several features, including an intellectual property rights and patent declaration consulting services center. The center will also have a training center, a finance consulting center, as well as areas for software assessment and software outsourcing services.


• Haier and Intel (NASDAQ:INTC) announced their entering into a joint marketing program in Qingdao, a move that follows their signing of a memorandum of understanding [MOU] covering a range of strategic cooperation. The agreement will see the two companies working together on joint promotions in which they will make marketing goals, strategies and designs. Industry observers see this agreement between Haier and Intel as bringing more flexibility in their cooperation in the terminal market.

Information Technology

• EDS (NASDAQ:EDS), a global IT outsourcing company, announced that it has set up a global service center in Wuhan, making it the company’s first in the country. EDS also has three global service centersin India, Argentina and Hungary. The company serves clients found in more than 60 countries and regions. In a related development, the general manager of EDS Greater China was quoted as saying EDS will get another city as a site for another global service center in 2008.

Disclaimer: IRG is not responsible for the accuracy of the news compiled within this article, which is based on publicly available information.