Monday, February 28, 2005

China Sets Threshold for 3G Mobile Phone Makers

From China Sets Threshold for 3G Mobile Phone Makers

"China rules that manufacturers must present their applications and obtain approval before producing and selling mobile telecommunication equipment and mobile phones, including 2G and3G switch equipment, base station equipment, and cell phones."

"China also rules that the registered capital of the new mobile phone manufacturing project must be no less than CNY 200 million (US$ 23 million), and the manufacturers must establish research and development centers, owning perfect development platforms and research environment, having designing capability in complete phones and cell circuit hardware, and etc." Read more

Shanda-Sina Deal: Yahoo! Denies Interest in Sina Stake

From Yahoo! Denies Chatter Re Anti-Shanda Sina Stake

"Over the weekend, rumors had amassed that Yahoo! planned to grab a stake in Beijing-based Web portal operator Sina. ... Yahoo! was expected to make the investment in order to head off a hostile takeover of Sina by online gaming firm Shanda Interactive Entertainment. ... But in the aftermath, Yahoo! denied it would acquire Sina shares."

"The National Business Daily quoted Yahoo China President Zhou Hongyi as saying, "It's neither possible nor meaningful for Yahoo! to get involved now." Read more

Sunday, February 27, 2005

Shanda-Sina Deal: Shanda Couldn't Wait To Spend The Money

From ChinaTechNews: Shanda Couldn't Wait To Spend The Money

"When I wrote a column about the Shanda IPO several months ago, I knew Shanda might decide to squander away its money, but I didn't know how fast my prediction would come true. Fresh from raising upwards of US$200-300 million in both the equity and debt markets, Shanda has now, in the space of a few short months, decided to spend most of the money on a marginally-related company. This is truly remarkable and could even be a world record."

"There are two problems with this deal. First, when Shanda did its IPO last year it marketed itself as an online games creator, which it is. The money it asked from investors was presumably to go to developing Shanda's online games. But is a web portal. Sure, Sina has an online games business but that is only one part of Sina's company. So Shanda is using its IPO money on something that bears little relationship to its reason for asking for the money." Read more

Saturday, February 26, 2005

U.S. Companies Not Keeping Pace With New Chinese and Indian Competition in Technology and Telecom

From RedNova: U.S. Companies Not Keeping Pace With New Competitive World Order in Technology and Telecom, Study Finds

"A new world order of competition is emerging in the global technology and telecommunications industries. But most North American companies are not keeping pace with the changes, according to a new study conducted by two executive thought leadership organizations, in cooperation with global management consulting firm A.T. Kearney. In fact, two-thirds of the more than 300 North American executives surveyed say they have not even instituted formal practices for tracking and analyzing their competition."

""U.S. companies risk falling behind global forces that are reshaping the competitive landscape in technology and telecommunications," said John Ciacchella, a vice president in A.T. Kearney's High Technology Practice. "The shift from enterprise to consumer, new global players from China and India, industry consolidation, and next wave technologies, such as VoIP, digital media, 3G, broadband to the home and WiFi/WiMax -- are all factors driving big dislocations in the market. ... " Read more

Friday, February 25, 2005

SOHU.COM Announces Launch of Upgraded Search Engine SoGou 2.0

From Press Release: SOHU Announces Launch of Upgraded Search Engine SoGou 2.0

"SOHU.COM Inc. (Nasdaq: SOHU), China's leading online media, communications, commerce and mobile value-added services company, today announced it has launched the upgraded version of its search engine SoGou with an expanded breadth of 500 million Chinese language indexed web pages, higher updating speed and shorter search time."

"This is the year in which our prime focus is on bringing to the market a superior search product based on powerful technology that gives our users an excellent search experience. Search is one of the most promising areas of growth in the Chinese Internet market and our goal is to be a top player in this market," said Charles Zhang, Chairman and CEO of SOHU." Read more

Thursday, February 24, 2005

How China Will Change Your Business

From How China Will Change Your Business

"Fourteen things every entrepreneur should know about the capitalist explosion heading our way."

1. China's economy is much larger than the official numbers show.
2. The growth of China's economy has no equal in modern history.
3. China is winning the global competition for investment capital.
4. China can be a bully.
5. China's economy is an entrepreneurial economy.
6. The most daunting thing about China is not its ability to make cheap consumer goods.
7. China is closing the research and development gap -- fast.
8. China now sets the global benchmark for prices.
9. China's growth is making raw materials more expensive.
10. No company has embraced China's potential more vigorously than Wal-Mart.
11. There are hidden costs associated with doing business in China.
12. Piracy is a problem.
13. China's heavy buying of U.S. debt has lowered the cost of money in the U.S.
14. Americans and Chinese have become reliant on each other's most controversial habits.

Read more

China's Net Gamers: Ready to Rumble

From BusinessWeek: China's Net Gamers: Ready to Rumble

"On Feb. 18, the Shanghai gaming company (Shanda Interactive) revealed that it had quietly accumulated almost 20% of Sina's stock. That made Shanda the largest shareholder and has set the stage for something that China has rarely if ever seen: a hostile takeover battle. The battle could be all the more hostile because Shanda and Sina are competitors to win the allegiance of China's growing population of online gaming fans."

"The Chinese government, recognizing that online gaming has the potential to be a blockbuster business, is pushing several measures to support the industry. Beijing has launched an online-gaming project. In typical communist fashion, it's a five-year plan to publish 100 homegrown games."

"Another Shanghai-based operator, The9, recently went public on Nasdaq. And Sina has struck a partnership with NCsoft, the premier Korean gaming company. The increased competition means Shanda must find ways to grow and diversify. One way is to reduce reliance on PCs by making Shanda's games available on TV. Shanda has been working with Intel and graphics-chip designer ATI to develop a set-top box to do just that." Read more

PCCW partners with China Netcom (China Network)

From MarketWatch: PCCW partners with China Netcom

"China Network and PCCW agreed to from a "strategic committee" and working groups to scout business opportunities, the Wall Street Journal reported on its website.

The plan comes on the heels of an agreement for China Network, or China Netcom, to buy a 20 percent stake in PCCW for about $1 billion, the Journal reported.

China Netcom Chairman Zhang Chunjiang said the companies could team in a number of areas, including broadband television, mobile phone service and real estate, according to the report. Zhang also said the companies could combine parts of their international businesses, the Journal reported." Read more

China's Cellular-Gear Maker ZTE - A Global Titan Telecom?

From BusinessWeek:

"China's No. 2 cellular-gear maker (ZTE) has launched a campaign to break into the ranks of Nokia and Motorola"

"ZT-who? The company, based just north of Hong Kong in Shenzhen, is little known in the West. But it's already China's second-biggest telecom-equipment vendor, after crosstown rival Huawei Technologies Co. Sales of its handsets, base stations, switches, software, and broadband networking gear grew 35%, to $4.1 billion, last year. Profits jumped 50%, to an estimated $186 million, according to brokerage DBS Vickers Securities. And exports soared 170%, to $1.6 billion."

"As ZTE picks up the pace, both it and Huawei are shaking up the telecom industry worldwide. With their low-cost manufacturing, vast pools of engineering talent, and abundant supply of customer-service technicians, the Shenzhen pair "really could change the structure of the industry,"says Andrew Chetham, an analyst with Gartner Inc. in Hong Kong. "In five years' time, Western companies [won't be able to] keep up with their research and development spending because of their low-cost advantage." Read more

Chase Begins for Chinese Gamers - Sina Deal Puts China in Play

From TheStreet: Sina Deal Puts China in Play

"The firing gun that started the race was a below-the-radar purchase of a 19.5% stake in Sina (SINA), China's biggest Internet portal, by Shanda Interactive Entertainment (SNDA), China's leader in online games. ... Shanda is now in a position to play kingmaker at Sina," said Jason Brueschke, an analyst with Pacific Growth Equities, which performs no underwriting for companies. "They can now dictate, if not strongly influence, whether Sina is bought and who it would be sold to."

"The battle for Sina might end up coming down to two unlikely rivals: Yahoo! (YHOO), the American online media giant that analysts say has been quietly courting Sina for a takeover for some time, and Softbank, a Japanese venture capital firm that is Yahoo!'s co-investor in Yahoo! Japan. Softbank is a key backer in the SB Asia Infrastructure Fund, which controls a 15% stake in Shanda."

"But for both companies -- and for any non-Chinese company seeking a strong foothold in China's Internet sector -- there are few options beyond Sina, which is only 15% owned by Stone Electronic and directors. According to Goldman Sachs analyst James Mitchell, the other major Internet companies in China -- such as Shanda, NetEase (NTES) and Tencent -- are majority-owned by founders and directors. The closest is (SOHU), which is 40% owned by controlling shareholders." Read more

Huawei threatens incumbent telecom equipment vendors

From Light Reading: Huawei Gains Ground in HR Survey

"Incumbent telecom equipment vendors should keep an eye out for Chinese manufacturer Huawei Technologies Co. Ltd., which is gaining ground quickly as a market leader, according to Heavy Reading's 2005 Wireline Telecom Equipment Market Perception Study, which was released today."

"Huawei's rapid rise in Europe shows that service providers are willing to break from existing suppliers for strategic equipment purchases, a fact that has to concern Huawei competitors. More than 33 percent of respondents ranked Huawei as the top vendor based on price, a significant lead over #2 Juniper Networks Inc., which nabbed 25.4 percent of the vote."

"Huawei's most remarkable score came in the service and support category, where it received a rating of 16.7 percent, fourth-best in this group," the authors write." Read more

Wednesday, February 23, 2005

The9: Unaudited Fourth Quarter and Fiscal Year 2004 Financial Results

From ChinaTechNews: The9 Shows Small Increase In Quarterly Revenue For Online Games

"For the fourth quarter 2004, The9 Limited (NCTY) reported net revenues of US$1.0 million, an increase of 0.6% from the third quarter of the year. The company announced these unaudited results today.

For the entire year of 2004, the company says its net revenues increased by 111.9% to RMB34.7 million (US$4.2 million) from RMB16.4 million (US$2.0 million) in 2003, the result of an increase in revenues from game operating support, website solutions and advertisement and SMS services, offset in part by the decrease in revenues from online game services and other products and services." Read more

Nokia says China will soon be its top market

From International Herald Tribune: Nokia says China will soon be its top market

"Sales in China currently account for 10 percent of Nokia's total revenue, second only to the United States at 13 percent, but rapid growth in coming years is likely to push China beyond that, Jorma Ollila, the chief executive, said during a visit to Beijing. "I would not be surprised to see China take up the No. 1 position in the next three years," he said."

"We expect that strong growth to continue," he said, adding that China was likely to account for a quarter of new mobile phone users worldwide over the next five years as its subscribers grow from 330 to 700 million."

".., analysts said China would be a focus of mobile phone growth in coming years, especially as growth in other mature markets slows. China is adding five million mobile subscribers every month, and that growth is likely to continue." Read more

China's Hungry for More - Prospects for Chinese Internet Stocks Remain Strong

From China's Hungry for More

"There is still heady growth to be found in China. With (Nasdaq: NTES) posting healthy earnings last night -- just weeks after ... Shanda Interactive (Nasdaq: SNDA) came through with a nod-worthy quarter -- is 2005 just 2003 revisited?"

"While both NetEase and Shanda have dipped since they were recommended as part of the Rule Breakers newsletter service, their outlooks remain positive. Some of the world's biggest dot-com players seem to agree after buying into the region over the past year. Amazon acquired online retailer, while eBay scooped up Chinese auction site EachNet. Yahoo! partnered with SINA to launch an auction site last year as well. 2005 may be a bit different now that Shanda is taking an interest in SINA. In other words, Chinese companies may be looking to nibble at their own, and that kind of consolidation may be just the catalyst to reintroduce investors to the region's equity potential." Read more

Sina fights off unwelcome bidders

From BBC News: Sina fights off unwelcome bidders

"Sina came up with the scheme within days of online games firm Shanda Interactive Entertainment revealing it had acquired 19.5% of Sina's shares.
If Shanda lifts its holding to 20%, Sina shareholders get the right to buy Sina shares at half price. The scheme - known as a "poison pill" would allow Sina to issue new shares. " Read more

Tuesday, February 22, 2005

Report on Microsoft’s Beijing research lab (Microsoft Advanced Technology Center (ATC))

From TechnologyReview: Microsoft: Getting from "R" to "D"

"Can a firm have too much innovation to handle?
It happens. And that problem was the dominant issue for a small group of executives from Microsoft’s Beijing research lab when they held a retreat in November 2002 at a spa in Zhuhai, not far from China’s border with Macao."

"Microsoft’s Advanced Technology Center (ATC) opened in November 2003 with 20 employees and a couple of projects. By late last year, after receiving more than 30,000 résumés from around China and sparking keen demand among Microsoft’s business divisions, it had around 100 employees, with some 17 major projects and scores of minor ones on its books; this year, the ATC is set to double in size. In the next few years, the center expects to be the key technology transfer point for a host of new products, from Web-search technologies to mobile applications and home entertainment systems. On the strength of these innovations, Hongjiang Zhang, the center’s charter director, hopes to provide a powerful alternative to Microsoft’s traditional strategy of creating products in the U.S., spiraling into Europe, and then adapting them for the Chinese market. “China is still emerging, but China is no longer just a follower,” he says. “They are starting to lead.” Read more Fourth-Quarter Profit Rises - Online Games Are Main Revenue Driver

From ChinaTechNews: Online Games Are Netease's Main Revenue Driver

"For the fourth quarter ended December 31, 2004, reported total net revenues of US$31.6 million, a 9.7% increase over total net revenues of US$28.8 million for the preceding quarter and a 55.1% increase over total revenues of US$20.4 million for the corresponding period in 2003."

"The main revenue driver for the fourth quarter was online game services which grew to RMB196.8 million (US$23.8 million), a 22.6% increase over RMB160.5 million (US$19.4 million) for the third quarter. Performance of Netease's two self-developed titles, Westward Journey Online Version 2.0 and Fantasy Westward Journey Online, was strong during the quarter, as highlighted by record average concurrent user numbers of 159,000 and 146,000, respectively, for the fourth quarter in 2004." Read more

Ctrip Reports Fourth Quarter and Full Year 2004 Unaudited Financial Results

From ArriveNet: Ctrip Reports Fourth Quarter and Full Year 2004 Unaudited Financial Results

"Highlights for the fourth quarter of 2004:
-- Net revenues were RMB98.5 million (US$11.9 million) in the fourth quarter of 2004, up 46% year-on-year. -- Operating income was RMB33.0 million (US$4.0 million) in the fourth quarter of 2004, up 49% year-on-year. -- Net income was RMB41.6 million (US$5.0 million) in the fourth quarter of 2004, up 69% year-on-year. Fully diluted earnings per ADS were RMB2.60 (US$0.31) against the original guidance of US$ 0.24 to US$ 0.25 per ADS. -- " Read more

SOHU.COM Announces Completion of Stock Repurchase Program

From prnewswire: SOHU.COM Announces Completion of Stock Repurchase Program; Repurchased 6% of Outstanding Shares

"SOHU.COM Inc.(Nasdaq: SOHU), China's leading online media, communications, commerce andmobile value-added services company, today announced it has repurchased 885,605 shares of common stock between February 10 and February 17, 2005. SOHU reports that in the period from February 10 to February 17, 2005, it purchased 885,605 shares at an average price per share of US$15.66, for total consideration of US$13,873,000 including a brokerage commission of US$0.03 pershare." Read more

Monday, February 21, 2005

Shanda-Sina Deal: Counterbid from other firms possible

From BBC News: China's Shanda buys stake in Sina

"The move may be a precursor to a full takeover, with analysts saying that a better-known international firm may also now show an interest in Sina."
China Net Investor: Yahoo! ??? -Yahoo and Sina jointly run the Chinese auction service 1Pai.

"There could still be some potential parties that could still counter bid," said Wallace Cheung, an analyst at DBS Vickers. "Even though Shanda has 20% of Sina, they still have quite a long way to take full control." However, Mr Cheung noted that a foreign company trying to take control of a Chinese internet portal firm, with its ability to filter and pass on news, may not be viewed very favourably by Beijing." Read more

Sunday, February 20, 2005

China is No 1 mobile phone maker

From China is No 1 mobile phone maker

"China has become the world's largest mobile phone producer by churning out 240 million units in 2004 and the figure is expected to increase to over 500 million this year, a report said on Monday. Out of the total production, about 140 million units were exported, the highest number in the world."
"There will be 40 (!) more firms to start manufacturing mobile phones this year. The total annual production amount may exceed 500 million units. This is more than 80 per cent of the world's total consumption," Xiao Chang, a senior economist of China Information Industry Association, said."
"Between 1999 and 2004, foreign investors have injected about $3.6 billion into China. They have been establishing technology research centres for mobile telecommunications. Meanwhile, domestic firms have achieved substantial progress in both production and sales. Their market share is now above 50 per cent, the report said." Read more

Saturday, February 19, 2005

Speech by Stephen Green CEO HSBC: 'The rise and rise of Asia'

From Lancaster University: 'The rise and rise of Asia'
Speech by Stephen Green CEO HSBC

"I want to talk about a phenomenon that we at HSBC believe will fundamentally reshape the world’s economic landscape in the decades ahead. The rise and rise of Asia."

"The pace of change in China has been so rapid, and so extraordinary, that people are only now beginning to adjust intellectually to the reality of China as an economic power. In virtually every industry in the next 20 years, China will make its presence felt, and there are encouraging signs that, at last, the West is beginning to take this in. ... Today, everyone needs a China strategy."

" China is dominating low-end markets, but manufacturers who comfort themselves that they will be content with that, and leave the value-added products to established American, European or Asian companies, are making a grave mistake."

"... the desire to rise up the value chain is very evident. Huawei Technologies, a leading Chinese hi-tech company, employs 10,000 R&D workers – almost half of its total workforce – and invests no less than 10 per cent of its sales revenues in R&D."

"The Asian economic miracle produced a 40-year period of above average economic growth in countries like Japan, Taiwan and Singapore. If China were to follow the same pattern, it may only be halfway along its amazing economic journey." Full text of Stephen Green's speech

Friday, February 18, 2005

Shanda Discloses Stake in Sina Corp.

Press Release: Shanda Discloses Stake in Sina Corp.
Source: Shanda Interactive Entertainment Limited

SHANGHAI, China, Feb. 18 /Xinhua-PRNewswire/ -- Shanda Interactive Entertainment Limited (Nasdaq: SNDA) today disclosed that as of February 10, 2005 it has, together with its controlling shareholder Skyline Media Limited, acquired approximately 19.5% of the outstanding ordinary shares of Sina Corporation (Nasdaq: SINA) through open market purchases. Read more

Huawei Unveils Newish IP DSLAM in London on Monday; SmartAX MA5600 IP DSLAM

From LightReading: Huawei Unveils Newish IP DSLAM

"Huawei Technologies Co. Ltd. is to unveil its latest IP DSLAM in London on Monday at the 21st Century Communications World Forum event, in a bid to attract the attention of Europe's triple-play hopefuls."

"The timing and location of Huawei's MA5600 launch are significant. The topic of delivering TV and video over broadband is hot in Europe, and most of the continent's leading carriers, including Belgacom, Deutsche Telekom AG, France Telecom SA, TeliaSonera AB, and Telecom Italia SpA, are attending the event" Read more

China making great leap forward in tech

From ZDNet: China making great leap forward in tech

"China's growth into a nation that leads in the use of broadband technology, and the changing role of its manufacturing companies from just assemblers to designers, were among the trends analysts discussed at a conference ... Thursday."

"If you're resting on the belief that design will continue to only be done in Europe or the states, you may need to reconsider that." Abelson pointed to cellular handsets as an example. Many of the major manufacturers of handsets are Chinese companies, but in 2002 only 10 percent of handsets made in China were designed in house by the companies that made them. That figure will increase to 40 percent by 2008. "

"Chinese telecommunications companies will increase the installation of broadband technology to spur use of their wired networks. The result will be that by 2008, China will be the leading user of broadband technology in homes." Read more

Thursday, February 17, 2005

China online games sector battles foreign domination ; Shanda, Netease, The9

From TheStandard: China online games sector battles foreign domination

"China's domestic online games publishers have declared war on foreign domination of an industry that is expected to be worth more than 10 billion yuan (approx. 1.3 billion US dollars) by 2009. ... Foreign online games companies accounted for 70 percent of those sales. ... . "

"Online games in China were once the preserve of foreigners, but a domestic industry began to emerge at the same time as online entertainment companies like Shanda, Netease and The9.
China last month ordered the General Administration of Press and Publication (GAPP) to take the responsibility for regulating the online games industry."

"Apart from controlling imports of online games, GAPP will also implement policies to help domestic online games producers win a bigger market share by developing games on Chinese themes, he said. They would be encouraged to develop 100 Chinese online games on nationalistic themes in the coming five years. ... Now, only 10 foreign-made games per year are allowed into the mainland market. Last year, 30 or 40 were imported." Read more

Sina News: UBS Lowers Price Target to $30; Lawsuit Looms

From PacificEpoch: UBS Lowers Sina Price Target To US$30

"UBS lowered its price target for Sina from US$35 to US$30 on Wednesday. However, UBS maintained a Buy 2 rating for the stock. UBS' chief concern regarding Sina is the company's lack of growth potential. According to UBS, online gaming is the only sector that offers significant growth potential for Sina and Sina needs to internally develop and launch one or more massively multiplayer online role playing games with 100,000 or more players."

From ChinaTechNews: Lawsuit Looms Over Sina

"At least four separate law firms in the United States have issued press releases notifying investors that a class action lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of all securities purchasers of Sina between October 26, 2004 and February 7, 2005." Read more

China's ZTE eyes Siemens' mobile

From China's ZTE eyes Siemens' mobile

"Leading Chinese telecoms equipment maker ZTE is reportedly among the candidates for a possible mobile phone partnership with German electronics giant Siemens.
The list of potential tie-up partners for Siemens' loss-making mobile phone business is growing and already includes two other Chinese firms, Ningbo Bird and Huawei, South Korean group LG Electronics and Japan's NEC."

Wednesday, February 16, 2005

China's Businesses Thrive on the Web

From npr: China's Businesses Thrive on the Web
By Rob Gifford

"Recognizing the Internet's power, China's Communist government has embraced and developed it. The Web is now transforming the way business is done in China." Listen to the audio report

Companies mentioned in the report: (Chinas B2B giant), (China's largest online Chinese book retailer)

Open Letter to Henry Blodget - Doing Business in China

From ChinaTechNews: Henry Blodget Does China
By Perry Wu

"First, most foreign companies in China fail. That begs the question: why do they still keep on coming? The standard answer is that with a population of 1.3 billion, you can't afford to ignore China. It is too big, too important, has too much potential to ignore. That might be true, but I think there is a different reason. ... The reason has much in common, Henry, with why people poured money into Internet companies in the late '90s."

"When a company wants to "conquer the Chinese market," the company should be reminded that even China Mobile has different services, prices, and business plans for each of China's provinces. Add to that, China Mobile only recently was able to standardize wireless short messaging services (SMS) among most of its provincial outposts. Now if China Mobile can't localize and standardize in each province after a couple years, no foreigner should expect to be able to do anything similar in less than an annum multiple of ten."

"Anthony Lok, managing director at Bank of China International in Hong Kong, said a few days ago: "Everyone sees 1.3 billion people buying things online, but it turns out that 800 million of them are sitting on the farm." This sums it all up for you."

"Investing in one of China's many website portals is an example of investing in most other industries in the Middle Kingdom. Pretend you are an emperor whose concubines are a group of quintuplet sisters (true, a small group for an emperor like yourself) and you want one to bear you a son. This is the type of crapshoot you have as you wager on which portal will be China's Yahoo. Though these companies have billion-dollar valuations, that there are so many identical (,,,, et al.) offerings for users and advertisers should make you shudder. How can such identical companies exist online?"

"Libraries are filled with some good, and some poor, writings on what it takes to do business in China. But just as Oscar Wilde described marriage as the "triumph of imagination over intelligence," I think many foreigners in China have fallen in love with a fantasyland." Read more

Henry Blodget, the disgraced bubble-era analyst, is now a columnist for the online magazine Slate. He has written recently about business and investment in China:
Go East, Young Man
Where's My $58 Million, Madame Wu?
Caged Hedgehogs, Car Smugglers, and Guanxi
The Real "Great Leap Forward"

China and India: An Opportunity, and A Threat to Western Mobile Industry

From TheFeature: China and India: An Opportunity, and A Threat

"The mobile industry typically thinks of India and China in terms of opportunity -- but the reality is that they are an increasing threat as well. With a combined population of up to 3 billion and rapid predicted growth in mobile usage, much of the talk at 3GSM is about the opportunity in India and China. Yes, vendors realize that they are facing increasingly fierce domestic competitors in the two markets. Take the Chinese handset market, where the domestic vendors now claim over 50% of the market. But the threat that is usually ignored is Chinese and Indian vendors entering European and US markets."

"Moving from the general to the specific, let's take a look at three of China's largest infrastructure players. Huawei, UTStarcom and ZTE earned around 1% of their revenues outside China in 2000; in 2004, the figure is expected to be around 33%. Chinese researchers Norson Consulting expect this proportion to rise to 70% for Huawei, and 80% for both UTStarcom and ZTE by 2008. The majority of international sales for Huawei and ZTE are in mobile infrastructure."

"From Western vendors dominating the Chinese handset market, domestic vendors now claim over 50% (although this figure is hard to assess). What is clear is that the local vendors have used their domestic knowledge to fight back ... . Chinese vendor TCL has already joined the major leagues by forming a joint venture with Alcatel. Formed in August 2004, TCL & Alcatel Mobile Phones (TAMP) is 55% owned by TCL, with Alcatel owning the remaining 45%. Other major Western vendors such as Siemens have also partnered with Chinese vendors to reduce their exposure to the market.
A different approach is being taken by Ningbo Bird, which had total handset sales of around 15 million in 2004, with 3 million outside China. In 2003, it established Bird International in Hong Kong, and grew international sales by 500% in 2004 and has plans to sell 20 million handsets outside China a year by 2006. Its key differentiators have been cost and innovative designs." Read more

China's Greatest Tech Myths - IBM-Lenovo deal, Linux, Piracy

From ChinaTechNews: China's Greatest Tech Myths
By Steven Schwankert

1. The IBM-Lenovo deal represents the arrival of Chinese companies on the international stage
"What few seem to consider is that Lenovo did not go to IBM with the intention of buying its PC division. IBM decided to axe the increasingly commoditized businesses because, as former GE CEO Jack Welch would have put it, it's yesterday's business."

2. Linux will be huge in China.
"A guy the Grouch knows who heads an IT department at a state-run Chinese publishing house came aboard and decided that he would migrate all of the publisher's electronic communications and Web sites to a Linux-based system. Because open source software is free, he said, the cost savings reaped by this change would be significant. His Chinese counterpart looked at him and said, with a straight face, "but in China, all software is free."

3. Piracy could be reduced in China if the government would just enforce some of its existing intellectual property laws.
"Until China creates an economically secular government, piracy will be the norm rather than the rule. Just like revaluing the renminbi, the Chinese government is not going to make a significant change unless there is a measurable benefit for China, and when it comes to stamping out piracy, at this point there just is not." Read more

China’s 3G attack, via Europe - ZTE, Huawei clinching important deals in Europe

From RedHerring: China’s 3G attack, via Europe

"With its major manufacturers clinching important—and long-term—deals in Europe, China is challenging the market’s foreign rulers (Motorola, Ericsson, Nokia). Chinese telecom equipment manufacturer ZTE announced a code division multiple access (CDMA) technology alliance with France’s Alcatel at the 3GSM conference in Cannes this week. It also outlined plans to launch third-generation (3G) mobile handsets on the continent as part of a planned push into the European market. Huawei, another Chinese vendor, clinched its first European contract for a 3G mobile network in December (10-year contract with Telfort, the smallest of the Netherlands’ five mobile carriers)."

“It used to be that Chinese manufacturers were used as a stick to beat down prices but technically were not competitive. Today, it is very different, technically they are competitive as well,” said Jason Chapman, a telecom equipment analyst in the London office of Gartner, a technology consultancy. “It would not surprise me at all if they started winning more contracts in Europe. ... U.S.-based Vodafone has said it is testing Huawei’s networking equipment in its labs, according to Gartner’s Mr. Chapman."

"The company (ZTE) said it has over 2,000 engineers engaged in research and development of the wideband CDMA 3G technology used in the European market. It has set up 14 offices in Europe and opened a research institute in Sweden." Read more

Tuesday, February 15, 2005

Report On China's B2B, B2C and C2C Giant Alibaba (Taobao)

From CHINAdaily: Open sesame to the Net highway

"Alibaba International was launched in 1999, and in this short span (through its website has already drawn 1.2 million registered users across some 200 countries; and 1.8 million businesses to its dedicated China site. And Forbes magazine's four-years-in-a-row "Best of the Web: B2B" honour is the feather in its crown."

"We don't have an online competitor (either) in China or in the world," Ma ('s founder, chairman and ceo) says. "Globally, our competitors are the traditional trade magazines such as Global Sources. They are very good. But in China there is nobody. We have 99 per cent of the users." The value of transactions through all its sites in 2004 was more than US$4 billion. ... An official fact sheet ... says US GAAP revenue for 2004 was US$46 million."

"The firm's phenomenal growth saw it expanding into three dedicated B2B portals, before turning its attention to the C2C market in 2003 with the launch of taobao, an online auction website. Taobao competes directly with US online auction giant eBay's dedicated China site, EachNet, for China's more than 90 million Internet users. ... So far, eBay is still ahead in China, but perhaps not for long. EachNet, with 10 million registered users, traded US$360 million worth of goods in 2003, compared to taobao's 4.3 million customers and US$300-million transaction for a US$46-million revenue. But the Shanghai-based EachNet controlled 60-70 per cent of China's online auction market when it was taken over completely by the US company in September 2004." Read more

Chinese OEMs Show Strong Growth

From ElectronicNews: Chinese OEMs Show Strong Growth

"Total electronics systems production in China rose to $209.5 billion last year, up 13 percent from $185.5 billion in 2003, while the nation's OEMs racked up 14 percent growth, according to the El Segundo, Calif.-based market research firm (iSuppli Corp.)."

"A listing of the top indigenous Chinese OEMs in 2004 showed that among the top 10 Chinese OEMs, telecommunications gear maker Huawei led the pack with a 71.8 percent increase in revenue from 2003 to 2004. Huawei competes directly with Cisco, Lucent and Alcatel and projected that 40 percent of its 2004 revenues were derived from sales outside of China.
TCL was the second-strongest performer among the top 10, with its sales rising 62.9 percent over 2003. TCL established with two joint ventures in 2004 – one with Thomson and the other with Alcatel – that are credited as allowing the company to emerge as the world’s largest TV OEM and as the seventh-largest handset OEM." Read more

Nasdaq-listed China Stocks' miserable start to the year - unrealistic investor expectations?

From TheStandard: Mainland tech firms falling fast on Nasdaq

"Shares in every mainland firm listed on the tech-laden market are down, some by more than half. Shanghai-based online recruiting firm 51job's shares fell 56 percent after it said fourth-quarter earnings would disappoint. Analysts, many of whom recommended the stocks, claim the problem, in most cases, is not poor management, but unrealistic investor expectations. How, they ask, can mainland Internet portals such as Sina or Sohu be expected to rake in the sort of profits seen at Yahoo and Google, two high-flying Nasdaq-listed firms operating in the United States, a country with high broadband and credit card penetration?"

"It's not that the model [for these companies] is bad, it's just that the market is not big enough yet,'' Anthony Lok, managing director at BOC International in Hong Kong, said. "Everyone sees 1.3 billion people buying things online, but it turns out that 800 million of them are sitting on the farm,'' he said." Read more

Huawei: China's First Producer of 3G Handsets - Huawei U626, U326, E600

From China's First Producer of 3G Handsets

"Huawei Technologies Co., China's largest telecommunications vendor, today announced the global launch of commercially ready-for-market UMTS devices at the 3G World Congress & Exhibition in Hong Kong. With the launch of the three types of commercially marketable series terminal UMTS products, Huawei is the first producer of 3G handset in China." Read more/Pictures

Monday, February 14, 2005

Ningbo Bird selects Trolltech's Qtopia Software for Linux-based Mobile Phones

From LinuxElectons: Over 50 Vendors Developing Linux Devices with Trolltech Software

"Ningbo Bird, the largest domestic supplier of mobile phones in China, has selected Trolltech's Qtopia as the software platform for all its Linux-based mobile phones. Ningbo Bird is targeting the launch of its first handset build on Linux and Qtopia, the E899 smartphone, for Q2 2005." Read more

More on China's biggest handset manufacturer (older stories):
From Hello, Ningbo - Motorola is losing its hold on China's mobile phone market. The little local startup that has Moto's number: Ningbo Bird.
From Technology Business Research: Uh-Oh, Ningbo
From BusinessWeekOnline: How Ningbo Bird Became a High-Flier

China's Preference for Open Source Technologies

From Playing the China card
By Bill Roberts

“The Chinese government doesn’t want to get locked into a Microsoft or Windows monopoly and wants to be involved with something it has some control over,” says Bob O’Donnell, an analyst at International Data Corp. As a result, the Chinese government is sponsoring several initiatives based on open source technologies, including the Linux operating system and chip architectures with at least some technical details available in the public domain. ... The Chinese seek low-cost computing options for a billion-plus people and hope open source is the forward."

"Some Western semiconductor companies understand this and are banking their China strategies on open source initiatives. Two recent examples are PMC-Sierra, which announced a partnership with Tsinghua University in Beijing to develop thin-client network terminals based on open source, and STMicroelectronics, which announced a partnership with China’s Ministry of Science and Technology to develop Linux-based microprocessors for computing devices ranging from handhelds to supercomputers."

"As appealing as going open might be as an entrée to the market, Brownridge says, Western chip companies must be willing to do more than just play the open card. They must work with universities and government researchers to help the latter develop their own domestic technologies. Byron Wu, an iSuppli analyst based in China, agrees. As important as the open strategy might be, he says, companies must be willing to offer expertise transfer to Chinese universities and companies. “The Chinese are still waiting for greater design capability [here],” he says. “Western partners must be willing to teach the locals the latest technology.” Read more

The Mighty Economic Engine Known as China - How the Rise of the Next Superpower Challenges America and the World

From The New York Times: Car Clones and Other Tales of the Mighty Economic Engine Known as China

"If the 20th was the American century, then the 21st belongs to China. It's that simple, Ted C. Fishman (CHINA INC. How the Rise of the Next Superpower Challenges America and the World) says, and anyone who doubts it should take his whirlwind tour of the world's fastest-developing economy."

"China still only makes one-twentieth of everything produced in the world, but on the world stage it plays the role of a new factory in an old industrial town," Mr. Fishman says. "It can spend, it can bully, it can hire and dictate wages, it can throw old-line competitors out of work. It changes the way everyone does business."

"One of the most powerful weapons in China's economic arsenal is what businesses have come to know as "the China price." A stampede from the countryside to China's new industrial boomtowns has created a vast low-wage army, working for an average of 40 cents an hour, that can turn out consumer goods of every description even cheaper than Mexican or Malaysian factories can. American factories that cannot deliver to Wal-Mart or General Motors at the China price often face two stark choices: they can go under or set up shop in China." Read more

From Book Takes Look at 'China, Inc.'
by Jennifer Ludden
Listen to interview with Ted C. Fishman

China's ZTE signs CDMA deal with Alcatel - signals strong push into European market

From Hindustan Times: Alcatel signs CDMA deal with China's ZTE

"China's biggest listed telecoms firm, ZTE, and France's Alcatel have signed a deal to cooperate on CDMA mobile network technology, the companies said on Monday. Under the agreement, Alcatel will use ZTE's radio access technology in its CDMA systems. CDMA mobile network technology is widespread in the United States, Latin America and parts of Asia. The GSM standard is currently more popular, but CDMA is growing fast."

"China is among the world's fastest growing markets for mobile services, and Chinese manufacturers of telecoms equipment like ZTE and Huawei have increased competition with top players in the sector such as Ericsson, Nokia, Motorola and Siemens." Read more

From ChannelMinds: ZTE Sets Its Sights On Europe With Ten-Country Technology Roadshow

"ZTE Corporation, China’s largest listed telecommunications manufacturer and leading wireless solution provider, today announced plans to bring its cutting-edge technology to ten European countries within the next five months. The planned roadshow - the first of its kind for ZTE in Europe - will visit Turkey, Greece, Romania, Hungary, the Czech Republic, Poland, Germany, France, Spain and Portugal between March and July this year." Read more

China On-line Game Industry Report: On-line games sales reached 298.6 million US dollars in 2004

From Xinhua: China's sales income of on-line game reaches 2.5 bln yuan in 2004

"China's sales of on-line games reached 2.47 billion yuan (298.6 million US dollars) in 2004, up 47.9 percent from the previous year, according to the 2004 China On-line Game Industry Report. The report, released by the Press and Publication Administration, said the number of Chinese Internet users amounted to 94 million in 2004. The number of on-line game players reached 20.25 million. The report predicted that China's on-line game sales income will reach 10.96 billion yuan (approx. 1.3 billion US dollars) in 2009." Read more

Sunday, February 13, 2005

Chinese government shut down 12,575 Internet cafes in 2004

Associated Press (AP) reports that Chinese authorities shut down more than 12,575 Internet cafes from October to December last year for "operating illegally", the government said.

From SiliconValley: China Says It Shut Down Internet Cafes

"The purpose of the crackdown was to create a "safer environment for young people in China," the official Xinhua News Agency said Sunday. It didn't give details of the violations, but said the businesses closed "were mainly located nearby primary schools and middle schools." China promotes Internet use for business and education, but communist authorities complain that Internet cafes harm public morality by giving children access to violent games and sexually explicit material."

Conversation with Oded Shenkar author of "The Chinese Century" - The Chinese Way to Brand Identity

From The New York Times: The Chinese Way to Brand Identity
By William J. Holstein

"A Chinese company's plan to acquire I.B.M.'s personal computer division is just one example of current Chinese efforts to buy or build recognizable brand names in the United States, says Oded Shenkar, professor of international business at the Fisher College of Business of Ohio State University and the author of "The Chinese Century". Here are excerpts from a conversation with him."

"Q. Will Chinese companies be as successful in establishing brand names in this market as those in Japan and South Korea?
A. Absolutely. They're going to take a different path, but I definitely believe they are going to get to the place where the Japanese and Koreans are now."

"Q. What are the prospects for two Chinese companies, Haier and Kelon, in establishing brands for appliances in America?
A. Both Haier and Kelon started with niche products, such as small refrigerators used mostly in offices. They are gradually expanding. They already are opening manufacturing facilities in the United States. Because of the nature of their products, there are substantial shipping costs from China. My own guess is that one of the two at some point will buy an established brand."

"Q. Could Whirlpool or Maytag sell to one of the Chinese appliance makers?
A. Yes, they are at risk. I will not be surprised if one of them decides to exit the business. But a more likely possibility would be that Haier or Kelon will acquire General Electric's appliance business." Read more

Saturday, February 12, 2005

Henry Blodget's Slate column: The Real "Great Leap Forward"

Henry Blodget (need a hint? Merrill Lynch, Amazon $400) writes a series ("go east, young man") on the China gold rush for Slate Magazine

The Real "Great Leap Forward"
By Henry Blodget

"According to China, Inc., a (great) new book by Ted Fishman, China now draws more foreign investment capital than any other country ($53 billion in 2003). The half-trillion foreign dollars invested in China since 1979 have built an estimated one-third of the country's current production capacity. A large chunk of this money, interestingly, has come from Chinese expatriates, some of whom fled the country during the Communist takeover."

"... but China's population is so huge that even a fraction of it represents an enormous market. For example, according to the Harvard Business Review, China is now adding 4 million to 6 million new cell phone subscribers per month. This statistic is mind-boggling. It means that, every year, China adds a new cell phone market about the size of Germany's—and Germany is the third-largest cell phone market in the world."

"Is the China business opportunity real enough that the next generation of gold-seekers should "go East"? Provided one construes "go East" to mean "learn Mandarin, develop guanxi, and be prepared to weather multiple economic and political storms over a multi-decade career," the preliminary answer is "Yes." I say "preliminary" because the next books on my reading list have titles like The Coming China Collapse." Read more

Friday, February 11, 2005

Betting on the next Lenovo - new giants in the making

From Asia Times: Betting on the next Lenovo

"December 2004 will be remembered as a time when a faceless Chinese company, Lenovo, suddenly took the global stage. The bluest of blue-chip multinationals, IBM, got out of its personal computer business by selling out to Lenovo, making the faceless company the third-biggest global PC player. So are there other Chinese brands that could take the world by storm? A rising economy must create multinationals. The UK and US have done it. Japan and South Korea have followed. Now it's China's turn. "

"There are dozens of relatively new, more entrepreneurial Chinese companies. They are more than eager to trot the globe. These include TCL, Huawei, Haier, Galanz, Chonghong, Ningbo Bird, Kelon, and Konka, among others. They are all manufacturers, still growing, and have a penchant for expansion beyond China. TCL, Chonghong and Haier focus on white goods and consumer electronics. They have now added handsets to their product list. Huawei and Ningbo Bird focus on handsets or telecom networks. One out of three handsets in the world is produced by Ningbo Bird and TCL." Read more

Thursday, February 10, 2005

2005 Analyst Conference - EBay looks for growth in China

From MarketWatch: EBay looks for growth in China

"While Korea is eBay's biggest marketplace in Asia, having generated $1.1 billion in gross merchandise value in 2004, China will fuel eBay's growth in the region, executives said. EBay China generated $307 million in gross merchandise value in 2004.
Jay Lee, vice president of eBay's Asia region, said that China will fuel Asia growth. Lee reiterated that eBay will invest $100 million in China this year. China has 70 million middle class households currently, he said. That's expected to grow to 170 million by 2010. Lee said that eBay's investment in China will include significant online marketing spending as well as TV campaigns. Lee said that eBay will have "tightly integrated" online campaigns with NetEase and Shanda Interactive Entertainment Ltd., two providers of online content in China." Read more

China goes text message crazy over Lunar New Year

From Channel NewsAsia: China goes text message crazy over Lunar New Year

"According to Beijing Mobile, it handled more than one billion outgoing short messages on Tuesday's Lunar New Year's Eve alone. Xinhua news agency Thursday estimated that more than 10 billion text messages would be sent over the week-long holidays that end on February 16, up 200 million from last year. ... Short message service (SMS) has become a major industry in the world's most populous country with more than 330 million mobile phones users sending 217.7 billion text messages last year, Xinhua said." Read more

Wednesday, February 09, 2005

Chinese Telecom Equipment Maker Huawei is Diving into the Core-Routing Market

From LightReading: Huawei Goes Hard Core

"Resurrecting the term "terabit router," Chinese vendor Huawei Technologies is diving into the core-routing market. But while Huawei is considered an able competitor in routers, analysts have their doubts that its core router will make much of a splash. Core routers are just too difficult a market, says analyst Samuel Wilson of JMP Securities."

"History is not on Huawei's side here, as no terabit router startup besides Avici has picked up any success. The roster of the fallen includes such bubble-era names as Axiowave, Ironbridge, Pluris, and, most recently, Procket. From the startup side, Chiaro Networks Inc. is still giving it a shot, having recently inked a reseller deal with ECI Telecom Ltd." Read more

China poised to overtake US in 2020s

From CHINAdialy: China poised to overtake US in 2020s

"China's unprecedented rise, fueled by foreign investment and technology, has put the Asian giant on a path to surpass the United States economically by 2025, the author of a new book (The Chinese Century) on China said on Tuesday. ... "The rise of China is a watershed," Shenkar told Reuters in an interview. "I compare it to the rise of the United States in the late 19th century."

"The Israeli-born researcher said he put China's emergence as the world economic power about two decades earlier than most analysts by measuring purchasing power rather than nominal figures to measure output and growth."

"A major theme of Shenkar's book is how technology transfers have helped China catch up to U.S. competitors at low cost. "Maybe we are selling our technology too cheap, or as in the case of China, we're giving it away or somebody is taking it without compensating us," he said." Read more

The Myth Of Uncertainty With Chinese Portals

From ChinaTechNews: The Myth Of Uncertainty With Chinese Portals

"But there was bad news and here's how Sina summed it all up in its press release this week: "..there is greater uncertainty as to these financial projections at this time than there has been in recent prior quarters" Don't you just love this word "uncertainty"? If there ever is a euphemism in the financial world, this is it. From the beginning of life on this earth, there has always been uncertainty about the future."

"Why doesn't Sina just be honest and call it like it is? This is not a problem of uncertainty, this is a problem of pessimism. Or better yet, this is a problem of Sina knowing that the gig might be up. The brief window of benign regulation that has existed in the Chinese Internet world the last few years is closing. And Sina can sense it. And so can investors. Perhaps that is why Sina's stock price was hit so hard this week with Sina's announcement."Read more

Huawei China's leading telecom equipment maker aggressively moves into international markets - profits jump.

From Financial Times: Huawei profits jump on strong orders

"Huawei Technologies, China's leading telecommunications equipment maker, recorded a 22 per cent increase in net profits last year to US$470m as orders rose sharply. The jump in earnings, disclosed in unaudited figures provided to the Financial Times, came on the back of a 46 per cent rise in orders to US$5.58bn."

"The increase in profitability comes as Huawei, widely considered one of China's best hopes for creating a global company, moves aggressively into international markets." Read more

Tuesday, February 08, 2005 Rises After Upbeat Analyst Note

From Rises After Upbeat Analyst Note

"... Pacific Growth Equities analyst Jason Brueschke said he believes can turn around its business now that two-thirds of revenue comes from advertising and sponsored-search ads, which are "lower risk, more predictable lines of business."

"Brueschke noted's August debut of its SoGo search engine and its plans to unveil a new version later this month, highlighting the potential to grow revenue from search-related advertising. "We believe this positions not only to grow search revenue faster in the second through fourth quarters, but also positions to be a leader in what could become a very large, fast-growing market in China," he wrote in a research note."Read more

Monday, February 07, 2005

Sina Q4 profit up but forecast lags

From MarketWatch: Sina Q4 profit up but forecast lags

"Sina Corp. reported late Monday that fourth-quarter net income almost doubled, but the Chinese Internet firm's first quarter forecast fell short of analyst estimates and its shares tumbled 20 percent in late trading."

"Sina said after the close of markets Monday that net income for the three months ended in December climbed to $17.4 million, or 30 cents a share, from $9.3 million, or 16 cents, in the same period a year earlier.
Excluding stock-based compensation costs and other charges, Sina said earnings were $18.4 million, or 31 cents a share, in line with the average estimate of analysts surveyed by Thomson First Call."

"Fourth-quarter sales rose 49 percent to $56.9 million from $38.3 million, slightly higher than analyst expectations, as the company sold more online advertising and provided Internet searches and wireless services to more Chinese consumers.
However, Sina forecast that first quarter sales would fall in a range between $43 million and $47 million, less than the $57 million analysts were expecting."Read more Profit Falls in Fourth Quarter - weakness in wireless business

From Yahoo finance: Profit Falls in Fourth Quarter

"For the latest quarter, net income fell to $6.5 million, or 17 cents per share, from $11.6 million, or 28 cents per share, a year ago. Revenue fell slightly to $24.1 million from $24.6 million, and gross margins fell to 68 percent from 72 percent. The latest figures matched the estimates of analysts surveyed by Thomson First Call.
For the full year, net income rose to $35.6 million, or 89 cents per share, from $26.4 million, or 66 cents per share, last year. Revenues grew to $103.2 million from $80.4 million in fiscal 2003. Analysts forecast a profit of 89 cents per share on revenue of 103.9 million."

""Fiscal year 2004 was a year of unprecedented online advertising success while we managed through a difficult operating environment in our wireless business," said Charles Zhang, chairman and chief executive."Read more

Sunday, February 06, 2005

Tencent Announces Alliance with Google in Web Search and Targeted Advertising

From Tencent Press Releases: Tencent Announces Alliance with Google in Web Search and Targeted Advertising

"Tencent Holdings Limited, ... and Google Inc., today announced that Tencent has started providing Google’s award-winning WebSearch service to its hundreds of millions of users in China. At the same time, Tencent offers Google’s targeted advertising service, Google AdSense, through this new partnership with the online search leader. ... Google WebSearch is now included in Tencent's major Internet-based services, including the QQ IM service, Tencent's fast-growing portal website, Tencent's Internet browser Tencent Traveler, and Tencent's enterprise IM products - Tencent Messenger (TM) and Real Time Exchange (RTX)." Read more

China Net Investor: Tencent Technology operates the most popular Internet instant messaging service in China (QQ IM service). Tencent develops its business in three strategic directions, i.e. consumer IM, enterprise IM and Infotainment (QQ-Portal, Casual Gaming, Mobile value-added services).

Friday, February 04, 2005

G-7 CEOs see rise of China, India predators: Huawei, ZTE

From The Financial Express: G-7 CEOs see rise of China, India predators

"The two most populous countries in the world are generating economic growth rates that create not only business openings for Western firms but also a new breed of fast-growing local companies that may soon challenge the global titans."

“There are some small (Chinese) telecom companies that manufacture equipment, like Huawei and ZTE. They don’t compare with the Ericssons, Motorolas or the Siemens and Lucents of the world,” Vodafone’s Sarin said. “In four to five years, I can actually imagine the ZTEs and the Huaweis becoming much larger, and to be candid with you, I won’t be surprised if they end up buying some of these companies.” Read more

China telcos push Internet TV (IPTV), but who will watch?

From Reuters: China telcos push Internet TV, but who will watch?

"China's two fixed-line phone companies are moving ahead with plans to offer pay TV on their broadband networks, hoping to overcome tough restrictions on programming and squeeze more profits out of their infrastructure."

"Analysts and industry watchers say the pair face an uphill battle to popularise the medium. As well as a dearth of good programming, they must contend with competition from cable TV operators rolling out premium services, likely to include video-on-demand and a wider choice of viewing. Moreover, due to strict controls on editorial content in China, much of the early programming is expected to be made by state-run companies, making it similar to what is already available through standard channels." Read more

Shanda Entertainment - The Numbers Don't Smell Right

From AlwaysOnNetwork:
Shanda Entertainment - The Numbers Don't Smell Right

"The numbers reported by Shanda Entertainment for Q4 2004 don't add up - the decline in deferred revenues, the use of one-time investment gains, the significant contribution of revenue growth through acquisition, and the last minute board member resignation of Andy Yang all point to a quarter less than stellar quarter.

Shanda Entertainment reported net revenues of $52.1 million apparently a nice street beating figure. However, as with many companies, the truth lies not in the numbers reported but the numbers omitted. There are several things that did not add up." Read more

Shanda's Profit Up Sharply - Large Online Game Revenue Growth

Summary of the fourth quarter 2004:

* Revenues for the fourth quarter of 2004 increased 133.3% year-over-year, and 21.9% quarter-over-quarter to US$54.7 million, and net revenues increased 134.2% year-over-year and 22.0% quarter-over-quarter to US$52.1 million
* Online games revenues for the fourth quarter of 2004 increased 118.6% year-over-year and 20.7% quarter-over-quarter to US$49.8 million, accounting for 90.9% of total revenues; fourth quarter MMORPG revenues grew 11.7% quarter-over-quarter to US$38.3 million and casual game revenues grew 64.9% quarter-over-quarter to US$11.5 million
* Other revenues for the fourth quarter, which primarily include revenues from online advertising, and other value-added services and products, increased 35.5% quarter-over-quarter to US$5.0 million, accounting for 9.1% of total revenues
* Gross profit margin increased to 67.1% in the fourth quarter compared to 62.7% in the third quarter of 2004, while operating margin increased to 43.5% in the fourth quarter compared to 40.2% in the third quarter of 2004
* Net income for the fourth quarter of 2004 was US$28.0 million, and diluted earnings per ADS were US$0.38

Recent Business Highlights:
Shanda completed the acquisition of an approximately 29% controlling stake of Actoz Soft Company, Ltd, a Korean developer, operator and publisher of online games, ... in early February 2005. In addition, in December 2004, Shanda purchased an additional amount of Actoz's shares ... equal to approximately 9% of Actoz's issued and outstanding shares ... . In total, Shanda currently owns approximately 38% of Actoz and will be accounted for under equity method in 2005. Through this acquisition, Shanda solidified an important alliance with the supplier of one of its leading games, The Legend of Mir II. According to the user survey conducted by IDC, in late 2004, Mir II is the most popular online game in China.

Source: Shanda Interactive Entertainment Limited - Press Release

Thursday, February 03, 2005

Barry Diller (IAC) infuses cash to Chinese online travel site eLong

From A Cheap Ticket On eLong
by Perry Wu

"eLong’s new majority owner IAC, Barry Diller’s company, earlier last month exercised millions of warrants for the privilege of gaining its majority stake. This exercise of warrants produced a cash infusion to eLong of around US$108 million, almost double the amount of cash raised from its IPO."

"The bad news for investors is that Barry Diller seems to have gotten a real sweetheart deal. While the market price of eLong’s stock is in the mid-teens, Barry got his shares for about US$6 a pop. ... But the good news is that eLong has no shortage of cash; its cash position now rockets it to the top tier of Chinese online listed companies. And, unique among Chinese listed companies, eLong can now benefit from the talent of Barry Diller, one of America’s premier dealmakers." Read more

EbayEachnet vs. Alibaba: Competition on China's e-commerce market intensifies

From Competition on China's e-commerce market intensifies

"Both the eBay Eachnet under the US giant eBay and the largest Chinese e-commerce company Alibaba are busy building secure online payment systems, heating up the competition on the domestic e-commerce market ... ."
"This year will be critical for the development of e-commerce and online payment," said Jack Ma, CEO of Alibaba and Taobao, Alibaba's subsidiary online auction website.He said Wednesday at a press conference that his company will use the experience of Taobao's online payment tool AliPay for the business-to-business e-commerce website Alibaba. ...
EBay Eachnet, in fierce competition with Taobao, also announced yesterday that it would spend more than 100 million yuan (US$12 million) this year to launch a new online payment system."

"According to iResearch, the total trading volume of e-commerce in China will grow from 440 billion yuan (US$53.14 billion) in 2004 to 620 billion yuan (US$74.88 billion) this year. "Read more

The world's largest job search Web site buys Stake in

From Monster Buys Stake in

"Monster Worldwide Inc., which operates the world's largest job search Web site, said Wednesday that it acquired a 40 percent stake in Holdings Ltd., the owner of online recreuitment site, for $50 million."

"As a result of the transaction, Monster Worldwide will initially occupy three of seven seats on ChinaHR's board. Monster also will have certain rights and obligations to purchase a stake of 51 percent or more in ChinaHR in the event of an initial public offering or in three years, whichever comes first." Read more

China Net Investor: ChinaHR/Monster face competition from China's No. 1 online recruitment company 51Job Inc.

Wednesday, February 02, 2005

Alibaba launches online payment service to compete eBay's PayPal

From the HindustanTimes: China's Alibaba launches online payment service

"PayPal solved the problems for US e-commerce and Alipay is the way we want to solve the Chinese e-commerce payment problem," Alibaba chief executive Jack Ma told Reuters in an interview."
"Alibaba, whose largest investor is Japan's Softbank Corp, had cash revenue of $68 million last year, more than double the $30 million in 2003. The company was "very profitable" and both revenue and profit were expected to double in 2005, Ma said." Read more
China Net Investor: is a rapidly expanding online merchant serving small and medium-sized businesses in mainland China. Its consumer online auction unit,, is one of the most popular online auction sites in the country. Competitors are (Sina/Yahoo) and EbayEachnet.

Chinese SMS market faces slowing growth

From CHINAdaily: SMS market faces slowing growth
"The ... runaway success of SMS in China, largely fuelled by the low-prices, took most investors and even China Mobile by surprise. In 2002, about 90 billion short messages were sent via mobile phones in China. That number jumped to 217.7 billion last year, according to the Ministry of Information Industry (MII).
What was also unexpected is that the growth of SMS in the country is now losing momentum, with an even greater slowdown expected in the years to come, according to analysts. That is pushing operators and mobile service providers to find ways to spur SMS growth and search for other profit engines."Read more

Tuesday, February 01, 2005

New generation of Chinese telecom and networking companies challenge Cisco, Lucent, Nortel and Alcatel

From ElectronicBUSINESS: Chinese telecom companies come calling

"And Huawei is not the only telecom and networking equipment maker charging out of China. Huawei's chief domestic competitor, ZTE, doubled its international sales in 2003 to $610 million. FiberHome Technologies Group, a commercial arm of a Chinese national research center that makes optical fiber cables and gear, gained major contracts last year in India, Iran and Australia. And analysts say that the next Chinese company likely to branch out into the global market is Harbour Networks, founded by former Huawei employees to develop next-generation data networking equipment. "

"The Huawei threat comes not from low-cost manufacturing—which is now a given throughout the industry—but from low-cost engineering. Huawei has an R&D work force of more than 10,000 people, many of whom have master's or Ph.D. degrees and whose salaries are one third to one fifth those of their Silicon Valley counterparts."

"Asking what Huawei's U.S. and European rivals can do to fend off the Chinese "is like asking what American consumer electronics companies could do when faced with the onslaught of Japanese technology in the 1970s," says Zeus Kerravala, an analyst at the Yankee Group in Boston. "Some loss of business is inevitable. It's just cheaper to do engineering over there," he adds. " Read more

BBC News Report on Huawei: China IT giant eyes new horizons

From BBC News: China IT giant eyes new horizons
By Mary Hennock BBC News business reporter

"Visitors to Huawei's headquarters outside the southern city of Shenzhen are left in no doubt about its ambitions. The site, which covers about a square mile, has its own exit from the expressway. Inside, Huawei's corporate campus has clearly been designed to rival those of US commercial juggernauts like Microsoft or Nike."

"... But production line workers make up only 12% of Huawei's 24,000 staff. The firm boasts that roughly 48% of its workforce - 10,000 people - are in research and development (R&D), and that 85% have at least a university degree. " Read more

China's largest Web search engine Baidu plans IPO

From Financial Times: Chinese search engine plans $200m IPO

"The company, in which Google holds a stake, is backed by US venture capitalists and is believed to have appointed Credit Suisse First Boston and Goldman Sachs to manage the initial public offering. It is likely to take place on Nasdaq or the New York Stock Exchange"

"An IPO by Baidu, which controls nearly half of China's web search market, would present international investors with a choice between the vast potential and huge risks of the country's internet sector. ... But it is unclear whether Baidu can retain its current hold on the market, as Google's own Chinese search engine and three different Yahoo! search services have been making inroads in China." Read more

Netease Online Gaming Revenues Hit 700M Yuan (about $85 million) In 2004

From Pacific Epoch:

"Netease (Nasdaq: NTES) director William Ding recently told press at a communications industry conference in Guangdong that Netease's online gaming revenues reached 700 million Yuan (China Net Investor: about $85 million) in 2004, Economic Information Daily reports. The number of Netease online gamers increased by five million in 2004. According to Ding, Netease has nearly 20 percent of China's online game market and Netease gamers account for 12.6 percent of China's 42 million broadband users."