IPO Candidate Baidu Needs to Find an Edge over Google

From Reuters: IPO VIEW-China's Google hopeful needs an edge

"Chinese search engine Baidu.com could become one of the hottest U.S. initial public offerings this year in light of Wall Street's interest in China and online seach engines.
But Baidu needs to find an edge over Google, which is expanding in China, to justify its high premiums.
The Beijing-based company's price to earnings ratio, based on an assumed pricing of $20 and annualized earnings of the most recent quarter, is an astounding 528, as calculated by Francis Gaskins, an IPO expert with IPOdesktop.com."

"The fact that Baidu is only selling $75 million of shares means demand could well exceed supply when it debuts on Nasdaq on Aug. 4 under the proposed symbol "BIDU." Goldman Sachs and Credit Suisse First Boston are lead managers.
"Seventy five million dollars is almost nothing for an IPO," Gaskins said. "If you want to participate in China's search market, there is nobody else."

"Adding allure to Baidu's IPO is Google's 2.6 percent stake in the company. There is speculation that Google might acquire Baidu to expand quickly in China, similar to what eBay Inc. did to Chinese online auction house Eachnet.
But if Google choses to go into China alone, that could present a big risk for Baidu."

Read more:
IPO by China Search Firm Baidu Called Likely to be Success
China's No. 1 Search Engine Baidu Holds Huge Growth Potential
Chinese search engine market seen as gold mine
Google Steps up Fight for the China Market
Google Interest In Baidu Buyout?

Huawei Technologies Has Yet to Win Much U.S. Business

From China Knowledge: Huawei Technologies Has Yet to Win Much U.S. Business

"Huawei Technologies Co., China's largest maker of telecommunications equipment, has yet to reach agreements with large U.S. phone companies in its quest to take customers from Cisco Systems Inc. and Lucent Technologies Inc., the Wall Street Journal said.
Huawei has had difficulty building its brand name in the U.S., partly because it changed its name there to Futurewei, because Americans couldn't pronounce the Chinese name, the newspaper said."

"The company also encountered troubles adapting to the culture, raising suspicions on adherence to rules on intellectual property rights and scaring away some job applicants by demanding reports detailing expert knowledge, the Journal said, citing former employees."

"The lack of progress in the U.S. contrasts with Huawei's success in other markets, including Germany and France, where it took business from Siemens AG and Alcatel SA, the paper said."

Read more:
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Chinese Telecom Sector Restructuring Rumours

From Financial Times: Rumours highlight uncertainty over 3G

"Investors in Chinese telecommunications stocks have been biting their nails this week as they await the dawning of Monday, August 1, when, according to a barrage of internet-fuelled rumours, Beijing will announce a major restructuring of the sector."

"Even though the state body that controls China's four big foreign-listed telephone companies has expressed ignorance of any such plan and the operator most affected has denied its existence, the rumours have highlighted expectations that Beijing is preparing for action."

"According to the most popular speculation of sectoral restructuring, Beijing will break up China Unicom, the country's second-largest mobile operator, and transfer its two wireless networks to Telecom and Netcom."

"Dividing China Unicom between Telecom and Netcom would immediately create stronger competition in wireless services for the dominant China Mobile, while also ending the strange situation of one company operating two networks based on different technical standards.
“I think this is the best plan because China only needs three telecom groups. There is too much competition already and Unicom is the weakest link,” said Daiwa's Mr Koh."

99Bill Partners With China's No.1 Search Engine Baidu

From ChinaTechNews: 99Bill Signs Online Payment Deal With Search Engine Baidu

"99Bill as signed a deal with Baidu to provide 99Bill's online payment platform to support Baidu's search engine services such as ''Pay for Performance'' and ''Movie Search.''

"With 99Bill's solutions, Baidu says it will be able to establish a more convenient and secure online payment platform that enables its customers and users to purchase Baidu's products and services directly on the Internet. This partnership is part of 99Bill's ongoing efforts to secure strategic relationships with leading Internet companies in China and establish the company as a leading third party online payment service provider in China."

China Net Investor: The cooperation between 99Bill and Baidu comes less than two weeks after Ebay's launch of Paypal in China and will further intensify the competition in China's online payment market. With more than 2 million users and almost two years of operating experience, Alibaba.com's AliPay is another tough competitor.

Read more:
PayPal China Country Head Jeff Liao Not Worried about Competitor Alipay
eBay's Whitman Concentrates on China this Summer
IPO by China Search Firm Baidu Called Likely to be Success
China's No. 1 Search Engine Baidu Holds Huge Growth Potential

Sohu.com Meets Q2 Guidance

From ChinaTechNews: Sohu.com Meets Q2 Guidance

"Unaudited revenues for Sohu.com's (SOHU) the second quarter ended June 30, 2005 totaled US$25.9 million, compared to revenues of US$23.7 million for the first quarter ended March 31, 2005, and US$27.3 million for the second quarter ended June 30, 2004."

"Net income for the second quarter of 2005 was US$7.1 million or US$0.18 per fully diluted share. This compares to net income of US$5.7 million or US$0.15 per fully diluted share for the first quarter of 2005 and US$9.9 million or US$0.25 per fully diluted share for the second quarter of 2004."

"Sohu's advertising revenues for the second quarter of 2005 totaled US$17.0 million, a 27% year-on-year improvement and 14% increase quarter-on-quarter. Advertising revenues, consisting of US$13.9 million in brand advertising and US$3.1 million in sponsored search, accounted for 66% of total revenues in the second quarter of 2005.
(...) Sohu's non-advertising revenues, which are derived from wireless value-added services, online games and e-commerce, decreased by 36% year-on-year but stayed unchanged quarter-on-quarter at US$8.9 million, representing 34% of total revenues."

China Goes for Supercomputing Crown

From InfoWorld: Lenovo leads effort to build 1,000 TFLOPS supercomputer

"China's Lenovo Group Ltd. has begun work on a project to build a computer that is nearly 10 times more powerful than the world's fastest supercomputer, a company spokeswoman confirmed Thursday.

When completed, the Lenovo supercomputer will offer performance of 1,000 TFLOPS (trillion floating point operations per second), according to Jean Cai, a spokeswoman for Lenovo in Beijing. No specific date was given for the completion of the project."

"The world's fastest supercomputer is IBM Corp.'s Blue Gene/L, which is owned by the University of California' Lawrence Livermore National Laboratory. Benchmark tests conducted on BlueGene/L have measured the computer's top performance at 137 TFLOPS, according to Top500.org."

Read more:
Lenovo wrestles back top spot in Asia's PC market
Lenovo Moves Into Global PC Top Ranks
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Alarm Bells Ring for Chinese Cellphone Makers

From Reuters: Alarm bells ring for Chinese cellphone makers

"Global cellphone giants like Motorola Inc. and Nokia N.V. have got their act together in China, putting pressure back on the home-grown rivals who stole the initiative in recent years."

"Analyst say that by late last year, the multinationals finally learned how to compete with the likes of China's TCL Communication, Ningbo Bird and Kejian in a market that buys one of every eight cellphones sold worldwide.
Copying the local groups' business models, Motorola and Nokia have introduced low-end models this year and strengthened their distribution in less affluent smaller cities and towns that are home to the majority of China's 1.3 billion people.
As a result, domestic handset makers have seen their combined share of the China market drop to 38.3 percent in June from 41.2 percent at the end of last year, off from a peak of 58.7 percent by the end of 2003, according to Norson Telecom Consulting."

"Analysts said the domestic malaise is likely to continue for much of the next year, as many smaller players bow out of the industry altogether or are forced into bankruptcy, and a few major manufacturers survive.
China is the world's biggest cellphone market by subscribers, with 350 million, and 100 million units are sold into the market every year. A recent survey put sales worldwide this year at 779 million."

Read more:
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UTstarcom Gets Licence to Make and Sell GSM and CDMA Handsets in China

Overview of Chinese 3G Licence Opportunities

From cullular news: Overview of Chinese 3G licence opportunities

"China's pending 3G license auction continues to hold the mobile community in suspense. The new Pyramid Research report stipulates that the infrastructure opportunity will be some US$9 billion for vendors in the 2006-2009 period with 2007 alone generating approximately US$4 billion, based on data from Pyramid Research forecasts."

"Regarding the 3G auction, Pyramid Research expects three nationwide 3G licenses to be awarded with one going to a fixed operator. An interesting scenario discussed in the report assesses the possibility of China Telecom and China Netcom consolidating and offering a nationwide 3G solution. Another scenario examines the possibility of dissolving China Unicom and dispersing its GSM subscriber base to China Telecom and the CDMA network to China Netcom - making way for both a TD-SCDMA and CDMA2000 operator."

"Adding to the importance of the 3G auction will be the future of China's 3G technology TD-SCDMA. The Chinese government would like to eliminate its dependence on Qualcomm, prop-up domestic vendors like Huawei and ZTE, and in the process bolster China's manufacturing industry. Additionally, if TD-SCDMA is a success, China would be able to export the equipment to developing countries as a cheaper alternative to WCDMA."

Read more:
China's Locally Developed 3G Standard Fares Poorly in Tests
3G Deployment Delayed in China
China’s 3G Standard TD-SCDMA Blooms
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IPO by China Search Firm Baidu Called Likely to be Success

From Herald Tribune: IPO by China search firm called likely to be success

"A year after Google's momentous stock debut comes Baidu.com, China's largest search engine. No one wants to predict that Baidu.com's initial public offering, scheduled for next week, will follow the same trajectory as Google, whose shares have more than tripled since it went public last August. But analysts say Baidu's IPO has what it takes to do well."

""This has all the potential to be one of the best deals this year," said Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles."

"According to iResearch, the number of Internet search users in China is projected to grow at a compound annual growth rate of 27.5 percent from 2005 to 2007."

"However, Baidu, formed in 2000, is at an earlier stage in its development than Google's was when it went public, Bard said. Google also has the added advantage of being a global search engine; Baidu is focused on China, he said."

"Another downside to providing search-engine services in China is the Chinese government, which imposes content restrictions that Google and Yahoo do not face in the United States. Baidu was forced to close for a week in 2002 and pay a fine after its search results contained content that the authorities considered "socially harmful.""

China Net Investor: "Google Inc. holds a 2.6 pct stake in Baidu. There are rumors that Google may be looking to buy Baidu. Google CEO Eric Schmidt was in Beijing recently to meet with Baidu officials. (Google Interest In Baidu Buyout?)

China's Online Games Gaining on Korea's

From Asia Times Online: China's online games gaining on Korea's

"South Korean game companies are struggling to retain their dominant position in the Chinese online gaming market as they slowly give ground to local game makers, industry sources said recently."

"According to KGDI, a computer game affiliate of the Ministry of Culture and Tourism, only two South Korean games - BnB from Nexon Co and Lineage II from NCsoft Corp - were successful in entering the top five popular online games in China in May. Meanwhile, US publisher Blizzard Entertainment and local Chinese game producer WangYi clinched the first and second spot, respectively, on the popularity chart, which used to be the domain of South Korean games."

"While China's homemade products are seemingly putting on a stellar performance in China, South Korean game companies seem to be fighting a desperate battle against their new rivals. South Korea's share of the Chinese on-line game market, where it had a total of 154 products on offer as of December 2004, has reportedly decreased to the 30-percent level from a dominant 51.4% just a few months ago, according to industry sources and the Ministry of Culture and Tourism."

Read more:
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The9 commits $74m for WoW; World of Warcraft, The9, Vivendi Universal
Bear Stearns reports on Shanda and The9: WOW (World of Warcraft) potential blockbuster in China
China's Net Gamers: Ready to Rumble
New research reports on Chinese online game market: Shanda, Netease, The9, World of Warcraft (WoW), Tencent, Sina

China's No. 1 Search Engine Baidu Holds Huge Growth Potential

From MSN Money: Own a piece of China's Google wannabe

"If you missed out on Google, take heart. This summer, you may get a second chance to own an Internet search giant, since China's version of Google is going public in about a month. For investors who get in early and think long term, China's most popular search engine, known as Baidu, has a chance to produce healthy gains. Whether its shares will match Google's 200% gain is another question."

Baidu's basics
"Launched in 2000, Baidu turned profitable just over a year ago. It pulled in just $5.5 million in revenue in the first quarter of 2005 and $13.4 million in 2004. But it has the potential for rapid growth."

"Baidu unabashedly imitates Google. Its site -- http://www.baidu.com/ -- has the same clean, no-frills appearance. Its marketing tag line borrows from the now-common use of “Google” as a verb in English. Baidu's own ads say: “Got a question, Baidu it."

"The company runs over 820,000 message boards in a service called “Baidu Post Bar.” Baidu’s search box is also on more than 76,000 Web sites in China, in a network it calls “Baidu Union.” Click-through traffic from this network generates about a fourth of Baidu’s revenue. And many observers claim that Baidu does a better job with Chinese language search than Google.

And like Google, Baidu is a huge hit. It’s the leading search engine and second-most-used Web site in China, according to iResearch. It’s also the sixth most popular Web site in the world, according to Alexa, a company that tracks Internet usage."

Cheap, for now
"Baidu is slated to start trading for $19 to $21 on Nasdaq under the ticker BIDU, in an IPO underwritten by Goldman Sachs, Credit Suisse First Boston and Piper Jaffray.In that range, Baidu will come public at about 35 times 2006 earnings, says Au of Hamon Asset Management. Assuming the stock does not pop too much on the IPO, that will make it look downright cheap compared with Google. Google has a forward price-earnings ratio of 45, but Baidu has faster growth."

Read more:
Baidu Files for Nasdaq IPO
Google Interest In Baidu Buyout?
Google Steps up Fight for the China Market
Approval of Google's Plans to Expand Mainland China Operations
Chinese search engine market seen as gold mine

Chinese Revaluation - Impact On Global Markets

Chinese Revaluation - Impact On Global Markets
By Kathy Lien Chief Strategist of www.dailyfx.com and www.chinarevaluation.com

"After years of speculation, China has finally dropped its decade long peg to US dollar. As we have been predicting for some time, the one major currency pair that will be impacted the most by the revaluation announcement would be the Dollar against the Japanese Yen (USDJPY) and indeed the pair slid 200 pips or points following China’s announcement.

So what did China do?
- China adjusted the RMB peg to 8.11, which is 2% higher in value against the dollar

The pegged value of the RMB has been adjusted to 8.11 from 8.31. This rather modest revaluation of 2.5% will for the most part do little to reverse or relieve the US’ burgeoning trade deficit. It does however have significant political and market implications. (See market section) Immediate pressure on China to revalue its currency should move to the backseat for at least a few weeks. However, despite the move, we would not be surprised to hear some protests from US Senators that the revaluation move was too small and that China needs to make a much more concerted effort to allow the currency to increase in value, especially since 2.5% pales in comparison to the RMB’s predicted undervaluation of 30-40%.

- The daily trading band against the dollar is still 0.3%

China is hanging onto its 0.3% percent trading band against the dollar which means that even with this move don’t except a lot of volatility in the currency pair. Also, speculators will probably stick around for a while longer which means that even though China has announced a move on its currency, the topic of revaluation and further steps by China will remain in the limelight.

- China will move to a managed float against a basket of currencies

This is the real story. China is planning to move to a managed float against a basket of currencies. Not many details have been disclosed on this front but the People’s Bank of China has written the following on their website: “the trading prices of the non-US dollar currencies against the RMB will be allowed to move within a certain band” - which will be announced later by the PBoC. We suspect that China will take an approach similar to that of Singapore, which is to float their currency against a basket of other currencies within a tight trading band while not disclosing the exact percentage make-up of the basket to prevent speculators from attempting to manipulate their currency. Given that China exports a large percentage of its goods to not only the US, but also the European Union and Japan, the basket would naturally have to include Euros as well as Japanese Yen. This in of itself could be very positive for both of those currencies. Also, if you recall, those currencies were indeed apart of the currencies that China’s internal “interbank” system was trading in May.

What motivates China to do this?
China has many reasons to want to revalue their currency. The most apparent of which is the country’s political motivation to get approval for deals such as Unocal or the new speculation that they may dropping their bid of Unocal for other US oil producers. The US’ time stamp for a move by China in August could be an unwritten agreement between the 2 countries that would pave the way for a buying spree by the Chinese government and Chinese corporations. The
revaluation also makes imports cheaper for China. This comes at a critical time when commodity prices are skyrocketing. The revaluation immediately makes prices of commodities such as oil 2.5% cheaper than they were yesterday.

What does it mean for the markets?
Treasuries - China’s move has ramifications for all of the financial markets. The most significant of which will probablybe in US treasuries. As the world’s second largest holder of US treasuries, China’s revaluation and move to a basket float significantly reduces their need for US treasuries and could potentially take away a big buyer from the market. If this is the case, it will cause bond prices to slide and long-term yields to rally, which could offset some of the additional pressure on the Federal Reserve to continue raising rates. If China even begins to dump US treasuries, we could see the “yield curve conundrum” begin to fix itself.

Currencies - The reduced demand for US treasuries and the possibility of increased demand for other currencies such as Euros and Japanese Yen could be very negative for the US dollar. Right now, the dollar is holding somewhat steady against the Euro thanks to the fact that China has yet to announce the components within the managed float. Once they confirm that the Euro will be included in the basket, the single currency could skyrocket.
As for the Japanese Yen, which is the proxy for Asia strength, the currency should continue to benefit from news of China revaluation. Malaysia has already followed suit this morning by scrapping their own Ringgit peg and also adopting a managed float. Japan is quite pleased with the move and for the immediate term, it should eliminate any fears of Japanese intervention. The revaluation of the RMB makes Japanese goods more competitive on a relative basis against
Chinese goods.

Stocks - The stock market should have a mixed reaction. Shares of companies such as Wal-Mart and Target have and will probably continue to sell-off because the revaluation means that their cost of imports will increase. So Wal-Mart and Target will either have to increase prices or take a cut out of profits. Shares of manufacturing companies that compete against China should rise along with shares of companies that are targets for Chinese acquisition. The revaluation makes it cheaper for Chinese companies to snap up US companies while at the same time possibility giving them more political sway.

Commodities - This could also be very positive for the commodity markets, with the revaluation immediately reducing the cost for commodities.

Is there more to come?
There will definitely be more to come in the world of revaluation. China has to still announce the details of their managed float against a basket of currencies. This announcement could result in another sharp move in the currency market. The 2.5% revaluation is modest at best - expect continued pressure on China to institute a larger revaluation. The managed float will allow them to gradually adjust the value of the RMB while at the same time maintaining an air of uncertainty and leg up over speculators. News of further Chinese bids on international companies should continue to flow into the market, especially since the country now has a massive amount of US dollars that may not need to be invested in as many US treasuries.

For more information, please visit www.dailyfx.com or www.chinarevaluation.com

For China, Valley Firms Just Got 2% Cheaper

From MercuryNews: For China, valley firms just got 2% cheaper

"Silicon Valley just went on sale, at 2 percent off, for anyone in China looking to buy companies here.
Thursday's revaluation of the yuan doesn't only make Chinese imports slightly more expensive for us. It also makes everything in the United States slightly cheaper for buyers in China.

The timing is crucial, because Chinese technology companies are now reaching the size and maturity where they want to join global markets by acquiring corporations elsewhere in the world.

China doesn't yet have the clout to go after the biggest and most successful companies in the valley, such as Apple, Hewlett-Packard, Intel and Oracle. But almost everyone else is fair game.

It's a matter of when, not if, China will start acquiring here."

""I think it's going to be a big trend, and it's going to happen soon,'' said Daniel Burstein, a partner with Millennium Technology Ventures in New York and a regular visitor to China since 1975."

Huawei Scores $4.1B Sales for 1st Half Year

From LightReading: Huawei H1 Sales Hit $4.1B


"Huawei Technologies Co. Ltd. is growing even faster than expected, according to a trading update issued today. And the company's latest numbers, and especially its international success, will act as yet another reminder to the traditional major vendors that they're facing intense competition from the Chinese vendor.

Huawei says it was awarded contracts worth 33 billion Renminbi ($4.1 billion) in the first six months of this year, an increase of 85 percent over the same period in 2004, when it notched up deals worth $2.2 billion.
That means Huawei is already more than half way towards its full-year target of $8 billion worth of contract sales. And to put it into further perspective, the first half total of $4.1 billion is 73 percent of the vendor's sales for the whole of 2004.

In addition, 62 percent of the total, RMB20.5 billion ($2.5 billion), came from deals outside its domestic market. That's higher than the firm's total international sales for 2004 of $2.3 billion."

Read more:
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China’s 3G attack, via Europe - ZTE, Huawei clinching important deals in Europe
Huawai gaining attention of North American carriers
Chinese Telecom Equipment Maker Huawei is Diving into the Core-Routing Market

China Netcom, Telefonica SA Establish Strategic Alliance

From Light Reading: China Netcom, Telefónica Cosy Up

"China Netcom Group Corporation (Hong Kong) Limited, a leading telecommunications operator in China and the Asia Pacific region, is pleased to announce that it formally entered into a memorandum of understanding ("Memorandum") with Telefonica, S.A. in Beijing on 21 July 2005.

With this Memorandum, the Company and Telefonica hope to establish a broad strategic alliance. The parties will explore possible areas of strategic co-operation which would be beneficial to both parties. They will also examine in good faith the form and terms of such co-operation as soon as possible. "

"The strategic co-operation could cover:

Fixed-line, broadband, domestic and international long distance communications
Domestic and international data services and value added services

Nationwide mobile voice and data services to individual and corporate customers, as will be allowed within the Chinese regulatory environment.

The exchange of certain managerial, technical and operational skills and resources."

UTstarcom Gets Licence to Make and Sell GSM and CDMA Handsets in China

From CRIonline: UTstarcom Gets Handset Licence

"California-based UTstarcom is planning for a big push into China's mobile phone market as part of its business diversification drive.

The firm has secured a licence from the Chinese Government to make and sell GSM and CDMA handsets in the country.

"UTstarcom started selling two GSM models and a CDMA model in China in January by leasing local firm CECT's licence, the official said.
And UTstarcom has signed a contract with China Unicom to supply 250,000 units of basic handsets, the firm said in a statement."

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China Internet Users Grow 18 pct to Hit 103 Million

From Reuters: China Internet users grow 18 pct to hit 103 million

"The number of Web users in China, the world's second largest Internet market, grew by 9 million people in the first half of this year to hit 103 million, the China Daily said on Friday."

"The growth represented an increase of 18.4 percent over the same period last year in a market that still has vast potential for further growth, the report said, citing a survey released by the "quasi-governmental" China Internet Network Information Centre on Thursday."

"While more than 67 percent of the U.S. population, about 135 million, have access to the Internet, in China the percentage is only about 7.9 percent," it said."

Microsoft and Google Prepared to fight for China's Internet Marketplace

From ZDNetIndia: Microsoft, Google duke it out for China

"China is quickly proving to be the next great Internet marketplace, and both Microsoft and Google are prepared to fight for it, starting in American courtrooms.

On Monday, the software giant sued Kai-Fu Lee, a former vice president of search technologies and Microsoft's chief architect of business strategy in China, for an alleged breach of a noncompete and confidentiality agreement. Microsoft also sued Google, claiming it was knowingly complicit in the alleged breach when it hired Lee to head up its new Chinese research center."

"With an estimated 100 million people online, China's Internet audience is second only to that of the United States, and financial analysts believe it will surpass America's Internet population within five years. China also has 350 million mobile phone subscribers, 43 million broadband homes and 20 million online gamers--the largest gaming population in the world, according to Piper Jaffray."

"China's Internet economy, which includes sales from e-commerce and advertising, also has plenty of room to grow. It's worth about only 5 percent of the U.S. Internet economy, according to analysts at Piper Jaffray. The analysts expect Chinese interactive sales, including online advertising, e-commerce, games and wireless, to be worth $1.38 billion in 2005. Next year, sales are expected to grow 37 percent to $1.9 billion."

"China is going to be the most significant opportunity for growth for Internet companies over the next five years," said U.S. Bancorp Piper Jaffray analyst Safa Rashtchy."

TaoBao's Q2 Transaction Volume Tops 200 Mln Usd

From Forbes: China's TaoBao.com Q2 transaction volume tops 200 mln usd

"China's TaoBao.com, which runs an online consumer-to-consumer marketplace, said in a statement that its second quarter transaction volume reached 200 mln usd in gross merchandise volume.

Taobao's product listings reached 8.5 mln by the end of the second quarter and currently stand at 8.8 mln, according to the statement.

The firm said it had 7.2 mln registered users by the end of the second quarter. That number has since grown to 7.6 mln registered users.

Taobao.com is a division of China's e-commerce giant Alibaba.com. Taobao and eBay Inc have been engaged in a high-profile fight for control of China's online auction market."

Read more:
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The Taobao Offensive
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Ebay Aims to Conquer China but Homegrown Rival Taobao Tries to Repel the Invasion

India Vs China: The Digital Media Market

From Herald Tribune: A censored market that delivers

"... in China, ... total online revenue hit $1.1 billion. India, an English-speaking democracy that allows freer flow of information, had online revenue of just $93 million.

"It does seem ironic that India, with its democratic government and free press, is so far behind China in developing its Internet market," says David Wolf, managing director of Wolf Group Asia, a Beijing-based regional consulting firm. "The simple reason is that China has the infrastructure and India doesn't."

"The number of Web users in China has expanded sevenfold in eight years to 94 million. India, whose population of 1.1 billion is close to China's, has 24 million Internet users. Yahoo employs 600 people in China, 10 times as many as in India."

"The Chinese government has paved the way for Internet growth by investing $138 billion in telecommunications networks in the past five years, even as it bans online content on topics from democracy to the Falun Gong spiritual movement."

"China has a critical mass that is driving Internet interest," says Duane Kuang, Hong Kong-based director of strategic investments for Intel Capital China, an Intel venture-capital unit. "The Internet companies we're seeing today have revenue and profits, and they're actually delivering services that people need."

China's Baidu to Offer 3.7 mln American Depositary Shares in IPO

From Reuters: Baidu.com sets IPO for 3.7 mln ADS

"China's largest search engine, Baidu.com Inc., may offer up to 3.7 million American depositary shares (ADS) for between $19 and $21 per ADS in an initial public offering, according to a regulatory filing on Wednesday.

The company is planning to sell 2.6 million of the ADS, each equal to one ordinary share, while existing shareholders plan to sell 1.1 million ADS, according to the filing with the U.S. Securities and Exchange Commission.

The Beijing-based company has applied for a Nasdaq listing under the symbol "BIDU" "

China Net Investor: The underwriters are Goldman Sachs (Asia) LLC, Credit Suisse First Boston and Piper Jaffray

Paying Player Base for World of Warcraft (WoW) has Surpassed 1.5 Million in China

From Yahoo Finance (press release): The9 Announces World of Warcraft Exceeds 1.5 Million Paying Players in China

"The9 Limited (Nasdaq: NCTY) today announced that its paying player base for World of Warcraft (WoW) has surpassed 1.5 million in China - just a month following the game's commercial launch on June 7, 2005. WoW is a massively multiplayer online role-playing game (MMORPG) developed by Blizzard Entertainment."

"Mike Morhaime, President and Co-founder of Blizzard Entertainment, said: "World of Warcraft's success in China has quickly exceeded our expectations, and seeing Chinese gamers respond so enthusiastically to the game has been extremely gratifying. We thank the players for embracing World of Warcraft, our partner The9 for helping to make all of this possible, and the Chinese authorities for their support of Blizzard Entertainment."

"Chinese gamers across the country have embraced World of Warcraft," said Michael Fong, Blizzard Entertainment Managing Director, Greater China, "and we are committed to responding with continual updates to the game, including new dungeons for players to explore, additional player-vs.-player content, ongoing live events, and much more. Blizzard and The9 also remain dedicated to delivering unparalleled service to Chinese gamers with fully localized content and local, around-the-clock customer support."

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The Chinese MMORPG Market: Legend of Mir II vs. World of Warcraft
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PayPal China Country Head Jeff Liao Not Worried about Competitor Alipay

From Pacific Epoch: Interview: PayPal China Country Head Jeff Liao (excerpt)

"After much anticipation, eBay's PayPal has finally arrived in China. However, C2C site Taobao's payment system Alipay has a head start, with almost two years of operating experience and more than 2 million users. Paypal is not worried. Pacific Epoch editors Paul Waide and Shang Koo sat down with Paypal China country manager Jeff Liao and talked about Paypal's plans in China.

Alipay is your biggest competitor at least in the media's eyes. Are you worried about competitors in China?

"Not at all. PayPal pioneered online payment back in 1998, we were the one that identified the unique business model and we now own 72 million accounts. China is the second largest market in the world, with more than 100 million users and there are a couple of payment companies in the market but I don't see any that are serious players. The one you've mentioned is only being used on one site. We have Netease, we have Tom Online, we have a strategic alliance with ChinaPay - the alliance is to share their Internet merchant base with us. PayPal, "Bei Bao" in China is going to be an open platform. So almost any Chinese Internet site can use PayPal.

Two, three, five years I think there will be competition, there will be two, three, four, five major players. But today, I don't see that.

One of the advantages of PayPal around the globe is that we always follow eBay. Globally, it is the number one auction site, eBay Eachnet is the number one auction site in China. Do our competitors have that advantage. PayPal is an open platform, anybody can use it. From day one we are on Netease, from day one we are on Tom Online. Have you seen any other payment company, whether it is mobile or online, getting traction? No."

Read more:
eBay's Whitman Concentrates on China this Summer
The Taobao Offensive
China Auction Wars Episode III Part 6 - Revenge of the Taobao
China's Online Auction War Rages On: 1pai General Manager Zhen Zhaodong Resigns
eBay Targets China as its Biggest Market Within a Decade
Putting a value on China's Alibaba
Ebay Aims to Conquer China but Homegrown Rival Taobao Tries to Repel the Invasion

Lenovo Regains Top PC Vendor Spot In Asia

From Yahoo News: Lenovo Regains Top PC Vendor Spot In Asia-ex Japan In 2Q

"China's Lenovo Group Ltd. regained the position of leading personal computer vendor in the Asia-Pacific region excluding Japan in the second quarter of 2005 after completing the acquisition of International Business Machines Corp.'s (IBM) PC division, market research firm IDC Corp. said Wednesday."

"Lenovo had a 19% share of PC shipments in the quarter, compared with 10.9% in the first quarter and 11.7% a year earlier, the research firm said."
Hewlett-Packard Co. (HPQ), which gained the No.1 position in the first quarter, dropped back to second place with a 12.3% market share.
Dell Inc. (DELL) was the third-largest PC vendor with a 9.0% market share, followed by China's Founder Technology Co. with 5.5% and Taiwan's Acer Inc. with 4.9%."

"Lenovo took back its top spot by not only riding on seasonal recovery in China, but through its newly acquired IBM's personal computing division," said Bryan Ma, associate director of personal systems research at IDC."

Read more:
Lenovo Takes On Dell
Lenovo Moves Into Global PC Top Ranks
Microsoft's Red Menace: IBM-Lenovo Deal Could Threaten Bill Gate's Empire
China's Greatest Tech Myths - IBM-Lenovo deal, Linux, Piracy

Chinese Internet Companies Still Cheap?

From Forbes: Alibaba's Magic Carpet

"Some of the heat from China's scorcher of summer in 2005 may be finding its way to the country's booming Internet and media companies. Indeed, shares in a swath of such firms may be ready for a new round of price increases following last week's successful Nasdaq IPO by Shanghai-based ad agency Focus Media and Rupert Murdoch's big bid on Monday for a U.S. Internet firm.

What some investors term a "familiarity gap" between Chinese and Western Internet companies seems to be closing as huge valuations in the U.S. and Western Europe combine with a better understanding of China's burgeoning Internet industry and public offerings that set increasingly robust prices here.

"Chinese Internet companies have historically traded at a discount to their American counterparts" because global investors aren't as familiar with Chinese companies as those in the States, says Victor Koo, a Stanford MBA who recently left his job as president at Sohu.com after six years. What Koo describes as a "familiarity gap" should be closing over time as companies learn how to communicate better with overseas investors, he says."

Many Chinese companies offer more profits in a booming market at lower valuations. Among China's most highly coveted "low hanging fruit" is Alibaba.com, whose Taobao.com unit has been putting pressure on eBay despite high-profile efforts in China by the U.S. online auction company."

China Net Investor: Alibaba.com is still a private company

Google Gets New China Chief And R&D Center

From ChinaTechNews: Google Gets New China Chief And R&D Center

"Google will open a product research and development center in China, and has hired Dr. Kai-Fu Lee to lead the operation and serve as President of the company's growing Chinese operations.

The Google China R&D center will open in the third quarter of 2005. By establishing an R&D center in China, Google says it is making a strong commitment to attracting and developing Chinese talent, as well as partnering with local universities and institutes.

Dr. Lee, who is known for his pioneering work in the areas of speech recognition and artificial intelligence, joins Google from Microsoft, where he most recently held the position of corporate vice president, after founding Microsoft Research China in the late 1990s."


From The New York Times: Microsoft Sues Over Google's Hiring of a Former Executive

"Microsoft filed a lawsuit against Google on Tuesday asserting that Google hired away a Microsoft executive in violation of a clause in the executive's contract that precludes him for working for a competitor.

The lawsuit came one day after Kai-Fu Lee, 43, an expert in speech recognition and an accomplished engineer, told Microsoft officials he was leaving his position as vice president of the interactive services division to take over as head of Google's fledgling operations in China.

Tom Burt, a deputy general counsel for Microsoft, said Dr. Lee had knowledge of trade secrets pertaining to Microsoft's search engine technology and its China business strategy. Under Dr. Lee's employment contract with Microsoft, he is not allowed to work for a direct competitor for at least one year after leaving Microsoft or to disclose company trade secrets at any point, Mr. Burt said."

Read more:
Google Steps up Fight for the China Market
Chinese search engine market seen as gold mine
Microsoft Prepares to Launch MSN China
U.S. Web Giants Target China

UTStarcom to Mass Deploy DSL in China

From Yahoo Finance (Press Release): UTStarcom Signs Contracts to Deploy Approximately 500,000 IP DSLAM Lines With China Telecom and China Netcom

"UTStarcom, Inc.,(..), today announced that it recently signed contracts with China Telecom and China Netcom to deploy approximately 500,000 lines of its AN-2000(TM) IP-based Digital Subscriber Line Access Multiplexer (IP DSLAM) solution in 18 provinces throughout Mainland China."

"More than 30 million people currently subscribe for broadband service in China today, representing a 300 percent increase in subscribers since the end of 2003," said Simon Le, senior vice president of sales at UTStarcom China. "IPTV and other triple play services continue to drive the demand for broadband throughout China, one of the fastest growing regions in the world for broadband services. UTStarcom is collaborating closely with both China Telecom and China Netcom on IPTV in field trials at over 40 sites throughout China."

Read more:
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UTStarcom's 3G and IPTV Plans
UTStarcom/Cisco Announce Triple Play Partnership
UTStarcom Signs Contract With Tiscali Italy to Expand its Broadband Network

Internet Use in China Explodes Despite Tight Controls

From ContraCostaTimes: Internet use in China explodes despite tight controls

"To get an inkling of how China controls and sanitizes the Internet experience, it helps to step into any Internet cafe in Shanghai.
Each incoming user must give a name and address, then hand over identification to a clerk. Closed-circuit TV cameras monitor from overhead. Every computer terminal is loaded with software to track all activity. If a user heads toward a prohibited Web site, cafe employees know right away.
"A blinking light goes off," said Lin Fusheng, owner of the sprawling Shigong Network cafe, off Shanghai's main pedestrian walkway.
The software also alerts authorities at a Shanghai municipal security post across town, and inspectors eventually may drop in to check on the infractions.""

"As Internet usage explodes, billion-dollar businesses have emerged, offering gateways, news sites, auctions and other services. Private Internet tycoons, reliant on government approval and fearful of criminal prosecution, ensure that online postings don't broach sensitive topics. They hire online moderators with lightning-fast fingers on the "delete" key."

"A country of 1.3 billion people, China has only 42 million computers. Relatively few people have computers in their homes, so many users rely on the estimated 100,000 or so Internet cafes scattered around the country.
Shanghai's Shigong Network cafe is full of young men playing online games. Some 85 percent of China's Internet users are male, mostly under 30.
At any given moment, 2 million Chinese are gaming online. One leading portal, NetEase.com, says that as many as 600,000 users have played its most popular game concurrently."

China's Biggest Cellphone Maker, Ningbo Bird, Plunges into Red

From The Standard: Cellphone giant plunges into red

"China's biggest cellphone maker, Ningbo Bird, warned it has slipped into the red, joining rival TCL Communication in the loss column amid cut-throat competition in their home market."

"China is the world's largest mobile market by subscribers, with about 350 million, and one of the largest for mobile-phone sales, with about 100 million handsets sold last year, according to various sources.

But it has also become one of the world's most competitive markets in recent years, as a group of home-grown companies led by Bird and TCL rose to take about half of the market in 2003 from a dominant group of multinationals led by Nokia, Motorola and Samsung Electronics.

Those multinationals have fought back in the last year, particularly at the low end of the market that had become a stronghold of the domestic players.
As a result, the foreign companies clawed back market share, controlling about 60 percent of the market last year, according to Gartner."

ZTE Corp. Ramping up Efforts in Emerging WiMax Sector

From LightReading: ZTE: Future WiMax Hero?

" Chinese equipment vendor ZTE Corp. is ramping up efforts in the emerging WiMAX sector, backed by analyst opinion that the company has the potential to be a dominant market force.
Speaking at the London leg of its European roadshow today, ZTE was keen to talk up its plans to develop technology based on both the fixed-wireless 802.16d standard and the future 802.16e mobile version."

"The company has set up a subsidiary that focuses specifically on WiMax equipment -- dubbed “ZiMax Technologies” [ed. note: Groooaaannnn!!!] -- and has development centers in San Diego in the U.S. and Shanghai and Shenzhen in China."

"Analysts believe the company is well placed to strike it gold in the 802.16 market. “ZTE is widely expected to be among the first vendors to offer a WiMax-certified product, and given its position as a vendor of WLL [Wireless Local Loop] systems in China and other developing markets, ZTE could turn out to be the major force in Fixed WiMax,” writes Gabriel Brown in the latest Unstrung Insider."

Baidu Files for Nasdaq IPO

From Forbes: China's Baidu.com to raise 80 mln usd from Nasdaq IPO

"Baidu.com, a leading Chinese language Internet search engine, said it is looking to raise 80 mln usd from its initial public offering to develop new products and expand network capacity. "

"Baidu, in which Google Inc holds a 2.6 pct stake, said it has applied to be quoted under the symbol as 'BIDU'. Goldman Sachs (Asia) LLC, Credit Suisse First Boston LLC and Piper Jaffray & Co will act as underwriters."

"However, the major risk is its ability to maintain a leading position in the Internet search industry in China, Baidu warned, without providing further details. Earlier state media reports said that Google, which also made its debut on Nasdaq last August, will likely buy a much larger stake in the Chinese company once it lists."



From MotleyFool: Is "Baidu" Chinese for "Google"?

"It's almost the one-year anniversary of Google's IPO, and of course, there are many happy shareholders. Investors taking part in the firm's online Dutch auction snagged their shares at a mere $85 a piece.
But at $291.78 per share, even diehard Google fans are starting to wonder whether the big gains are over. What's a Google investor to do?"

"The next move might be Baidu, which filed to go public yesterday. The company will list on Nasdaq with the ticker symbol BIDU.
According to Baidu's prospectus, it is "the leading Chinese-language Internet search provider." In Web traffic, it ranks No. 2 in China and No. 6 in the world. Much like Google, Baidu has built its traffic mostly through word-of-mouth and the so-called Baidu Union. Over 76,000 third-party websites have posted Baidu's search box on their pages; if their users search Baidu via that box, and click on ads in the process, Baidu Union members get a piece of the resulting profits."

Chinese Spend More Time on Internet than TV

From Eastday.com: Chinese Spend More Time on Internet than TV

"Chinese people are now spending more time surfing the net than watching TV, according to results of a survey by the Chinese Academy of Social Sciences (CASS) published Thursday. The survey, of citizens of five Chinese cities, found that 79 percent of interviewees use the internet for information, and 55.1 percent prefer to read news on the internet. The average times spent surfing the net and watching TV were 2.73 hours and 1.29 hours, respectively. "To our surprise, only 63 percent of the interviewees use e-mail," Guo Liang, a researcher with the CASS said.""

"Five major web sites in the Chinese language, namely Sina, Sohu, Netease, Baidu and Yahoo are still ranked top ones by web users, and those that voted for Sina as the best among them were 30.9 percent."

EBay to Launch PayPal in China by End of Year

From Forbes: EBay to launch PayPal in China by end of year, rival 'not concerned'

"EBay Inc will launch its online payment system PayPal in China by the end of the year, according to an EBay China spokeswoman. But EBay's chief rival, Alibaba.com, which operates its own online payment service, AliPay, is unconcerned about PayPal's entrance into the field. 'We're ready, we're prepared and not very concerned because they've got a lot of catching up to do,' said Porter Erismann, vice president of corporate marketing for Alibaba.com."

"Ebay, which had first-mover advantage in China's online auction market, had originally scheduled its launch of PayPal for the first quarter of this year."

"But Ebay downplayed their late entry to the China online payment market. 'We think that for China, the online payment or e-commerce market is still at the early moment, so we don't think we are late,' said Lillian Liu, a spokeswoman for Ebay China."

Google Interest In Baidu Buyout?

From SearchEngineWatch: Google CEO Schmidt Visits China; Interest In Baidu Buyout?

"TheDeal.com covers (Google hovers as Baidu readies IPO) how Google CEO Eric Schmidt has been spotted recently in China meeting with officials of the Chinese Baidu search engine. Google owns a 4 percent stake of that service, which is to be the most used in the country. Google confirms he was there but wouldn't say the visit revolved around buying more of Baidu or another homegrown service. (...) This article says Baidu has 33 percent of the search marketing in China, "outpacing" any other competitors. But Google's listed not that far back in third place, at 22 percent. Second place isn't cited."

China Mobile Takes More Content Cash

From The Standard: China Mobile Takes More Content Cash

"China Mobile (HK), the world's largest cellphone company by users, said it will keep a larger share of revenue from non-voice services under new revenue-sharing arrangements.
It will keep 30 percent of gross revenues on short messaging services and other value-added services offered by its partners in return for helping them with after-sales and support services. Its share will rise to 50 percent if it helps market services."

"Service providers such as Sina.com and Tom Online now keep 85 percent of gross revenues from messaging and value-added services to China Mobile users.
Service providers have the option of retaining the 85-15 sharing arrangement, but China Mobile will provide only basic billing services in return."

"''The new program will be implemented soon, probably in one or two months,'' said Guan Yimin, a China Mobile spokesman in Hong Kong."

Yahoo! BB Broadband (Japan) Focuses On UTStarcom's mVision IPTV Solution

From LightReading: Softbank Focuses on UTStarcom's mVision

"Japan’s largest broadband provider, Softbank BB Corp., has been busy building its new IPTV offering, BBTV, using UTStarcom Inc.'s mVision solution, the equipment vendor announced Wednesday.
The new IPTV service is the third product in a triple-play bundle to be delivered over Softbank BB’s widely popular Yahoo! BB broadband service. BBTV will feature 28 live broadcast channels and more than 5,200 video on demand (VOD) movies, UTStarcom says."

"The account looks to be a “showcase” account for UTStarcom’s IPTV solution. At the end of March, Softbank BB had 4.8 million Yahoo! BB ADSL lines installed. More than 4.5 million people had registered to use Yahoo! BB’s VOIP service, called “BB Voice.”"

Chinese Companies Abroad

From The Economist: The dragon tucks in

“Going overseas for Chinese companies is a prerequisite for success,” argues Gordon Orr, a consultant with McKinsey in Shanghai. Indeed, there are more deals in the pipeline. SAIC, China's leading car company, remains keen on overseas expansion following an acquisition in South Korea and a last-minute withdrawal from buying Britain's MG Rover. ZTE and Huawei, the two main producers of telecom equipment, are already serving international clients and the latter is rumoured to be interested in Marconi, a perennially troubled British rival."

"Does this amount to a carefully planned assault on global assets? For all its appearance as a communist-directed monolith, China is ultimately too fragmented for that. Unlike Japan's fabled Ministry of International Trade and Industry in the 1960s and 1970s, China does not have a single agency powerful enough to be an effective co-ordinator. Nevertheless, China's acquisition spree has clear political backing. The leadership in Beijing is determined to create its own set of “global champions”—30-50 internationally competitive, yet still state-controlled, firms."

"Although it is clear what Chinese firms want, it is less clear that their buying spree will prove successful. In their favour, Chinese firms can contribute cheap finance, cut costs by relocating factories to China and tap their potentially vast domestic market. Of these, the first is the most compelling. For state firms—and most big companies still have government links—that do not have to make a commercial return or perhaps even repay loans from state banks, the cost of capital is very close to zero. This gives them a huge advantage when it comes to competing with private-sector firms from abroad. And there is increasing evidence that Chinese companies are routinely overpaying for assets."

"In terms of peacefully integrating China into the world economy, this is to be welcomed, not feared. Chinese companies will make their mistakes, and they will need to learn fast. Another wave of hopefuls is already discernible. On June 28th, Thomson of France sold the final leg of its TV operations—not to China's TCL, its partner until now, but to an Indian rival."

Is China the Next R&D Superpower?

From Electronic Business: Is China the next R&D superpower?

"Fewer Americans are earning doctoral degrees in science and engineering, 25,509 in 2001 (the last year for which comparative figures are available), versus 27,243 in 1996. And American governmental spending on R&D in the physical sciences, math and engineering has slipped from 0.25 percent of the gross domestic product (GDP) in 1970 to 0.16 percent in 2003, according to the Alliance for Science & Technology Research in America (ASTRA). Meanwhile, China is steaming in the opposite direction. China nearly doubled its output of science and engineering Ph.D.s between 1996 and 2001, to 8,153. And in the six years between 1997 and 2002, national and local governmental spending on research in China doubled, to approximately $9.9 billion. On top of that, multinational corporations have been racing to set up research centers in the country and China's own industrial titans are now plunging into R&D, realizing they have to have their own technology to compete in global markets."

"China's scientific rise may seem sudden, but it's not. "China is now poised for a technological takeoff because of a whole set of policies and reforms that have been put into place over the last 20 years," says Denis Fred Simon, a specialist in Chinese science and technology policy at the Levin Graduate Institute of the State University of New York, in New York City. China had built its scientific infrastructure on a socialist model in which scientists had lifetime employment, regardless of research output.
But starting in 1985, the country set out to create a more competitive, merit-driven system that would respond to market needs. The country turned the applied research labs affiliated with the various ministries into enterprises that have to turn discoveries into marketable products or find corporate sponsors for their research. Basic research has been concentrated in the top universities and the Chinese Academy of Sciences, a network of 85 institutes spread around the country. Research funding and promotions are heavily dependent on a researcher's output of scientific papers and patents. "One thing China has gotten right is the incentives for researchers," says Lan Xue, associate dean of the School of Public Policy and Management at Tsinghua University. "

BlogChina Aims for Nasdaq

From Asia Pacific Media Network: CHINA: BlogChina aims for Nasdaq

"The company that launched China's leading blog portal plans to list on the technology stock-heavy Nasdaq exchange by the second half of next year and hopes to achieve a market capitalisation of more than US$1 billion, company officials said yesterday.

"I expect we will surpass Sina with our [initial public offering] next year," said BlogChina founder and chief executive Fang Xingdong, as he outlined plans for the next stage in the firm's meteoric growth. "

"Mr Fang, who was the first to coin the Chinese word for blog (bo-ke), has steered BlogChina into the dominant mainland weblog portal with more than two million bloggers as at the end of May."

Telefónica Buys Stake in China Netcom

From Financial Times: Telefónica buys stake in China Netcom

"Telefónica of Spain yesterday broke into China's state-run telecommunications sector by agreeing to pay €240m (US$290m) for a 3 per cent stake in China Netcom, the Hong Kong and New York-listed operator."

"The Spanish company, the world's third-biggest telecoms group by market value, said it had signed a broad strategic alliance with Netcom, China's second-largest fixed-line operator.
It said it hoped eventually to lift its stake to the maximum 5 per cent and qualify for a seat on the board."

"China Netcom is widely seen as weaker than China Telecom, its larger rival, as it mainly operates in the less affluent northern regions. However, it is confident of being awarded a third-generation mobile phone licence, which should shore up its long-term growth.
Amid growing competition and China's maturing fixed-line market, Netcom has been relying on broadband and a limited wireless service as its key growth engines. It is also dipping its toes into broadband television."

China's Sina Corp Officially Launches New Search Engine iAsk

From ChinaTechNews: Sina Finally Unveils Its Search Engine

"iAsk offers knowledge-based and community-based search in addition to the standard web-based search. While maintaining the power of traditional algorithm technology, Sina's iAsk offers an added bonus of users' interactivity with a unique Q&A platform.

iAsk categorizes search subjects into areas of news, pictures, music, knowledge, and video and allows users to input key words and questions of their interests. iAsk then ranks sites partly by subject-specific popularity, clusters results into subject groups, and lists related link collections by experts.

iAsk also features an ''express zone'' that filters all past information and data collected by the search engine on the subject being searched. iAsk offers personalized features such as search by local content and an archive of personal favorites. iAsk is designed to work with both the Chinese and English language queries."