Morgan Stanley: China Internet - Industry Overview

From Morgan Stanley Equity Research: China Internet - Industry Overview
By Richard Ji (Internet / Media - China) and Mary Meeker (Internet - US / Global)

China Internet - Creating Consumer Value in Digital China

"• We are initiating coverage of the China Internet industry with an attractive view. We believe Chinese Internet companies that focus on creating consumer value have the highest potential to create shareholder value. China is No. 1 in the world in mobile subscribers and No. 1 in Internet users under the age of 30 - this evolving presence on the world stage should not be underestimated.

• We believe the ‘click plus brick’ model may dominate ecommerce in China; content may prove to be king; foreign companies lagging in localization may lag in market penetration; and local companies may need to become savvy acquirers to outgrow rivals.

• Online gaming is our favorite segment pick. Local players with selfdevelopment and distribution capacity may emerge as long-term winners.

• We believe competition is breaking out in online brand advertising, which faces inventory oversupply and a secular shift toward performance-centric models. Paid search, on the other hand, is poised for robust expansion.

• We view mobile value-added services as an overlooked opportunity. Despite regulatory concerns, entry barriers are rising and a segment recovery is in sight.

• We see rising opportunities in online commerce including travel, instant messaging-related services and auctions. Emerging payment mechanisms will be key to more substantive growth.

• Our top stock picks include Ctrip, NetEase, and Tencent. See our related reports for these companies, plus Sina, Sohu, TOM Online and 51job."

ZTE Aims to Penetrate North American Market

From Light Reading: ZTE Talking to Tellabs, Ciena

" ZTE Corp. has held discussions with at least two big US telecom equipment vendors -- Tellabs Inc. and Ciena Corp. -- in hopes of broadening its reach outside of China, Light Reading has learned.
A well placed source close to Tellabs says ZTE has met with the company several times since Supercomm. It's not clear that the two firms have seriously discussed a merger, but our source says an OEM deal between ZTE and Tellabs would help both companies gain market share outside their respective home countries."

"(...) ZTE, (...) has made it clear that it aims to penetrate the North American market and sell to Tier 1, Tier 2, and Tier 3 carriers -- both wireless and wireline. The company has been steadily building its presence in the states and now has between 80 and 100 employees between its Dallas, New Jersey, and San Diego offices.

The company's international (non-China) revenues jumped by more than 100 percent for the first half of this year. But that's just the first part of its plan. The rest of it appears to involve some key strategic partnerhips, much like the ones it has already forged with Alcatel and Ericsson AB."

Read more:
ZTE Wins Deals in South America
China’s 3G attack, via Europe - ZTE, Huawei clinching important deals in Europe
China's Largest Telecommunications Manufacturer ZTE Reaches Top Five As Global DSLAM Equipment Supplier
Growing Global Importance of China's Network Industry
China's ZTE signs CDMA deal with Alcatel

UTStarcom Earns Top Product Rating in IP DSLAM Competitive Analysis

From Yahoo Finance (Press Release): UTStarcom Earns Top Product Rating in Heavy Reading IP DSLAM Competitive Analysis

"UTStarcom, Inc. (Nasdaq: UTSI), (...) today announced that the company's AN-2000(TM) B1000 IP DSLAM ranked first in four of the nine categories evaluated for Heavy Reading's IP DSLAM Competitive Analysis. Based on Heavy Reading's recent report, UTStarcom holds the top-rated product in these categories: Central Office (CO) IP DSLAM, Large OSP IP DSLAM, Combined IP DSLAM/Routers/B-RAS, and OSP Combined IP DSLAM/Router/B-RAS. Additionally, UTStarcom's Universal Broadband Server FiberNode(TM) (UBS 4848-1GE) placed second in the OSP Sealed-Unit IP DSLAM category."

"Our IP DSLAM report presents one of the most detailed, comprehensive competitive analysis of IP DSLAMs to date. We evaluated 50 different IP DSLAM products from 19 manufacturers and ranked UTStarcom's AN-2000 B1000 as the clear leader in four distinct categories based on performance scalability and the breadth of its feature set," said Graham Beniston, analyst at large at Heavy Reading."

Read more:
UTStarcom to Mass Deploy DSL in China
Yahoo! BB Broadband (Japan) Focuses On UTStarcom's mVision IPTV Solution
UTStarcom's 3G and IPTV Plans

Chinese MMOG Yulgang Amassed 9 Million Registered Players in Two Months

From Next Generation: Chinese MMOG Hits 9 Million Users

"Chinese MMOG Yulgang has amassed a massive audience of 9 million registered players, just two months since its launch. This is more than double World of Warcraft's global audience.
The game, from Beijing 17game Network has reached a peak of 215,000 concurrent users. However, unlike WoW, it costs nothing to buy or play the game, with revenues drawn from sales of virtual merchandise."

China Net Investor: 17game Network is China.com's online gaming unit. China.com owns 48 percent of the gaming unit, while the unit's founders and employees own the rest.

Baidu.com: Bull vs. Bear

From Motley Fool: Dueling Fools: Baidu.com Bull
By Rick Aristotle Munarriz

"Baidu bears have it wrong, though. The stock is not overvalued once you dig beneath the surface. Baidu's trailing revenue wouldn't seem to justify the company's $2.5 billion price tag at the moment. However, Baidu is also extremely profitable. Thanks to its shrewd operating prowess and China's low tax rates, Baidu sported 17.6% in net margins this past quarter."

"Baidu is profitable, with rich double-digit net margins right now. Yahoo! didn't shake the red-ink stink until its top line hit $591.8 million in 1999. Google made it earlier in its tenure, but last year the company produced $399.1 million in profits on $3.2 billion in revenue. That's a respectable 12.5% showing in net margins, but it's a far cry from what Baidu has working in its favor right now."

"The reason that Baidu is still so early in its revenue growth cycle despite being the market leader in the world's most populous nation is that most of China is not online. In fact, just 10% of the country's 1.3 billion residents have Internet access. How would you have liked to buy into Microsoft when just 10% of the country knew how to boot up a PC or Starbucks back when just 10% of the country was sipping premium java blends? That's the opportunity you have here with Baidu."


From Motley Fool: Dueling Fools: Baidu.com Bear
By Charly Travers

"So let's take the perspective of an investor who wants to hold for five years while Baidu.com goes through its growth phase. For this investment to pay off and make us some money, we need to see the company's market cap increase over this five-year holding period. For a small, high-risk growth company like Baidu.com, my hurdle rate would be an annual increase in value of 20%. This means Baidu.com needs to grow to a $6 billion market cap from today's $2.5 billion value to get me the kind of return I'm looking for."

"To get me the 20% return I'd want to make on this kind of investment, Baidu.com would need to grow earnings from the current $3 million to $156 million by 2010. And that's using a very generous P/E ratio of 40. This means that an investor buying Baidu.com today is counting on the company to grow earnings at an annual rate of 120% for five years.

Does that look like a good bet to you?"

Microsoft Finds New Appetite for China Software

From cnet.news: Microsoft finds new appetite for China software

"Microsoft has stirred to life in China with a string of small but pivotal deals in the past months after years of seeming slumber as the Asian country's market began to mature."

"In the latest, Microsoft said Monday that it and International Finance, the World Bank's private sector arm, would together invest $35 million in software maker Chinasoft International.

In May, Microsoft announced the creation of two ventures for its MSN Internet service in China, saying the development would allow it to offer services running "the full gamut of a true Internet portal" in the market--including services targeted at China's 370 million mobile phone users.

In June, the company unveiled plans to team with Indian software outsourcing leader Tata Consultancy and several Chinese partners to form an IT outsourcing firm, which the investors hoped would serve as a model for Chinese firms hoping to replicate India's outsourcing success.

And in July, Microsoft agreed to invest $25 million in Hong Kong-listed Lang Chao International, a unit of a larger Chinese software maker."

Read more:
Microsoft China Claims to Gain Ground against Linux in China
Microsoft Prepares to Launch MSN China
Microsoft and Google Prepared to fight for China's Internet Marketplace

Annual Conference of Chinese Software Professionals Association

From SunHerald: Valley firms get advice on China

"The annual conference of the Chinese Software Professionals Association in Santa Clara Saturday brought together high-profile venture capitalists such as Lip-Bu Tan of Walden International and executives from Google, Microsoft and Yahoo as well as leaders of firms in China. (...)

Many painted a picture of China radically different than just a few years ago. Only a handful of Silicon Valley venture firms were in China four years ago. Now, more than a dozen have invested there, with more on the way. Venture financing in China rose to $1.3 billion in 2004, nearly a 30 percent jump from 2003, according to Walden Ventures. In addition, more than 250,000 Chinese from abroad have returned to China, including many from Silicon Valley, to work and start new businesses.

China's market is among the fastest-growing in many sectors. Opportunities abound in semiconductors, software and telecommunications, particularly mobile services, speakers said. Though China has long been tapped to manufacture older generations of technology, there are growing numbers of firms working on cutting-edge products, particularly in the semiconductor sector, said Tan, founder and chairman of Walden. He and others predict that over the next decade, Chinese companies will be technology innovators."

Baidu Attempts Mediation with Music Giants

From Forbes: China's Baidu in mediation talks with music companies

"China's biggest Internet search engine Baidu and seven global music groups agreed to enter into mediation on the first day of a copyright trial, state media reported.

The music companies including Universal, Warner, EMI and Sony BMG are suing the Nasdaq-listed Baidu whose MP3 search technology provide links to websites which allegedly allows users to illegally download copyrighted music. The companies are suing Baidu for allegedly infringing the copyright of 137 songs and are seeking 1.67 mln yuan ($ 200.000) in compensation.

Baidu has maintained it is not at fault as it merely provides the search technology and not the offending downloading service."

Read more:
Baidu Guilty of Copyright Infringement
Sony, Warner, EMI Sue Baidu Over Free Music Downloads
Netease Drops Music Search Service To Cut Piracy
China's Baidu Sued for Piracy ahead of IPO

Internet Protocol TV is Paying off for PCCW

From BusinessWeek: The Second Coming Of Richard Li

"At a sprawling control room in an old industrial building overlooking Hong Kong's Victoria Harbor, technicians tinker with tall racks of networking equipment and a wall of TV screens blinking everything from cricket matches and cartoons to fashion shows and porn. It would be a familiar scene at the home of any cable- or satellite-TV operator. But this network belongs to a telephone company -- PCCW Ltd., Hong Kong's leading fixed-line operator. For two years, PCCW, formerly Pacific Century CyberWorks, has been delivering pay TV over its broadband telecom lines."

"PCCW is showing that IPTV can succeed. Even though its service has limited interactivity, PCCW's NOW unit has signed up more than 450,000 customers. It trails i-Cable Communications Ltd., the cable monopoly owned by Wharf (Holdings) Ltd., which has 718,000 subscribers, but the gap is closing. In fact, PCCW accounts for some 30% of all IPTV subscribers worldwide. "PCCW is definitely at the forefront" in the world in IPTV, says analyst Michelle Abraham of Scottsdale, Ariz., consultancy In-Stat."

"If PCCW can maintain the momentum, it could not only prove broadband TV is commercially viable. It also could become one of Asia's better corporate turnaround stories -- and finally vindicate Richard Li's vision for PCCW. The second son of Hong Kong magnate Li Ka-shing, Richard Li, 38, was often ridiculed in the 1990s for his brash style and controversial deals. He launched PCCW in 1999, intent on creating an Asian Internet powerhouse. PCCW didn't live up to the hype, but Li was able to use its stock, inflated by the dot-com euphoria, to buy Hong Kong Telecom from Britain's Cable & Wireless in 2000. PCCW stock later plunged when the Net bubble burst, and its debt soared to $12 billion. Meanwhile, PCCW's fixed-line business lost customers as Hong Kong's phone market was deregulated. Li's telecom gambit looked like a fiasco."

Read more:
IPTV in China: PCCW’s "Now TV" has over 440,000 Subscribers
China Telecom And China Netcom To Begin IPTV Trials
China Awards First IPTV Licence to Shanghai Media Group
Asia Leading Global IPTV Revolution

China sets New Net Controls

From detnews.com: China says it wants 'healthy' news only on Web sites

"China said Sunday it is imposing new regulations to control content on its news Web sites and will allow the posting of only "healthy and civilized" news.
The move is part of China's ongoing efforts to police the country's 100-million Internet population. Only the United States, with 135 million users, has more.
The new rules take effect immediately and will "standardize the management of news and information" in the country, the official Xinhua News Agency said Sunday."

"Only "healthy and civilized news and information that is beneficial to the improvement of the quality of the nation, beneficial to its economic development and conducive to social progress" will be allowed, Xinhua said.
"The sites are prohibited from spreading news and information that goes against state security and public interest," it added."

Mary Meeker on China's Online Future

From BusinessWeek: Mary Meeker on China's Online Future

The Morgan Stanley analyst sees the world's largest concentration of young users sparking the rapid development of new products and services Link

"Why so much excitement about China's Internet?
It's the combination of one of the biggest markets in the world with the biggest evolution agents, if you will. They have kind of come together. We have defined it as an emerging market meeting an emerging market. So from an investor standpoint, along with a lot of opportunity and interest, there comes a lot of risk. It's a little bit of either a double benefit or a double whammy. China is the No. 2 market in the world based on the number of Internet users. It will probably be No. 1 in the next two to five years. There are more Internet users under the age of 30 in China than any market in the world, by our estimates.

What do all those young people [about 70 million] mean for the development of the Chinese Net?
Oftentimes, the hotbeds of innovation in technology occur where you have the largest number of young users and the largest number of young engineers. So we actually think that while there hasn't been a tremendous amount of global innovation in the China Internet market -- most of the China Internet companies have adopted models that were developed in other markets first [such as] portal, online advertising, search, and, in effect, imported them to the Chinese market -- we think there's going to be a fair amount of innovation coming out of this market in the next three to five years."

Lenovo Collaborates on Research with Western Tech Companies at a New Beijing Center

From Red Herring: Lenovo, Westerners Team Up

"Lenovo will team up on research with other major technology companies at a new research center that opened Wednesday in Beijing, a move that further cements the Chinese PC maker’s position as a multinational company after buying IBM’s computer business last year.

The Innovation Center brings together Lenovo, Intel, IBM, LANDesk, Microsoft, and Symantec. The companies will work on joint research and development in client information technology. It is the second such center for Lenovo, which in May opened a similar facility with the same companies in Raleigh, North Carolina."

Read more:
Lenovo Sees Itself as No.1 PC Maker in Five Years
Lenovo Launches First ThinkPad Laptop
China Goes for Supercomputing Crown
Lenovo wrestles back top spot in Asia's PC market

Q&A with Vice President of Juniper, Greater China

From DigiTimes: Q&A with Eric Yu, vice president of Juniper, Greater China

"Juniper Networks has made significant inroads into China’s telecom market over the past two years, including successfully winning a large contract to help build China Telecom's next-generation backbone network, known as CN2 (ChinaNet Next Carrying Network) in late 2004. Eric Yu, vice president, Greater China, for Juniper Networks, discussed the company’s strategy in the development of the telecom market in China as well as the growth potential of China’s IP service market during an interview with DigiTimes." Link

Chinese Start-ups and Silicon Valley (video)

From Market Watch: Start-ups and Silicon Valley

"Tim Draper of Draper Fisher Jurvetson, the venture capital firm behind Skype and Baidu, talks to Bambi Francisco about companies that are gaining traction in China and the ongoing innovation in Silicon Valley." Link

Top Valley VC Firms to Invest in China

From Mercury News: Top valley VC firm will invest in China

"One of Silicon Valley's top venture capital firms is going to start investing directly in China, in a move other companies are likely to follow.
Last week, Sequoia Capital -- which has backed Google, Cisco Systems and Apple Computer -- said it will announce a $200 million fund next month to seed Chinese start-ups. Sequoia has already hired two people in China, and may be looking for more."

"... one of the early valley firms to venture abroad, Draper Fisher Jurvetson, has scored some big wins in China, including backing Chinese search engine Baidu, which now is valued at $2.6 billion. In fact, Draper Fisher Jurvetson's success -- as backer of Baidu, Focus Media and others -- apparently drew Sequoia's attention. Word is Sequoia hired away Fan Zhang, a former director of DFJ's China operations, called ePlanet Ventures. Zhang could not be reached for comment, and DFJ did not respond to a request for comment. Last month, Sequoia also hired Neil Shen, the co-founder and chief financial officer of Ctrip, the online travel company in China."

"Another big valley firm, New Enterprise Associates, also plans to announce a China fund next month, said partner Dick Kramlich. The fund will be led by Min Zhu, co-founder of WebEx Communications."

UTStarcom Eyes other Markets for Expansion

From ContraCostaTimes: UTStarcom eyes other markets for expansion

"To make up for the slowdown of its PAS business in China, UTStarcom needs to increase its sales in other markets. But right now, UTStarcom is on hold as it tries to sell its new technology. It has secured trials across the globe, but has yet to turn those trials into full-blown orders.
IPTV, for one, is just getting off the ground. UTStarcom has 40 IPTV trials under way in countries such as China, India and Brazil, but only one regular customer, Softbank, which offer IPTV to its subscribers through its Yahoo Broadband service."

"Similarly, UTStarcom is waiting for China to roll out 3G, or its third-generation cell phone network, which has been delayed and is now expected to debut sometime next year.
UTStarcom is banking that the introduction of 3G should help its business in China, assuming that the company beats out its bigger, more powerful competitors, such as Nortel, for the deals. UTStarcom believes it has an advantage in China, since it already has an established relationship with several of the Chinese telecommunications providers. For now, however, the Chinese telecommunications carriers have slowed down their purchases of UTStarcom's PAS equipment as they get ready for 3G."

Baidu Guilty of Copyright Infringement

From Pacific Epoch: Baidu Guilty

"Beijing Haidian People's Court on Friday found Baidu (Nasdaq: BIDU) guilty of copyright infringement, China Computer World reports. According to the court, Baidu must pay 68,000 Yuan (2,000 Yuan for each song) to Shanghai Busheng Music Culture Broadcasting Limited for offering download services to 34 Busheng Music songs. In addition, Baidu must remove the 34 songs from its website immediately."

Sony, Warner, EMI Sue Baidu Over Free Music Downloads

From Bloomberg: Sony, Warner, EMI Sue Baidu Over Free Music Downloads

"Sony BMG Music Entertainment, Warner Music Group Corp., EMI Group Plc and Universal Music Group are suing Baidu.com Inc., China's most-used Internet search engine, for allowing free downloads of their music."

"Restrictions on Baidu's services would make it more difficult for the Beijing-based company to maintain its lead in China over Google Inc., the world's biggest search engine company. (...) "About 28 percent of Baidu.com's traffic are users of the MP3 service, so if the company loses that service, it will hurt them,'' said Edward Yu, chief executive of Beijing-based technology research firm Analysys International."

Read more:
China's Baidu Sued for Piracy ahead of IPO

Mary Meeker on China's Internet Sector

From YahooFinance: Morgan Stanley's Meeker Places Bets On China

"While this week's plunge in the shares of Chinese search engine Baidu.com Inc. (BIDU) demonstrates the risks of excess enthusiasm, Meeker said some companies in China's Internet sector may be among the safer bets for investors to capitalize on the country's stellar economic growth.

""The leaders in the Chinese Internet space are some of the best and the brightest in the country," Meeker told Dow Jones Newswires in an interview Thursday. She adds, however: "There will be more failures than successes in this sector over time."

"Morgan Stanley's analysts have overweight recommendations on just three Chinese Internet companies: travel planner Ctrip.com International Ltd. (CTRP), gaming firm NetEase.com Inc. (NTES) and online content company Tencent Holdings Ltd. (0700.HK)."

Baidu "underperform" ratings due to concerns about its valuation

From Investors.com: Baidu sinks on valuation concerns
(Copyright ©2005 MarketWatch, Inc. All rights reserved.)

"U.S-listed shares of Baidu (BIDU) fell 21% to $89.65 in early morning dealings. The stock had gained more than 35% during the previous three trading days after analysts at J.P. Morgan and Morgan Stanley offered optimistic outlooks on Chinese Internet stocks."

""Baidu's current stock price has far exceeded even the most aggressive valuations and is distinctly 'off the chart' in our view," wrote Piper Jaffray analyst Safa Rashtchy in a note to clients. The analyst set a $45 price target on the stock. "

Read more

Baidu's Way from Unknown to No.1 Search Engine in China
Quotes on the Baidu (BIDU) IPO
Fact Sheet on the Chinese Search Leader

Lenovo Aims to Grow at Twice the Industry Growth Rate

From Financial Times: Lenovo to focus on growth

"Lenovo (...) is already the third largest PC maker behind Dell Computer and Hewlett-Packard, the US market leaders."

But Mr Yuanqing, the Lenovo chairman said "the Chinese group planned to grow by focusing on innovation in the PC market and targeting high-growth market segments including consumers in developing markets and the mobile and small business segments in more mature markets."

"As part of its efforts to boost market share in China, Lenovo planned to open 800 franchise stores by year-end, bringing the total to 5,500, said Stephen Ward, chief executive, at a conference last week. Lenovo also has opened 70 stores in India."

Read more

Lenovo Launches First ThinkPad Laptop - ThinkPad X41T
China Goes for Supercomputing Crown
Lenovo wrestles back top spot in Asia's PC market
Lenovo Moves Into Global PC Top Ranks

Goldman Sachs: Baidu.com Fair Value at about $27 Per Share

From Forbes.com: Baidu.com Fair Value Seen At About $27 Per Share

""We are extremely positive on the market opportunity in China and Baidu's commanding leadership position in search, but we cannot justify the valuation," Goldman said. "Our implied fair value is about $27; a more-aggressive scenario suggests about $45." The $45 price target is still 60% below current levels, Goldman noted." "

"The research firm expects Baidu to generate about 35% revenue growth and about 40% earnings-per-share growth from 2006 to 2009 (...) ."

""The most notable risk is the nascent nature of the paid search market in China," the firm said. "With a Chinese search market of less than $200 million in revenue in 2004, the drivers of success remain uncertain.""

Read more:
Quotes on the Baidu (BIDU) IPO
Google's China Situation Better Than You Might Think
China's Baidu Sued for Piracy ahead of IPO
Google Loosing Ground in China

Facts and numbers: Baidu (BIDU) IPO - Fact Sheet

Chinese Internet CEOs: "Wall Street Analysts Ignorant of China's Internet Industry"

From ChinaTechNews: Chinese Internet CEOs Criticize Wall Street Analysts

"Three Chinese Internet luminaries lashed out at Wall Street analysts this past week during the Alibaba.com-sponsored West Lake Internet Symposium held in Hangzhou. Zhang Chaoyang, CEO of Sohu.com; Ding Lei, CEO of Netease.com; and Ma Huateng, CEO of Tencent.com, launched what one local newspaper described as "a collective attack against Wall Street analysts."

"The three said that many analysts on Wall Street do not know anything about China's Internet industry, so when they judge a Chinese business, their judgement is only 10% accurate, at best."

Watch out for India and China!

From BusinessWeek online: Why the world must watch out for India, China

"Washington think tanks are publishing thick white papers charting China's rapid progress in microelectronics, nanotech, and aerospace -- and painting dark scenarios about what it means for America's global leadership.
Such alarmism is understandable. But the US and other established powers will have to learn to make room for China and India. For in almost every dimension -- as consumer markets, investors, producers, and users of energy and commodities -- they will be 21st-century heavyweights."

"One implication is that the balance of power in many technologies will likely move from West to East. An obvious reason is that China and India graduate a combined half a million engineers and scientists a year, vs. 60,000 in the US."

"American business isn't just shifting research work because Indian and Chinese brains are young, cheap, and plentiful. In many cases, these engineers combine skills -- mastery of the latest software tools, a knack for complex mathematical algorithms, and fluency in new multimedia technologies -- that often surpass those of their American counterparts.
As Cisco's Scheinman puts it: "We came to India for the costs, we stayed for the quality, and we're now investing for the innovation."

"China already has the world's biggest base of cell-phone subscribers -- 350 million -- and that is expected to near 600 million by 2009. In two years, China should overtake the US in homes connected to broadband. Less noticed is that India's consumer market is on the same explosive trajectory as China five years ago. Since 2000, the number of cellular subscribers has rocketed from 5.6 million to 55 million."

Alibaba to Set up European Headquarters in London

From Interfax China: Alibaba to set up European headquarters in London

"Alibaba.com, operator of China's largest B2B portal, will establish the company's European headquarters in London, Chief Executive Jack Ma said Saturday at the China Internet Summit in Hangzhou."

"A major portion of Alibaba's B2B business is helping buyers outside of China buy goods and supplies from Chinese manufacturers. The Chinese e-commerce company currently has about 200,000 customers in Europe, with a large portion of those located in the U.K., Ma said.
In August, Yahoo announced it was investing USD 1 bln in Alibaba and injecting all of its China-based assets into the e-commerce company in return for a 40% stake. New capital from this deal will, among other business expansion plans, allow Alibaba to further increase its presence on international markets."

Blog Recommendation: "Chinawhite" - Chasing the "Chinese Dream" in Shanghai

Shakil Khan is a 31-year-old Brit who just arrived in Shanghai where he wants to become a man on the ground for Silicon Valley VCs or companies who are looking for alliances or joint ventures with Chinese players. His blog "Chinawhite" will help you to stay up with the latest gossip inside China's Internet and venture scene.

(Khan was an early player in the UK sms industry. His 1st Internet venture was a domain name registrar in the UK. In 2000 he launched SMSboy.com, which allowed you to send free text messages to any phone across Europe.)

China Telecom Seeks to Block VoIP - Skype Blocked in Shenzhen

From Red Herring: Skype Blocked in China

" The Shenzhen branch of China Telecom, China’s largest telecommunications carrier, has begun blocking VoIP calls in a possible effort to stanch the massive loss of revenue it could sustain if a substantial percentage of that country’s 100 million Internet users switch their long-distance calling to services like Skype.

Reuters cited media reports and Internet postings as the source of its information that the Shenzhen branch of the former monopoly carrier has begun blocking Internet users from accessing Skype’s voice services within that city.

The news service also cites a report in the Shanghai Daily that China Telecom plans to block Skype’s service throughout the country, eventually. However, there was no confirmation of that unattributed report."

Read more:
Skype and Tom Online Create Chinese Joint Venture

Alibaba Eyes Growth, But No Acquisitions or IPO Yet

From The Economic Times: Alibaba eyes growth, but no acquisitions yet

"Yahoo Inc's newly acquired Alibaba.com unit will focus on building up several key businesses, but has no near-term plans for acquisitions or a public offering, as it aims to be China's Internet leader, top company executives said on Saturday."

"Ma (Alibaba founder and CEO) has said previously that Alibaba would like to go public and still has such ambitions, but is happy with its current major three shareholders and is in no hurry to go to market."

"Yang (Founder of Yahoo!) said the company was unlikely to go public for at least the next year."

Read more:
A Critical View on the Yahoo-Alibaba Deal
Fact Sheet on the Alibaba-Yahoo deal

UTStarcom To Host IPTV Webinar on September 15

From Yahoo! Finance (Press Release): UTStarcom CTO Bill Huang To Host IPTV Webinar on September 15

"UTStarcom, Inc., a global leader in IP-based, end-to-end networking solutions and services, today announced that the company will host an online webinar on IPTV on Thursday, September 15, beginning at 10 a.m. Pacific/1 p.m. Eastern. The webinar will last approximately one hour and will be led by UTStarcom CTO Bill Huang."

"With two live commercial deployments and more than 40 active trials to date, UTStarcom is a global leader in IPTV deployments. Huang will offer insight into the worldwide IPTV market, latest market trends, the competitive landscape as well as UTStarcom's IPTV strategy and recent IPTV deployment with Softbank in Japan."

"The webinar will begin at 10 a.m. PDT/1 p.m. EST on Thursday, September 15. You can sign up for the event via this link: IPTV Webinar on September 15
To listen to the live webinar, please go to the Web site at least 15 minutes early to register and to download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will also be available at the above link."

Read more:
UTStarcom to Mass Deploy DSL in China
Yahoo! BB Broadband (Japan) Focuses On UTStarcom's mVision IPTV Solution
UTStarcom's 3G and IPTV Plans

China Internet Summit 2005

From AuctionBytes: Alibaba.com to Host China Internet Summit 2005

""Connecting China and the World" is the theme of this year's China Internet Summit 2005 at Westlake, hosted by eBay competitor Alibaba. Leading CEOs of Chinese Internet companies will meet September 10 in Hangzhou, China. Jack Ma, CEO of Alibaba, will give the welcoming address, and Bill Clinton, former President of the United States of America, will give the keynote."


From CNSNews: Clinton Urged to Address Internet Repression in China

"Internet giant Yahoo was accused this week of providing information to the Chinese authorities which helped convict and jail a journalist for 10 years (see related story)."

"The incident came to light shortly before Clinton was due to give a keynote address to major Internet summit in Hangzhou, hosted by Yahoo's partner in China."

"Human rights campaigners urged the former president to use the opportunity to challenge the Chinese government and Internet companies. Human Rights in China research director Nicolas Bacquelin said from Hong Kong that Clinton had in the past "come out pretty forcefully in defense of the free flow of information."

Ericsson Plans $1B Investment in China

From Bloomberg: Ericsson to Invest $1 Bln in China Over Five Years

"Ericsson AB, the world's largest mobile-phone network maker, plans to invest $1 billion on manufacturing and research in China in the next five years to take advantage of lower costs and meet demand for high-speed mobile phone services.

Chief Executive Carl-Henric Svanberg, 53, told reporters today in Shanghai that the investment will allow Ericsson to win a 33 percent market share for equipment that allows faster downloads of movies and games on handsets. He said China will spend $10 billion to $12 billion on such third-generation networks within three years of issuing licenses in early 2006.

Ericsson and world No. 2 Nokia Oyj are relying on demand for 3G networks to spur orders next year and maintain their market share over Chinese rivals such as ZTE Corp. and Huawei Technologies Co. that are able to offer lower prices. Stockholm- based Ericsson expects China to issue three 3G licenses."

"``China is still the market with the largest potential,'' Svanberg told reporters. ``It adds about five million mobile- phone users a month.``''

Read more:
Nokia Sees 200M New China Mobile Users in 3 Yrs
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Google's China Situation Better Than You Might Think

From SearchEngineWatch: Google's China Situation Better Than You Might Think

"The China Internet Network Information Center has released a new China Online Search Market Survey Report (PDF file) outlining the search market in China that's well worth a read. And despite headlines you may have seen from this report that painted a gloomy picture for Google, actually reading the report makes me think Google's much better off than you might think."

"(...) when you drill down into this recent report, you find that in specific types of searches, Google probably has the healthier outlook. IE, Baidu may lead with those interested in downloading music, but for those seeking things like shopping and business information, Google is very strong."

"In other words, perhaps Baidu is so popular in China because it has served as a type of Napster for the nation. If so, then Google has far less to worry about in the "race" for China, since if these are illegal downloads, it's not a business it wants or can be in."

"Google wins in the share of those seeking maps, city guides and travel info -- 41.8 percent of searchers to Baidu's 38.8 percent. Google also ties with Baidu for those seeking shopping and business information, 42.5 percent."

"There are other Google wins I think are significant. The more money you have, the more likely you are to search with Google. At the highest income level surveyed, those with 5,000 yuan per month (about US $600) or higher, Google has 58.1 percent of the searchers to Baidu's 25.7 percent."

China Internet Network Information Center: China Online Search Market Survey Report (PDF file)

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Yahoo! Helped Chinese Authorities Jail Journalist

From BBC News: Firms face moral dilemma in China

"Media watchdog Reporters Without Borders has accused Yahoo of being "a police informant for the Chinese regime", following allegations that information supplied by the company helped jail a journalist."

"Reporters Without Borders accepts that Yahoo - and it is not currently known whether the firm volunteered or was forced to supply the e-mail details of Shi Tao - could have encountered legal problems with the Chinese authorities if it refused to comply.
But, Reporters Without Borders said, it is about time that the powerful net firms such as Yahoo and Microsoft that have set up shop in China stood up and were counted, putting an ethical position before their legal obligations."

"Shi Tao, the Chinese journalist at the centre of the Yahoo controversy, was sentenced in April to 10 years in prison for sending, via e-mail, the text of an internal Communist Party message to foreign websites."

Veteran Chinese VCs: " Bubble Won’t Burst"

From Red Herring: Chinese Bubble Won’t Burst

"Leading venture capitalists and entrepreneurs weighed in Tuesday on the state of China’s technology economy in keynote addresses on the first day of the Red Herring Asia conference in Shanghai, as they downplayed the danger of a bubble bursting anytime soon."

"“Look at all the listed Chinese companies, with the exception of Baidu,” said Mr. Chao (managing director of Doll Capital Management). “Sina, Ctrip, 51Job—if you compare them to their U.S. counterparts like Travelocity for Ctrip, Monster for 51Job, Yahoo for Sina—and you look at their P/E multiples, the Chinese companies are trading much lower.”"

"With Chinese search engine Baidu’s recent Nasdaq listing and its 354 percent one-day leap, the three keynote speakers were each asked to frankly assess whether the company has been overvalued.
“In reality it’s being valued on what it will do 10 or 15 years from now,” said Mr. Chao. “It’s potentially overvalued. ... If I were a board member or shareholder, I would be nervous.”"

Chinese Dotcom Bubble?

From ChinaTechNews: Dotcom Boom, Version 2.0

"But when it comes to dotcom dementia, it's deja vu all over again. Yahoo agreed to purchase a 40 percent stake in Hangzhou-based e-commerce player Alibaba for US$1 billion, and inject its China unit into the deal. The Grouch wonders: what else were the Yahoo people injecting when they came up with these figures? One. Billion. Dollars. US dollars."

"The Yahoo/Alibaba deal represents unfounded exuberance. It's not based on revenue. It's not based on the future. Runaway economic growth in China, like Dotcom Boom Part One, and the 17th century Dutch tulip mania, will not last forever. It probably won't last until the end of the decade. Once the Olympics are over, all bets are off. No chance that Beijing will let a little civil unrest or an economic downturn spoil the 2008 party, but after that, it's possible that the chips will be allowed to fall where they may."

"Missed the first Internet boom? Welcome back, 'cuz here we go again. We still have the Alibaba IPO to look forward to."

Read more:
A Critical View on the Yahoo-Alibaba Deal
Why eBay Must Win In China
Is eBay Dead in China?

Fact Sheet on the Alibaba-Yahoo deal

Microsoft China Claims to Gain Ground against Linux in China

From The Seattle Times: Microsoft gains ground against Linux in China

"Stories about Microsoft losing ground to Linux in China are overblown, says Tim Chen, chief executive of Microsoft China. Instead, Microsoft likes to cast gains against Linux as evidence that China's technology industry is maturing and moving toward the proprietary-software approach championed by Microsoft."

"Three of Asia's leading Linux vendors, including Beijing-based Red Flag Software, recently released a new version of their Asianux 2.0 server platform. But Chen asserts that Microsoft is gaining ground in the country's booming business-software market, and said changes are under way."

"But it's not just small, local Linux companies Microsoft is battling. IBM, a key supporter of open-source business-software products, in February announced plans to expand its presence in China with an "innovation center" staffed with Linux experts who will help local software companies develop and test their products.
IBM asserts that the Chinese government is moving away from, not toward, proprietary-software products like Microsoft's. According to IDC statistics cited by IBM, the Chinese government last year was the largest user of Linux and accounted for 28 percent of Linux server sales."

Interview with Tim Chen, chief executive of Microsoft China

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China's Greatest Tech Myths - IBM-Lenovo deal, Linux, Piracy
Piracy Prevents Microsoft from Generating Substantial Software Sales in China

Skype and Tom Online Create Chinese Joint Venture

From Reuters: Skype and Tom Online create Chinese joint venture

"Free Internet telephone software provider Skype has formed a joint venture with China-focused Internet portal Tom Online, in a bid to boost its subscriber base in the fast-growing Asian market.
The joint venture, Skype's first move into China, will be controlled by Tom Online, with its 51 percent holding, while the balance will be held by Skype, the companies said on Monday.
The new business will develop and distribute a simplified Chinese version of Skype software, which allows users to make free Internet-based phone calls around the world using a broadband connection."

"Tom Online, which also provides mobile Internet services, is controlled by Hong Kong conglomerate Hutchison Whampoa and Cheung Kong."

China Net Investor: Guess they expect us to have poor momories. ;-) Read this posting from November 03, 2004

Zhaopin and Sohu Cooperate to Launch New Job Recruitment Portal

From ChinaKnowledge: Zhaopin and Sohu Cooperate to Launch New Job Recruitment Portal

"Zhaopin.com, a leading Chinese human resource website, and Nasdaq-listed web portal, Sohu.com Inc. have announced the launch of Job.Sohu.com. This cooperation will inevitably raise the competition among China’s online recruitment websites."

"This cooperation follows the similar strategic alliance of ChinaHR.com, 40% owned by Monster.com, and Sina.com in May, 2005. The cooperation of Zhaopin and Sohu will inevitably raise the competition among China’s online recruitment websites."

"According to People's Daily, there are more than 200 employment websites in China. Zhaopin.com, ChinaHR.com and Nasdaq-listed 51job.com, make up 70% of the market."

Hong Kong's PCCW Eyes UK Broadband Market

From BrandRepublic: Asian telecom firm PCCW eyes UK broadband market

"Asian telecom giant PCCW aims to shake up the booming UK broadband market with the launch of a wireless service called now.
The service is being rolled out in London from this week, ahead of phased launches in other UK cities, according to demand. Unlike fixed-line broadband, now relies on signals from mobile phone masts. It can be moved between locations and is not dependent on either a phone line or a Wi-Fi hub."

"Keith Hawkins, Freeserve's former consumer managing director, is spearheading the rollout as senior vice-president of sales and marketing of UK Broadband, a subsidiary of PCCW."

Read more:
IPTV in China: PCCW’s "Now TV" has over 440,000 Subscribers

TCL to Restructure Mobile Phone Joint Venture

From FT.com: TCL to revamp mobile phones venture

"TCL, the Chinese electronics group, is to undertake a substantial restructuring of its mobile phone venture with Alcatel of France, after admitting the business had failed to keep up with rivals on pricing and technology."

"The company will transfer research and development work from France to China to save on costs. French R&D staff will be redeployed within Alcatel. TCL will also merge the venture with its other mobile business, TCL Mobile, which has up to now existed as a separate unit.
It was announced in May that Alcatel would switch its 45 per cent holding in a joint venture to a 5 per cent holding in TCL Communication Technology, (...)."

"TTE, TCL’s TV business, the world’s largest supplier of television sets after buying Thomson’s TV and DVD player operations in 2003, is also being restructured."

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