TELECOMS: Huawei Outspends ZTE, Lenovo At Telecoms Extravaganza

Bottom line: Huawei’s massive spending at the world’s biggest telecoms show this week hints at its determination to make big inroads in Europe and the US this year for its older networking equipment and newer smartphone businesses.

Huawei spends millions at big telecoms show
Huawei spends millions at big telecoms show

In between running from interview to interview at the world’s largest telecoms show this week in Barcelona, I managed to scribble down some notes on which Chinese firms were spending the most heavily at this year’s Mobile World Congress (MWC). Such spending hints at company priorities for the year ahead, including which markets they are targeting. In this case it’s worth noting that MWC is largely a show for customers from North America and especially Europe, so anyone who attends as an exhibitor is almost certainly eying those markets.

All that said, it should come as no surprise that telecoms giants Huawei and ZTE (HKEx: 763; Shenzhen: 000063) were the 2 biggest spenders among Chinese firms at this year’s show, based on my own analysis. PC giant and smartphone aspirant Lenovo (HKEx: 992) was the only other Chinese firm with major representation. But perhaps most surprising was the size of Huawei’s presence, which easily dwarfed both ZTE and Lenovo. Continue reading

INTERNET: E-Commerce Giants Alibaba, JD Sag On Any News

Bottom line: Alibaba and JD.com shares will remain under pressure through the middle of the year as short-term investors sell the stock on any news, but could start to recover after that as new money flows into the companies.

Investors unimpressed by JD.com results

E-commerce leaders Alibaba (NYSE: BABA) and JD.com (Nasdaq: JD) are both in the news today, the former for yet another major purchase in the entertainment space and the latter for its newly released quarterly results. Neither news bit excited the markets too much, as investors continued to sell a pair of stocks that are quite overinflated from a year of hype over the potential of China’s Internet.

For Alibaba, the news that it purchased an unspecified stake of film producer Enlight Media (Shenzhen: 300251) for 2.4 billion yuan ($383 million) was relatively small, even though the deal would be large for most other companies. Meantime, investors probably found it hard to get excited about JD’s latest report that showed its losses ballooned in the final quarter of last year, even as it posted relatively healthy revenue growth and seemed to be bringing costs under control. Continue reading

Shanghai Street View: Overpowered In Pingyao

Lights go out in Pingyao
Lights go out in Pingyao

While many spent their Lunar New Year in a cutting-edge world of smartphones and virtual red envelope grabs, I had a chance to travel back to an older edition of China with a trip to interior Shanxi province. Several experiences there seemed uncomfortably close to the China from my memory in the 1980s, including a brief but chaotic ride on a local train that was packed to the gills with Spring Festival travelers.

But one particular experience seemed to summarize the many growing pains that China continues to feel in its ongoing transformation to the modern era. That experience saw the small historic banking city of Pingyao plunged into complete darkness not once, but around half a dozen times during my brief two-day sightseeing visit.
Continue reading

CELLPHONES: ZTE Chases Simplicity, Seeks A Voice

Bottom line: ZTE’s decision to slim down its cellphone product line and focus on 4 key areas looks like a smart formula for success, but its big bet on voice could bring trouble if the technology fails to gain momentum.

ZTE slims down cellphone product line

After a painful but necessary restructuring, telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063) has largely withdrawn from the price wars that have plagued China’s smartphone market and is focusing on a strategy that emphasizes simplicity and higher-end products. The simplification strategy takes its cues from Apple (Nasdaq: AAPL), whose focus on just 2 or 3 new smartphones each year contrasts sharply with the many different models rolled out by its now-struggling chief rival Samsung (Seoul: 005930).

I quite like the simplification strategy for a number of reasons, even though consumers ultimately get less choice. Fewer models lowers product development costs, and allows a company to focus on a smaller number of phones with better designs. Such a strategy also creates stronger focus in consumers’ minds, which in turn helps to build a brand’s identity and the kind of customer loyalty that Apple has found. Continue reading

News Digest: March 5, 2015

The following press releases and media reports about Chinese companies were carried on March 5. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════

  • China Says Tech Firms Have Nothing To Fear From Anti-Terror Law (English article)
  • China’s Net Mobile Users Could Shrink This Year – Unicom (HKEx: 762) Chief (Chinese article)
  • Trina Solar (NYSE: TSL) Announces Q4 And Full Year 2014 Results (PRNewswire)
  • Phoenix Satellite TV (HKEx: 3002) Warns Of 24-32 Pct Profit Drop For 2014 (HKEx announcement)
  • China Mobile (HKEx: 941) Launches 4G Roaming Services in 71 Countries And Regions (PRNewswire)
  • Latest calendar for Q4 earnings reports (Earnings calendar)

TELECOMS: China Mobile Tackles WeChat With New Platform

Bottom line: China Mobile’s new unnamed social networking platform based on RCS technology has a 50-50 chance of posing a serious challenge to WeChat due to the many advantages it will enjoy from its China Mobile connections.

New China Mobile platform to challenge WeChat

After 2 years of standing on the sidelines as Tencent’s (HKEx: 700) WeChat rapidly stole its text messaging business, leading telco China Mobile (HKEx: 941; NYSE: CHL) is finally preparing to fight back with its own competing product offering, according to ZTE (HKEx: 763; NYSE: CHL), which is supplying networking equipment for the product. ZTE’s cloud computing chief Zhu Jinyun told me the new product will be an entire platform for social networking and other services based on rich communications suite (RCS), a technology developed by a global telecoms association.

I’m admittedly not too familiar with RCS, though some web searches showed it’s a platform that allows for a wide range of functions, from one-on-one instant messaging to group chats, file transfers, IP voice calls and location-based services (LBS). Anyone looking at that list will instantly recognize that many of those features are already present on WeChat, whose popularity has rapidly siphoned texting business from China Mobile and the nation’s other telcos. Continue reading

INTERNET: LeTV Surprises With Low-Key Global Appearance

Bottom line: LeTV could be a company to watch as it embarks on a global expansion, drawing on a savvy business model that sells smart TVs and smartphones at low prices in exchange for video subscription contracts.

LeTV makes cryptic debut at trade show
LeTV makes cryptic debut at trade show

A major telecoms show happening this week in Spain was filled with small bits of news, but one of the biggest surprises came when I stumbled on an area decked out with signage for the racy online video firm LeTV (Shenzhen: 300104). So far as I could tell, none of the company’s many rivals like Youku Tudou (NYSE: YOKU) and iQiyi were at the show, and even global leader YouTube was absent. That’s not hard to understand, since the Mobile World Congress taking place in Barcelona is a telecoms show whose main attendees are telecoms equipment and smartphone makers. Continue reading

CELLPHONES: Lenovo Peddles Moto, Crowds Respond

Bottom line: Lenovo could make significant inroads into western smartphone markets with its newly acquired Motorola if it lets the brand remain independent and maintain its own product development and sales resources.

Lenovo struts phones at trade show
Lenovo struts phones at trade show

A tour of the Lenovo (HKEx: 9992) booth at a major trade show happening this week in Spain made me realize just how much the company is betting on its recently purchased Motorola brand to boost it into the smartphone big leagues. Motorola’s continuing attraction as a powerful brand was on full display at the Lenovo booth, with large crowds clamoring for a look at what seemed like quite a ho-hum new low-end model being rolled out at the show.

By comparison, a glitzy new Lenovo-brand model from its higher-end VIBE line was drawing far less attention, even as a Brit on the stage sang on with nonstop praises for the unique features of the new model that has many attributes of a high-end camera. Continue reading

News Digest: March 4, 2015

The following press releases and media reports about Chinese companies were carried on March 4. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════

  • Obama Sharply Criticizes China’s Plans For New Technology Rules (English article)
  • ZTE (HKEx: 763) Doubled 4G Shipments, Global Share Exceeded 25 Pct In 2014 (Businesswire)
  • JD.com (Nasdaq: JD) Announces Q4 And Full Year 2014 Results (Globe Newswire)
  • China Overtakes US At The Box Office In February (English article)
  • Li Dongsheng Becomes Biggest TCL (Shenzhen: 000100) Shareholder After New Placement (Chinese article)
  • Latest calendar for Q4 earnings reports (Earnings calendar)

INTERNET: 58.com Gets Bargain For Real Estate Site

Bottom line: 58.com’s purchase of a secondary real estate trading site at a big discount looks like a shrewd move for the longer term, but could cause a short-term drag on profits due to weakness in China’s property market.

58.com buys Anjuke for bargain price

Local media are buzzing about a relatively large Internet deal that will see leading online classified advertising site 58.com (NYSE: WUBA) buy Anjuke, one of China’s largest online platforms for services involving secondary real estate. But the source of the buzz isn’t the deal itself, but rather the huge bargain that 58.com is getting compared to what Anjuke said it was worth just a year ago. That massive discount reflects the broader gloom surrounding China’s real estate market as it teeters on the edge of a major correction, and certainly doesn’t bode well for listed peers like E-House (NYSE: EJ) and SouFun (Nasdaq: SFUN). Continue reading

CELLPHONES: Alibaba-Backed Meizu Takes On Xiaomi In India

Bottom line: Meizu’s rapid India expansion could provide it with some relief from the overheated China market over the short-term, but will result in new price wars over the next 2-3 years as its domestic rivals make similar moves.

Meizu eyes India

Freshly infused with nearly $600 million in new capital after a major investment from e-commerce giant Alibaba (NYSE: BABA), smartphone maker Meizu is getting set to take on higher profile rival Xiaomi outside China with a major new campaign in India. In many ways, this particular move looks like China’s way of exporting the rampant price wars that have plagued its smartphone market to other countries with similar demographics. In this case, Meizu is not only eying a country that has suddenly become Xiaomi’s second largest market, but is also planning to follow its rival into Southeast Asia. Continue reading