MULTINATIONALS: Unigroup’s Micron Bid Dead — Really

Bottom line: The latest downbeat remarks from Unigroup’s chairman after a visit to the US indicate the company has given up on its bid to buy Micron, though it could potentially relaunch the effort after next year’s presidential elections.

Unigroup’s Micron bid looks dead

I wrote several weeks ago that a bid by China’s Unigroup to buy US memory chip giant Micron Technology (Nasdaq: MU) had become the victim of politics, and now it appears the deal is finally dead. Or at least it’s on life support, with little hope of resuscitation. That’s my interpretation, following the latest reports that say Unigroup’s chairman has given remarks that look quite pessimistic after returning to China from a last-ditch US visit to try to save the deal.

This deal looked quite interesting when it was first reported back in July, and would have been worth some $23 billion, marking the biggest-ever acquisition of a US company by a Chinese counterpart. But political sensitivities quickly surfaced due to Micron’s status as the biggest US maker of memory chips used in most electronic devices and also in the defense industry. Read Full Post…

YCBB On Holiday

We will be on holiday from Sept 3-6 for the Chinese holiday marking the 70th anniversary of the end of World War 2. Regular postings will resume on Sept 7.

MULTINATIONALS: China National Security Law Bites Trend Micro

Bottom line: Smaller foreign tech companies could follow Trend Micro’s lead and withdraw from China over the next few years, as they suffer sharp business downturns due to restrictions under the country’s new national security law.

Trend Micro sells China unit

This summer has been unusually quiet for big multinationals in China, following campaigns in the last 2 years targeting foreign companies for monopolistic practices and corruption, among other things. But the real turbulence this year has been happening behind the scenes, as foreign technology companies face a major business downturn following China’s recent roll-out of a strict new law designed to protect national security.

Many foreign tech firms have complained the new law is too broad and intrusive, and now security software specialist Trend Micro may have become the first major victim. That’s my interpretation, following an announcement that appears to show Trend Micro is withdrawing from the market. This particular move will see Trend Micro sell all of its China operations to AsiaInfo, a Chinese owned maker of telecoms software. Read Full Post…

INTERNET: Alibaba Seeks Share Boost with Wine, NetEase with Cash

Bottom line: Alibaba’s new tie-up with a leading US wine maker is mostly symbolic and represents a boom in the e-commerce market for imported goods, while NetEase’s new share buyback plan is unlikely to provide much support for its sagging stock.

Robert Mondavi launches on Tmall

Leading Chinese Internet companies Alibaba (NYSE: BABA) and NetEase (Nasdaq: NTES) are trying different approaches to boost their sagging stocks, amid a broader sell-off for US-listed Chinese companies in tandem with China’s own tanking markets. The first case has e-commerce leader Alibaba launching a new online wine shop with US giant Robert Mondavi, as part of a broader move to let Chinese consumers buy imported goods online. The move by online game giant NetEase looks a bit more conventional, with its announcement of a plan to buy back up to $500 million of its stock.

Alibaba and NetEase certainly aren’t alone in watching their shares tumble, amid a broader sell-off for US-listed Chinese stocks over the last 2 months. Alibaba shares have lost nearly half of their value from their all-time high reached last November, and now trade about 5 percent below their IPO price from a year ago. NetEase shares have lost a quarter of their value since early August, in a plunge coinciding with China’s own tumbling stock markets. Read Full Post…

MEDIA: Sputtering Phoenix New Media Cuts Staff, Charts New Course

Bottom line: Phoenix New Media’s retrenchment could produce some short-term improvement for its profits, but won’t halt a longer term decline due to its inability to adapt in a rapidly changing new media environment.

Phoenix New Media in big job cuts

After stumbling badly in its latest quarterly report, a sputtering Phoenix New Media (NYSE: FENG) is making major job cuts and rolling out a broader retrenchment, as it tries to avoid getting sidelined in China’s rapidly evolving media market. This particular story has an interesting parallel in a mostly forgotten company called Tom Group (HKEx: 2383), which was backed by Hong Kong billionaire Li Ka-shing who hoped to build it into a regional media giant when he launched the company during the Internet boom of the late 1990s and early 2000s. But more on that shortly.

Phoenix also began its life as a traditional media company, and the lesson from all this is that such media are having a hard time adapting to the rapid pace of change in the Internet age. That said, I’m not at all optimistic that Phoenix will be able to chart an effective new course, and it could just be a matter of time before the company becomes a non-player on the Chinese Internet or disappears completely. Read Full Post…

News Digest: September 2, 2015

The following press releases and media reports about Chinese companies were carried on September 2. To view a full article or story, click on the link next to the headline.
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  • NetEase’s (Nasdaq: NTES) Board Approves $500 Mln Share Repurchase Program (PRNewswire)
  • Phoenix New Media (NYSE: FENG) to Cut Staff, Retrench – Memo (Chinese article)
  • Alibaba (NYSE: BABA) Launches “Tmall Vineyard Direct” With Robert Mondavi Wines (Businesswire)
  • AsiaInfo to Acquire Trend Micro Chinese Subsidiary (Businesswire)
  • Qihoo 360 (NYSE: QIHU) Reports Q2 Unaudited Financial Results (PRNewswire)

SMARTPHONES: Lenovo Overhauls Mobile Unit Around Motorola

Bottom line: Lenovo’s plan to reorganize its mobile division around its struggling Motorola operations looks misguided, and doesn’t address why the company’s smartphones have become such industry laggards.

Lenovo reorganizes mobile unit around Motorola

Just a week after I called on PC giant Lenovo (HKEx: 992) to write off Motorola, the company is doing just the opposite and betting bit on the sinking US smartphone brand. That’s the latest word coming from reports that Lenovo is preparing a major overhaul for its struggling mobile operations, which are being reorganized with Lenovo’s recently acquired Motorola operations as the centerpiece.

All of this comes as Lenovo is rapidly emerging as the first major loser in the ongoing war for market share among China’s big smartphone makers. Lenovo reported dismal quarterly results a couple of weeks ago, including a miserable performance for smartphone operations that it hopes will someday replace fading PCs as its core business. Leading the poor results were a 31 percent drop in sales for its Motorola phone division, which Lenovo purchased last year from Google (Nasdaq: GOOG) for $2.9 billion. (previous post) Read Full Post…

IPOs: Focus Media Tries Again on Tough Road Back to China

Bottom line: Focus Media’s latest backdoor listing plan could stand a 50-50 chance of success, and should come as a warning of the difficulties that may face many other US-listed Chinese firms hoping to privatize and re-list in China.

Focus Media in new backdoor listing plan

You have to admire the persistence of Focus Media, the outdoor advertising specialist that’s trying to blaze a new homecoming trail for US-listed Chinese firms trying to privatize and re-list in China to get higher valuations. More than 2 years after leaving the Nasdaq and one failed re-listing attempt in Shenzhen, Focus is trying again with a new plan for a backdoor listing via a Shenzhen-listed shell company called Hedy Holdings (Shenzhen: 002027).

I’m actually being just slightly facetious in admiring Focus for its persistence, since it really has very few other options in this case. Big investors including US private equity giant Carlyle put up billions of dollars to help Focus de-list in 2013, and now they’re simply looking to recoup their investments and hopefully make some profits by re-listing the company at a higher valuation in China. Read Full Post…

Shanghai Street View: Trapping Tourists

Shanghai sags under high ticket prices

This week’s Street View takes us to the Shanghai tourism circuit, where several recent headlines are spotlighting the high ticket prices we pay for many of the city’s most famous attractions. This particular story seems to surface every time a major holiday approaches. In this case an unusual triple-header of holidays is coming, starting with a 3-day vacation for the 70th anniversary of the end of World War 2 next week, followed closely by the Mid-Autumn Festival and the October 1 National Day.

I’ve written previously about this phenomenon, though every time it seems like ticket prices are higher than the last time. But this time I also have some added perspective of how Shanghai compares to other cities, following my own summer travels to Yunnan, Inner Mongolia, Sweden and Britain. Read Full Post…

News Digest: September 1, 2015

The following press releases and media reports about Chinese companies were carried on September 1. To view a full article or story, click on the link next to the headline.
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  • Micron (Nasdaq: MU) Deal in Suspense as Unigroup Exec Returns Home (Chinese article)
  • Focus Media Aims to Relist Via Hedy (Shenzhen: 002027) Acquisition (English article)
  • Internet Entrepreneurs Back Chinese Tesla (Nasdaq: TSLA) Rival NextEV (English article)
  • Front-Line Research Shows Many Buyers Returning Xiaomi’s Redmi Note (Chinese article)
  • Ageas to Sell Hong Kong Unit to China’s JD Capital for $1.4 Bln (English article)

FUND RAISING: Slowing Economy Undermines BOC, Great Wall Motor Deals

Bottom line: Muted interest in Great Wall Motor’s fund-raising plan and Bank of China’s sale of a major asset reflect weakening investor interest in such deals due to the slowing Chinese economy.

Weak sentiment pressures, BOC, Great Wall Motor deals

Funding for Chinese Internet companies is showing no signs of slowing just yet, but reports of weak demand for 2 other deals reflects fading investor interest in more traditional sectors as China’s economy slows. The first of those has car maker Great Wall Motor (HKEx: 2333; Shanghai: 601633) sharply reducing plans for a new issue of A-shares on China’s domestic stock markets. The second has Bank of China (HKEx: 3988; Shanghai: 601398) attracting scant interest for the sale of a major asset in Hong Kong.

Neither of these developments comes as a huge surprise due to growing worries over China’s rapidly slowing economy. Great Wall was never one of China’s top auto makers to start with, and the big reduction in its 16.8 billion yuan ($2.6 billion) fund-raising plan comes as the domestic auto market slows and investors pile out of China’s crumbling stock markets. Meantime, Bank of China has been trying to sell its Hong Kong-based Nanyang Commercial Bank for a while now, and the latest reports say only 1 interested party has emerged. Read Full Post…