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…

INTERNET: Tencent, Alibaba Heat Up Take-Out Dining with New Investments

Bottom line: New O2O take-out dining investments involving companies backed by Tencent and Alibaba reflects intensifying competition in the space, and is likely to result in a costly price war for market share.

Alibaba, Tencent in new take-out dining investments

The take-out dining space continues to heat up, with word of a major new funding for Ele.me, the service backed by social networking giant Tencent (HKEx: 700), and a big new investment for Koubei, the service owned by e-commerce leader Alibaba (NYSE: BABA). Both investments reflect a recent rush into online-to-offline (O2O) services by all 3 of China’s top Internet companies, as each tries to forge a hybridized mix of services that are likely to make up the retailing landscape of the future.

The larger of the 2 deals has Ele.me raising as much as $630 million in new funding, in a deal that brings in existing investors Tencent, along with its main e-commerce partner JD.com (Nasdaq: JD) and several other major private equity firms. The second has Koubei, Alibaba’s recently resurrected take-out dining site, investing a more modest 300 million yuan ($50 million) in a rival that operates the service called SHBJ.com. Read Full Post…

BUYOUTS: Qihoo Buyout Unraveling, China Mobile Games Wraps

Qihoo buyout in danger of sinking

Following last week’s wild ride for Chinese stocks, now seems like a good opportunity to revisit the flurry of privatization bids for US-listed China Internet companies and how they’re faring. The list of headlines is led by reports that the biggest of the buyout bids for software security maker Qihoo 360 (NYSE: QIHU) is showing signs of unraveling, as investors balk at the widening gap between their original buyout offer and the company’s latest share price following last week’s sharp declines.

Meantime, another much smaller deal first announced at the height of the buyout wave in June has been quietly completed, resulting in the delisting of shares for China Mobile Games. Completion of this second deal just a couple of months after it was originally announced shows that such buyouts can still be done despite the big sell-offs in both China and New York that are making it hard to value such deals. Read Full Post…

News Digest: August 29-31, 2015

The following press releases and media reports about Chinese companies were carried on August 29-31. To view a full article or story, click on the link next to the headline.
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  • Investor Group Considers Cutting $9 Bln Offer for Qihoo (NYSE: QIHU) (English article)
  • Take-Out Dining Platform Ele.me Completes $630 Mln Series F (English article)
  • Bank of China (HKEx: 3988) Reports H1 Results (HKEx announcement)
  • Great Wall Motor (Shanghai: 601633) Cuts Share Sale Plan After Stock-Market Rout (English article)
  • Snail Mobile Says VNO Subscribers Reach 3 Mln (Chinese article)

CELLPHONES: Meizu, Qihoo Join Smartphone March to India

Bottom line: Qihoo and Meizu are likely to struggle with their new smartphone campaigns in India, where intensifying competition will also undermine domestic rivals like Xiaomi and Huawei that have recently entered the market.

Qihoo unveils new Qiku smartphones

Qihoo (NYSE: QIHU) and Meizu have announced they are taking their smartphones to India, becoming the latest Chinese brands to export to the fast-growing but increasingly competitive market. India is actually the second stop on Qihoo’s smartphone roadmap, which will begin in its home China market with the launch of the first 2 models of its new Qiku smartphone brand. Meizu has become a major second-tier player in its home China market over the last few years, and formally announced its own move into India this week as it looks to move overseas.

The pair will join several of China’s top smartphone makers in the increasingly crowded India market, which shares many qualities with China. Xiaomi launched in India last year and the market quickly became its second largest globally, while Huawei’s Honor brand has also scored rapid progress in the market. But Qihoo’s biggest competitor in India could be Coolpad (HKEx: 2369), which is already a big player in the market but will also produce Qihoo’s new smartphones through a joint venture formed by the pair last year. Read Full Post…

CELLPHONES: Huawei’s Honor Smartphones Zoom in India, Eye US

Bottom line: Strong sales growth for Huawei’s Honor brand in the first half of the year reflects the company’s broader accelerating momentum, and could pose a growing challenge for domestic rival Xiaomi.

Huawei’s Honor brand grows in India, eyes US

More new data is showing the growing momentum for smartphone aspirant Huawei, with word that the company’s Honor brand surpassed its sales target in the first half of the year as it prepares to enter the US. The latest numbers continue to portray a surging Huawei, and show how the company is using its traditional strengths in product development and a newer expertise in consumer marketing to overtake big domestic rivals like Xiaomi and Lenovo (HKEx: 992) and also a host of smaller ones like Meizu and Coolpad (HKEx: 2369).

These latest numbers don’t look extremely impressive at first glance, as they show that Honor just slightly surpassed its sales target for the first half of the year. But in the current climate where many companies are missing their targets due to intense competition in China, the ability to not only meet but even slightly exceed a sales target does seem like a noteworthy accomplishment. Read Full Post…

News Digest: August 28, 2015

The following press releases and media reports about Chinese companies were carried on August 28. To view a full article or story, click on the link next to the headline.
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  • Chinese Banking Giants: Zero Profit Growth as Bad Loans Pile Up (English article)
  • Motorola to Lead Lenovo (HKEx: 992) Mobile Unit in New Overhaul (Chinese article)
  • Cinda (HKEx: 1359) Only Bidder for BOC (HKEx: 3988) Bank Unit with $8.8 Bln Price (English article)
  • Dalian Wanda Buys Ironman Triathlon Owner for $650 Mln (English article)
  • Uber China Unit Wins $1 Bln in New Funding – Source (Chinese article)
  • Latest calendar for Q2 earnings reports (Earnings calendar)