TELECOMS: Globalizing Unigroup Buys Talent, US Hard Drive Stake

Bottom line: The latest global acquisitions by Tsinghua Unigroup and Unisplendour show the company still aims to build a global IT services and hardware giant, which could culminate with a new bid for Micron in 2017.

Unigroup makes major boardroom acquisition

The ambitious Tsinghua Unigroup may have abandoned its controversial bid for leading US memory chip maker Micron (Nasdaq: MU) for now, but the Chinese high-tech wannabe certainly isn’t giving up on its global aspirations. That’s my interpretation of the company’s latest moves, which include its hiring of a Taiwanese executive with ties to Micron, as well as the recent purchase of a major stake in leading US hard drive giant Western Digital (Nasdaq: WDC) by a sister company.

Unigroup and sister company Unisplendour‘s names have appeared all over the map this past year, as they form a steady string of major equity tie-ups with the likes of leading global chip maker Intel (Nasdaq: INTC) and IT services and hardware giant Hewlett-Packard (NYSE: HPQ). But the companies’ ambitious plans to create an IT services and hardware megaplex similar to IBM’s (NYSE: IBM) hit a major roadblock over the summer, when Unigroup had to scrap its plans to buy Micron due to potential political opposition in Washington. (previous post) Read Full Post…

FUND RAISING: Alibaba Builds a Home, Baidu Funds E-Commerce

Bottom line: New $200-$300 million investments by Baidu and Alibaba in smaller Internet companies show such fundings are starting to recede in size after peaking earlier this year.

58 Home gets investment from Alibaba, KKR

Two big fund-raising stories are in the headlines today, each involving a top Internet company as China’s “big 3″ trio of Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (HKEx: 700) look for ways to put their big cash pots to work. It’s interesting to note that neither Baidu nor Alibaba is the central player in either of these latest deals, one in e-commerce and the other in online-to-offline (O2O) services. Instead, both are playing secondary roles, supporting other companies with good growth potential.

The larger of the 2 investments is seeing Alibaba participate in a new $300 million first funding round for a 1-year-old company that helps web surfers find home-based services like cleaning and baby sitting. The second has Baidu participating in a $200 million funding for an older e-commerce company with close ties to state-run cereals giant COFCO. Read Full Post…

MULTINATIONALS: New China Board Should Welcome Yum, Uber

Bottom line: China should expand its plans for a new enterprise board in Shanghai to include a place for the Chinese units of big multinationals like Yum and Uber, allowing domestic investors to buy into these big foreign names.

Calls grow for KFC parent to spin off China unit

Global fast food giant Yum Brands (NYSE: YUM) became the latest major multinational to contemplate a spin-off for its China business last week, following in the tracks of Uber and IMAX (NYSE: IMAX), two leaders in their respective areas of hired car services and big-screen theater technology. The trend acknowledges that China will soon become the world’s largest consumer market, and its unique qualities and complexities often justify creation of separate companies for these big global names to effectively develop the market.

China should seize on this trend and modify its current plans for a new Nasdaq-style enterprise board based in Shanghai to also include a place for these larger, newly created companies with foreign roots. Reports earlier this year indicated the regulator was aiming to roll out the new strategic industries board as soon as next year, though its plans could be delayed due to the recent turmoil on China’s stock markets. Read Full Post…

News Digest: October 13, 2015

The following press releases and media reports about Chinese companies were carried on October 13. To view a full article or story, click on the link next to the headline.

  • Tsinghua’s Latest Deal Is Adding Chairman of Micron (Nasdaq: MU) Venture (English article)
  • (Nasdaq: JD) Opens First US Office in Silicon Valley (company announcement)
  • Baidu (Nasdaq: BIDU), Taikang Life Lead $200 Mln Series C in E-tailer Womai (English article)
  • (NYSE: WUBA) Unit 58 Home Raises US$300 Mln Series A Funding (PRNewswire)
  • China RE IPO Raises Nearly $2 Bln, Shares to Debut on Oct 26 (Chinese article)

INTERNET: Inflate Gate Scandal Rocks SouFun

Bottom line: A scandal involving inflated sales reporting by workers at SouFun could cause the company to miss 2015 revenue guidance, and reflects pressures that China Internet firms are facing due to a slowing home economy.

SouFun uncovers inflated sales by employees

Just when it was beginning to claw its way back to favor with investors, real estate services website SouFun (NYSE: SFUN) is being rocked by a scandal after an internal probe revealed that some employees were inflating their new orders. The latest reports say SouFun has verified it fired some workers after uncovering the issue, though there’s no word on the magnitude of the problem.

More broadly speaking, this kind of report highlights the stresses that SouFun and rivals like E-House (NYSE: EJ) are facing due to a sharp slowdown in China’s overheated real estate market. That slowdown has caused prices to stagnate and transaction volumes to also tumble as buyers and sellers wait to see how the market will trend. That’s critical for companies like SouFun, since they depend on transactions for a big part of their business. Read Full Post…

SMARTPHONES: Price Wars Topple Huawei, ZTE Supplier

Bottom line: The bankruptcy of a major component supplier to ZTE and Huawei is the latest sign of stress in the overheated smartphone sector, and at least 1-2 small to mid-sized brands are likely to leave the market by mid-2016.

Smartphone price wars undermine parts maker Fosunny

Fresh new cracks are appearing in China’s smartphone making machinery, with reports that a major component supplier to Huawei and ZTE (HKEx: 763; Shenzhen: 000063) has gone bankrupt. At the same time, another report is citing bad weather for a supplier’s delivery delays that are causing Alibaba-backed (NYSE: BABA) smartphone maker Meizu to postpone the launch of a new high-end model.

The most worrisome of these 2 stories is the bankruptcy of Fosunny, a maker of metal casings used for smartphones. The company lists US wireless carrier AT&T (NYSE: T) and Europe’s Vodafone (London: VOD) among its customers on its website, but I suspect that both of those relationships come via third-parties like Huawei and ZTE  that supply smartphones to those telcos. Read Full Post…

Shanghai Street View: Travel Tensions

Masses flock to Xitang
Masses flock to Xitang

As Shanghai returns to work from the week-long holiday, we’re getting bombarded by the usual crush of statistics that show just how many people visited our city, how many traveled outside, and which tourist sites were the most popular during the fall Golden Week. But this year really seems like a case where pictures are worth a thousand words, as many of my personal images seemed to capture an intensifying mobility and anxiousness that were new and just slightly unsettling during this year’s holiday.

I spent most of the latest Golden Week here in Shanghai, though I did make a day trip to the nearby water town of Xitang where the third installment of the “Mission: Impossible” movie series was filmed. That trip, along with my single venture to the East Nanjing Road pedestrian street, gave me more than enough reminder of the huge holiday crowds that typically flood into tourist attractions in both the city as well as in nearby towns. Read Full Post…

News Digest: October 10-12, 2015

The following press releases and media reports about Chinese companies were carried on October 10-12. To view a full article or story, click on the link next to the headline.

  • China Resources Unit to Sell Wal-Mart (NYSE: WMT) China Store Stakes for $525 Mln (English article)
  • Huawei, ZTE (HKEx: 763) Major Smartphone Component Supplier Goes Bankrupt (Chinese article)
  • Alibaba (NYSE: BABA) to Open 2nd Silicon Valley Data Center for Rising Cloud Demand (Businesswire)
  • Baidu’s (Nasdaq: BIDU) iQiyi Unit to Offer Lions Gate (NYSE: LGF) Films in China (English article)
  • TAL Education (NYSE: XRS) Invests $30 Mln in Phoenix E-Learning (PRNewswire)

BUYOUTS: Giant Eyes China Backdoor, Qihoo Still Trying

Bottom line: Giant Interactive is likely to achieve a backdoor listing in China over the next 12 months, while Qihoo could receive a new, lowered privatization offer by the end of this year.

Giant eyes China backdoor listing

Early signs of stabilizing on China’s stock markets are breathing new life into the nascent migration by Chinese tech firms that are abandoning overseas listings to re-list back at home. The latest signals of new movement are coming from formerly New York-listed Giant Interactive, which is eyeing a backdoor listing in Shenzhen, and from Qihoo 360 (NYSE: QIHU), which is indicating its faltering plan to de-list from New York is still alive.

Both of these deals have a bit of history, and are part of a broader wave that saw 3 dozen US-listed Chinese firms announce plans to privatize in the first half of this year. Most of those plans came when China’s domestic stock markets were rallying sharply. Backers of the bids were betting that companies whose shares had languished in New York could get much higher valuations from investors in their home China market. Read Full Post…

IPOs: New Listings Creak Back to Life with China RE Pricing

Bottom line: The offshore market for Chinese IPOs will see a brief resurgence in the next month as China’s stock markets stabilize, but the window will be short-lived as China’s economy shows new signs slowing sharply.

Imax China jumps in HK debut

After an extended period with few new listings, a new wave of IPOs by Chinese firms in offshore markets could be coming, led by stodgy insurer China RE. Sources are saying the re-insurer has taken a major step forward in its creaky IPO process by setting a price range for its stock after receiving strong feedback from investors.

This particular deal has been in the works for the last month, but it’s still relatively encouraging to see that it’s moving closer to the end. But the fact that it comes in the conservative and unexciting insurance sector means we’ll probably have to wait for a more controversial offering to see if the fall IPO season will really take off. Such a riskier deal could come in the next week or so if we see renewed activity for the other major offering in the pipeline, a $1 billion IPO by faded investment banking superstar CICC. Read Full Post…

NEW ENERGY: Holistic Approach Needed to Jump-Start China EVs

Bottom line: Beijing should take a more holistic approach to developing green cars in China, which should include education of owners and creation of owner communities in addition to financial incentives and infrastructure building.

Beijing in new steps to charge up EV sales

China made the latest new move to boost its sputtering electric vehicle (EV) program over the holiday, disclosing an ambitious plan to sharply accelerate installation of charging stations across the country. The plan was aimed at countering one of the biggest obstacles to EV development, namely concerns from potential owners about difficulties they might face recharging their vehicles.

The new move comes after Beijing announced new financial incentives for EV buyers in May, and could provide some more momentum to a national program that has fallen far short of expectations. These kinds of piecemeal measures look good in theory, but often seem to fall flat due to lack of national coordination and supporting education and other publicity. Read Full Post…