All posts by newsdoug

INTERNET: Sohu Slide Continues, Time to Sell?

Bottom line: Sohu founder Charles Zhang should privatize his company in the next year and then sell off the pieces, or risk see his dwindling empire slowly become worthless.

Sohu’s incredible shrinking empire

You know you’re a CEO when you can call results like those just released by Internet company Sohu (Nasdaq: SOHU) “solid”. Of course that’s my sarcastic assessment, after reading the latest quarterly report that absolutely nothing upbeat about it from one of China’s oldest Internet companies. Nearly all of the numbers in Sohu’s latest report were down, with the lone exception of its online search business, whose anemic growth shouldn’t excite anyone.

Also down was Sohu’s stock, which slumped 6.4 percent after the results came out and is rapidly approaching lows not seen for nearly a decade. All that brings us to my assertion that perhaps it’s time for founder Charles Zhang to consider the unthinkable and break up his company and sell of the various pieces while there are still potential buyers. If he waits too much longer, those pieces will continue to diminish in value to the point where nobody wants them. Read Full Post…

SMARTPHONES: Coolpad Losses Balloon, No Help in Sight

Bottom line: Money-losing Coolpad is likely to get sold before the end of this year to raise cash for controlling stakeholder LeEco, or could end up getting shut down if no buyer comes forward.

Coolpad to post big H1 loss

It’s a new week, and that means new chances to write about the struggles of companies in the orbit of fast-fading former video superstar LeEco (Shenzhen: 300104). Last week the company’s majority owned Yidao private car services was in the headlines, amid a he-said-she-said spat over 1.3 billion yuan ($189 million) in funds that Yidao said were “misappropriated” by its parent, leading to its own cash crunch that saw many of its drivers going unpaid.

If that wasn’t bad enough, now another one of LeEco’s assets, smartphone maker Coolpad (HKEx: 2369) is warning of ballooning losses due to plummeting sales in the fiercely competitive market. There are two subtexts here, the most obvious being that LeEco is hardly in any position to throw Coolpad a needed lifeline. The other is that LeEco’s own smartphone business is probably dying a rapid death, since it was theoretically going to use Coolpad to make at least some of its phones. Read Full Post…

TELECOMS: Huawei in US Hot Seat Over Iran Sales?

Bottom line: Huawei is likely to be found guilty of selling products to Iran in violation of US sanctions, and could be fined up to $2 billion but won’t face additional punishment.

Huawei being probed for Iran violations?

When word first emerged four years ago that telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) was being investigated for selling American equipment to Iran in violation of US sanctions, other reports also indicated that crosstown rival Huawei was also being probed over the same matter. Huawei’s name later disappeared from the headlines, though it was never really clear if the company had been cleared of suspicion in the matter. Now it appears the company may still be under investigation, meaning it could potentially be slapped with a fine even bigger than the nearly $1 billion levied on ZTE. Read Full Post…

VIDEO: LeEco Switches Off Vizio Deal, Cuts US Staff

Bottom line: LeEco’s scrapping of its Vizio purchase may be due to currency controls, but should be welcome by the company as a cash conserving move, and could presage a withdrawal of its investment in electric car maker Faraday Future.

LeEco scraps Vizio purchase

The first major pullback for cash-challenged LeEco (Shenzhen: 300104) is coming in the US, where the company is confirming the abandonment of its $2 billion agreement to buy no-name TV maker Vizio. At the same time, unconfirmed reports citing knowledgeable insiders are saying the company is cutting one-third of its headcount in the US. It’s not really clear if this pair of items are related, though both are certainly cost-cutting moves in a market where costs are quite high.

The next big move perhaps will see LeEco abandon its backing for Faraday Future, the electric car-making venture that’s building a $1 billion plant near Las Vegas. That deal is a bit more futuristic than the Vizio TV deal that’s now being abandoned, and is probably a bigger pet project of LeEco founder Jia Yueting. But the reality is that the company needs to conserve cash, and also that China’s foreign exchange regulator is making life difficult for anyone who wants to move money out of the country. Read Full Post…

FINANCE: Ant Makes Case, No New Offer, for MoneyGram Buy

Bottom line: Ant Financial’s open letter to MoneyGram could hint at a new raised offer coming soon for the company, though rival suitor Euronet is likely to bid equally aggressively and has a slightly better chance of winning the contest.

Ant makes case to MoneyGram workers, US politicians

Three weeks after being surprised by an unsolicited counterbid for US money transferring specialist MoneyGram, China’s Ant Financial is finally speaking out on the matter beyond its initial reaction to the rival bid. The former financial unit of e-commerce giant Alibaba (NYSE: BABA) frankly isn’t saying much about future plans in its open letter to the MoneyGram community, and there’s no hint on whether it will raise its offer for the US company.

Instead, the letter seems aimed at reassuring MoneyGram employees that their jobs will be safe, and on reassuring wary government officials that information on MoneyGram users won’t be recklessly used. Those messages look squarely aimed at quelling the very real possibility that such a deal could get vetoed by Washington on national security grounds, even though the jobs issue doesn’t really fall into that category. Read Full Post…

TELECOMS: China Telecom Displays Aggression, Unicom Conservatism

Bottom line: China Telecom’s aggressive bidding for a government contract highlights its more entrepreneurial style, while Unicom’s latest announcement on its private ownership plans reflects it conservative, bureaucratic style.

Unicom mixed ownership program crawls ahead

Two of China’s trio of wireless telcos are in the news today, reflecting an effort by Beijing to breathe some life into these laggard state-run behemoths that always seem unable to realize their potential. The first headline has China Telecom (HKex: 728; NYSE: CHA), the smallest of the nation’s 3 carriers, making an aggressive bid to essentially provide services  for free to a government agency in northeast Liaoning province. The second has Unicom (HKEx: 762; NYSE: CHU), the second largest carrier, disclosing some more details on its plan to introduce some private capital to the company. Read Full Post…

SMARTPHONES: Xiaomi Chases Value, Dumps Apple Approach

Bottom line: Xiaomi’s adoption of Costco as its new role model and abandonment of Apple looks like a realistic move, and could better position the company to survive over the next 5 years amid a looming market shakeup.

Xiaomi eyes chic cheap image

Smartphone maker Xiaomi appears to be a company with an identity crisis, with reports that charismatic CEO Lei Jun has dumped former role model Apple (Nasdaq: AAPL) in favor a new model in US bulk-item supermarket operator Cosctco (Nasdaq: CSCO). Many will probably smile at this not-so-subtle shift at Xiaomi, which was one of China’s hottest companies just two years ago when Lei liked to think of himself as China’s Steve Jobs.

But the adoption of a new role model in Costco probably speaks volumes about how Lei sees his company going forward, as he tries to salvage its core smartphone business following a difficult last two years. That fall from grace includes a 40 percent drop in sales in its home China market in last year’s fourth quarter, causing its market share to slip to 7.4 percent, or about half of what it commanded just a year earlier, according to IDC. Read Full Post…

SMARTPHONES: Oppo Lands in India Protest Storm

Bottom line: A mass protest against Oppo in India over a Chinese manager’s desecration of the national flag won’t impact the company beyond a week or two, and reflects cultural sensitivity issues Chinese firms will face as they expand abroad.

Oppo under fire in India

Smartphone high-flyer Oppo is quickly learning the road to India isn’t always so smooth, with word of a mass protest at the company’s local operation due to a controversy involving desecration of the Indian flag. In this case the company appears to be learning a fast lesson in cultural sensitivity, which underscores one of the more subtle lessons that Chinese firms will need to learn as they expand abroad.

I doubt this particular incident will have any long-lasting impact on Oppo, though it will be interesting to see if it might affect its recent major cricket sponsorship deal in India. (previous post) The incident could also make Oppo think twice about its other big plans for the market, namely the building of a major production base there.  Read Full Post…

VIDEO: LeEco Gets Lifelines from Creditor, Currency Controls

Bottom line: LeEco’s debt-for-equity deal with Compal and the looming collapse of its Vizio purchase are welcome developments that show it could quietly jettison some of its newer businesses and eventually emerge from its current cash crunch.

Picture dims on LeEco’s Vizio purchase

The unwinding of former online video superstar LeEco (Shenzhen: 300104) continues to unfold, with two major developments that could help to slow the company’s rapid decline. The first of those has one of LeEco’s largest creditors, Taiwan contract manufacturer Compal (Taipei: 2324), agreeing to swap out the huge amount of money it’s owed for LeEco shares. The second has a major deal last year that had LeEco agreeing to pay $2 billion for US television brand Vizio apparently unraveling due to China’s recent clampdown on money leaving the country for offshore M&A. Read Full Post…

IPOs: Wuxi AppTech, Qihoo Move Towards China Listings

Bottom line: New signals from Qihoo and Wuxi AppTech show they may be getting preferential treatment for A-share listings, as the regulator shifts its policies to favor high-quality private firms for IPOs.

Wuxi AppTech eyes A-share listing

New signals coming from China’s stock regulator hint that it’s softening its stance towards letting companies formerly listed in the US jump the queue for re-listings at home. That appears to be the message, following a string of new reports saying first software security specialist Qihoo 360 and now drugmaker Wuxi AppTech are moving towards re-listings on the China A-share market, both within a relatively short period after leaving New York.

This latest development comes not long after SF Express (Shenzhen: 002352), China’s largest parcel delivery company, completed a backdoor listing in Shenzhen, which again shows the regulator might be easing its view on this kind of path to market. The broader theme here, and one that will be important for other private firms waiting to list in China, is that the securities regulator is finally realizing that it’s not always necessary to use a “first come first served” approach when choosing who gets to make IPOs. Read Full Post…

INTERNET: Baidu’s AI Obsession Spawns New Silicon Valley Center

Bottom line: Baidu’s opening of a new artificial intelligence lab in Silicon Valley is the latest move in its AI obsession, which is likely to end in failure and a quiet pullback in around two years due to mediocre execution.

Baidu in new Silicon Valley R&D lab

I’m officially dubbing Baidu (Nasdaq: BIDU) chief executive Robin Li the “two-year attention span man”, with word that the company is setting up a new Silicon Valley office in the rush to build up its artificial intelligence (AI) capabilities. If any one of China’s “big three” Internet chiefs deserves the title of “short attention span” man, it’s most definitely Robin Li. As far as I can remember, Li has been a “flavor of the moment” guy who fixates on the latest daily hot trend, most often to jettison the idea around 2 years later when it falls out of fashion. Read Full Post…