All posts by newsdoug

INTERNET: Baidu Removes Millions of Ads, Shutters Travel Site

Bottom line: Baidu’s massive ad cleanup in May and shuttering of a site for travelers reflects ongoing pressure on its core ad-dependent search business while spotlighting its inability to branch into non-search areas.

Baidu search cleanup continues

Search giant Baidu (Nasdaq: BIDU) is in a couple of headlines as we head into the latter part of the week, reflecting two major challenges the company is facing. The larger headline says the company has just removed millions of ads, a whopping 237 million to be precise, for reasons including being misleading and promoting unhealthy topics like porn. The second has the company shuttering a relatively minor travel site, which made me laugh just slightly, since I wasn’t even aware the company had such a site.

The first story is certainly the most important, since Baidu still derives the vast majority of its money from ad sales related to its core search business. By comparison, the second story demonstrates once again Baidu’s inability to diversify into areas besides search. This particular travel investment, while probably quite small, follows a long stream of similar, and often much larger, investments into other areas like takeout dining, and e-commerce, just to name a few. Read Full Post…

INTERNET: Mogu, China Techs Learn Importance of Profits

Bottom line: Shares of recently listed loss-making Chinese tech firms like Mogu are likely to languish as long as they post losses, but could gain some new life if and when they can show sustained profits.

Wall Street tells China tech firms to “Show me the profits”

“Show me the profits.” That seems to be the message coming from Wall Street these days to a group of profit-challenged Chinese tech companies whose shares are languishing following IPOs over the past year. We’ll look at one such case involving online fashion site Mogu (NYSE: MOGU), which seems to typify the trend of shares that have tanked since their recent offerings.

But first we need to start with some broader background about what’s going on with Chinese high-tech IPOs in the US these days. The current wave of such listings not only in New York but also in Hong Kong dates back nearly two years, marking one of the longest-running windows I can recall in the two decades I’ve covered this group. Read Full Post…

TELECOMS: China Hits 5G Accelerator, But Will Telcos Bite?

Bottom line: China’s telcos won’t accelerate their 5G network building even if licenses are issued earlier than expected this year, though foreign equipment suppliers could benefit if Huawei is hobbled by the US-China trade wars.

5G coming to China sooner than expected?

What a difference a decade makes. That’s about how long has passed between China’s issuing of 3G wireless licenses and the upcoming issue of 5G licenses two generations later. I remember in the 3G era how China dragged its feet forever, and finally issued licenses several years after the rest of the world. This time around it appears to be moving more quickly, driven by what appear to be political and economic factors.

The topic has popped into the headlines again this week with word that China’s telecoms regulator will “soon” issue 5G licenses. (English article) The signals coming from the Ministry of Industry and Information Technology (MIIT) have been pointing to a release of licenses this year all along. But this could mean that will happen sooner rather than later, since many were previously expecting licenses toward the end of the year. Read Full Post…

INTERNET: Grindr Case Bodes Poorly for China Tech in US

Bottom line: The US decision to force a sale of gay dating app Grindr by its Chinese owner reflects a new environment where Washington is almost certain to veto China purchases of local firms with access to sensitive user information.

US forces sale of gay dating app Grindr by Chinese owner

A new report on the unhinging of a Chinese purchase of US gay dating app Grindr is shedding some interesting light on how Washington sees such deals, and offers insight into how far Chinese tech firms might be allowed into the country going forward. The picture isn’t exactly too encouraging, though perhaps some might over-interpret things in light of all the recent trade tensions.

The case also sheds some light on the near-hysteria that seems to be growing daily in the US over telecoms giant Huawei, which is rapidly shaping up as the Chinese boogeyman of the 21st century. The central theme in all of this is that Washington believes China is out to steal private information on Americans any way it can, including through the use of private Chinese companies. Read Full Post…

INTERNET: Loss Shakes Baidu to the Core

Bottom line: Baidu’s first-ever loss since going public reflects a long-anticipated decline for its core search business, which could mark the start of a longer-term decline due to lack of a strong new business lines.

Baidu in search of search replacement

It seems that profits are increasingly hard to come by these days on China’s Internet. That’s the major takeaway coming in the latest results from search giant Baidu (Nasdaq: BIDU), which has just posted its first loss since becoming a publicly listed company 14 years ago. Perhaps most worrisome, the biggest issue appears to lie in Baidu’s core search business, always a cash cow in the past, whose operating profits tumbled in the first three months of the year.

The surprise loss is one of the first-ever that I can recall for China’s three largest Internet companies or the BAT, namely Baidu, Alibaba (NYSE: BABA) and Tencent (HKEx: 700). That’s led many to wonder whether Baidu’s glory days are fast fading into the rear-view mirror, or whether perhaps this company has another trick pony beyond its search business that has sustained it for years. Read Full Post…

INTERNET: Money Losers Meituan, Luckin Search for Profits

Bottom line: Meituan’s opening of its delivery unit to more customers looks smart but will require execution to succeed, while shares of money-losing Starbucks challenger Luckin will move steadily downward in the months after its super-sized IPO. 

Meituan opens up delivery service

A couple of money-losers are in the headlines these last few days, casting a spotlight on how profits continue to evade many of China’s hottest tech companies and what they’re doing to try to change that. This kind of loss-making isn’t all that uncommon for such startups. But in at least one of the cases we’re looking at today, the company Meituan Dianping (HKEx: 3690), is already a decade old or more, depending on which piece of it you look at. That hardly qualifies as a startup by most people’s definition, even though the company is still losing massive money.

The news involving Meituan has it opening up one of its biggest money gobblers, which specializes in restaurant takeout delivery, to other third-party customers besides just restaurants. The other news involves Luckin, an app-only coffee chain that wants to challenge Starbucks (Nasdaq: SBUX). That news had the company significantly supersizing its IPO plan to $500 million despite the fact that it’s just two years old.  Read Full Post…

IPOs: Money-Burners DouYu, Luckin Look to Wall Street for Cash

Bottom line: Live streaming gamer DouYu should get relatively strong demand for its $500 million New York IPO, while a smaller listing plan by younger coffee specialist Luckin is likely to die on the vine.

Coffee specialist Luckin brews up Wall Street IPO

One of the longest runs I can recall for New York IPOs by Chinese firms continues to chug ahead, with two new filings, one by live streaming game operator DouYu and the other by a high-tech Starbucks (Nasdaq: SBUX) challenger called Luckin. This particular IPO window is now rapidly creeping up on its second anniversary and doesn’t seem to show too many signs of running out of steam.

The big difference between companies coming to market now is that many are younger and still losing big money, compared with companies earlier in the wave that were older and mostly profitable. That’s not too surprising, since usually the most profitable companies move to the front of the line because they’re naturally more attractive. Read Full Post…

E-COMMERCE: Is Amazon Leaving China, or Not?

Bottom line: Amazon’s withdrawal from selling domestic goods to local buyers in China was inevitable due to its lack of a standout service and cut-throat competition from Alibaba and the money-losing JD.com.

Amazon shutters core China e-commerce selling domestic goods to domestic buyers

The e-commerce headlines have been buzzing these last few days with word that global giant Amazon (Nasdaq: AMZN) is abandoning China, representing the latest setback for a western Internet company in the large market. Amazon has come out with some statements clarifying the matter, in a move somewhat akin to what happened when Internet peer Google (Nasdaq: GOOG) made a similar withdrawal nearly a decade ago.

As Google did then and Amazon is doing now, both companies are being quick to point out that they aren’t completely withdrawing from China, but rather are just exiting what’s arguably their most important business. In Google’s case it shuttered its core China search engine. Now with Amazon, the company says it’s shuttering the part of its business that sells domestically-sourced Chinese products to customers in China. (English article) Read Full Post…

E-COMMERCE – Profit-Seeking JD.com in Overhaul Frenzy

Bottom line: A steady stream of layoff and cost-cutting reports around JD.com appear to show it’s trying to sharpen its operations to achieve sustained profits starting in the second half of this year. 

Reshuffle going on at JD.com

What’s up with e-commerce giant JD.com (Nasdaq: JD)? That seems to be the question of the moment, amid a recent series of nonstop reports of shakeup at China’s perennial No. 2 in the e-commerce world. The company was stuck under a cloud for much of the second half of last year as its founder, Richard Liu, stood accused of rape in the US. That cloud was finally lifted when the prosecutor looking into the matter decided not to file charges.  (English article)

Since then JD.com has been the subject of a nonstop stream of rumors and confirmed reports involving everything from layoffs to corporate overhauls to an imminent divorce between Liu and his wife. The latest reports seem to continue in that vein, including one saying the company plans to lay off about 8 percent of its workforce and another of some major moves in its top ranks. The latter comes after JD confirmed in February it was laying off 10 percent of its senior executives. (English article) Read Full Post…

MEDIA: Qutoutiao in Fund-Raising Frenzy

Bottom line: Qutoutiao’s recent flurry of fund-raising, including a major  loan from Alibaba, underscores rising confidence in the news aggregator after its lackluster IPO last year.

Qutoutiao in new fund-raising frenzy

News aggregator Qutoutiao (Nasdaq: QTT) is making up for lost time following its lackluster IPO last fall that raised far less than its original target. The company has just announced a new share sale that will generate about $30 million in cash, just days after raising another $171 million from e-commerce giant Alibaba (NYSE: BABA).

Investors didn’t seem too impressed with the latest cash-raising exercises, with Qutoutiao’s shares shedding some 8 percent in the last trading session. That drop appears related to announcement of the pricing of this latest share sale, since the company first announced the move a few days ago. Regardless of that, this does provide a good opening for us to take a closer look at this company. Read Full Post…

INTERNET: Online Education Looks Good in Principle

Bottom line: The online education sector is currently in a teething phase that could last for the next two years, but could offer big potential for investors who can separate the wheat from the chaff. 

Big potential in online education?

Today I thought I’d look at some of the major online education stocks to hit the market over the last two years, most turning in a decidedly negative performance that may or may not be justified. The latest of those, Koolearn (HKEx: 1797) stumbled out of the gate late last week with a flat trading debut, and since has posted some minor gains that probably don’t mean too much. (English article)

Koolearn’s anemic performance actually looks quite strong when compared with some of the others that have floated shares over the last two years. Most of those are down moderately to sharply over the last 52 weeks, led by a 67 percent plunge for one called Puxin (NYSE: NEW) and a 55 percent slide for another called Sunlands (NYSE: STG). Read Full Post…