Journalist China

Business news from China By Doug Young.
Doug Young, journalist, has lived and worked in China for 20 years, much of that as a journalist, writing about publicly listed Chinese companies.

He is based in Shanghai where, in addition to his role as editor of Young’s China Business Blog, he teaches financial journalism at Fudan University, one of China’s top journalism programs.
He contributes regularly to a wide range of publications in both China and the west, including Forbes, CNN, Seeking Alpha and Reuters, as well as Asia-based publications including the South China Morning Post, Global Times, Shanghai Daily and Shanghai Observer

Kaixin Looks to Cash in on Facebook Effect 开心网似乎在利用Facebook效应

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Kaixin, China’s second biggest social networking site (SNS), has just released some new data that finally allow us to make some comparisons with industry leader Renren (NYSE: RENN), in what looks like a carefully timed move to restart its stalled IPO process to take advantage of hype surrounding the upcoming IPO for global leader Facebook. Frankly speaking, the Kaixin numbers look ok, but hardly seem to offer the kind of buzz the company would need to launch a hot IPO, especially in the current climate that has many US investors wary of Chinese companies following a series of accounting scandals last year. According to the handful of numbers given out by Kaixin, the company’s revenue grew 41 percent last year to about $60 million, while its registered user based reached 130 million, 60 million of whom were active users. (English article; Chinese article) The revenue looks rather weak compared to Renren, whose third-quarter revenue grew 57 percent to $34 million, meaning Renren is still about twice as big as Kaixin in revenue terms. (Renren Q3 announcement) In terms of users, Renren had 137 million registered users at the end of the third quarter, including 38 million unique users  logging in each month — figures that look similar but slightly stronger than Kaixin’s. What all this seems to say is that Kaixin and Renren are roughly equivalent in terms of their user numbers, but  that Renren has been more successful at parlaying its big user base into actual revenue, posting both stronger revenue and revenue growth compared to Kaixin. Despite its industry leading position, Renren shares have struggled since their IPO last year. They now trade at less than half their IPO level, though they got a nice bump after news first emerged that Facebook was preparing to file for its long awaited IPO, and are up about 20 percent since then. Kaixin is no doubt noticing the Facebook effect, and I suspect the company is now quietly scrambling behind the scenes to prepare its IPO documents so it can make a new filing in the next few weeks. Kaixin didn’t say whether it is profitable in its latest comments, which tells me it probably is still losing money, similar to Renren. But after months of shunning China stocks, perhaps the market is finally ready for another China Internet story, and Kaixin is clearly hoping to be that story. At the end of the day I could see a semi-successful offering for Kaixin, which in this case could be an IPO of about $100 million that probably won’t rise too much on its trading debut but also shouldn’t fall too much.

Bottom line: Kaixin’s release of limited new financial data indicate it may soon restart its stalled IPO, hoping to seize on hype generated by Facebook’s upcoming offering.

Related postings 相关文章:

◙ Kaixin Raises Profile in Renewed IPO March 开心网一改低调有意再次赴美上市

◙ Kaxin Buys Time With Tencent Tie-Up 开心网与腾讯合作堪称一箭双雕

◙ Gaopeng, Kaixin Spotlight China Internet Turmoil 高朋网、开心网凸显中国互联网混乱现状

360Buy Losing Focus With Travel Plan 京东商城涉足在线旅行服务业 偏离核心业务

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China’s Internet companies are famous for straying from their core businesses in pursuit of new growth even though such initiatives seldom work, and now e-commerce specialist 360Buy looks set to joint the club with a new travel services initiative. (English article) Nearly ever major Chinese Internet firm has dabbled in areas outside its core competency, with names like Baidu (Nasdaq: BIDU), Sina (Nasdaq: SINA) and Alibaba all making such initiatives, nearly all of which have ended in abysmal failures. None of these companies seem to have noticed that the big western names like Google (Nasdaq: GOOG), Amazon (Nasdaq: AMZN) and Expedia (Nasdaq: EXPE) have succeeded largely by focusing on their core areas, and only expanding into new ones when they can leverage some of their existing expertise. So that makes the latest move by 360Buy, which also goes by the name Jingdong Mall, look perfectly consistent with what other Chinese companies have done. In this case, 360Buy says it will launch a hotel booking service, and that it has already signed up 20,000 hotels in China, Hong Kong and Macau as partners. A company spokesman said the move is part of the company’s drive to become a more diversified online services company, instead of just an e-commerce specialist. Never mind the fact that the online travel services sector is already quite competitive, dominated by Ctrip (Nasdaq: CTRP) and Expedia-controlled eLong (Nasdaq: LONG), or that Baidu also recently entered the space with its investment in a company called Qunar. (previous post) We should also ignore the fact that 360Buy is currently locked in a series of price wars with rivals like Dangdang (NYSE DANG), and that rival Alibaba has learned its lesson and remains focused on e-commerce after its foray into online search ended in a complete disaster several years ago. In fact, I suspect this latest initiative is probably designed to generate market interest in 360Buy, which wants desperately to make a New York IPO to raise much needed cash. 360Buy launched its IPO process last fall, only to see the offering fall victim to abysmal market sentiment due to a series of accounting scandals at US-listed Chinese companies. This new travel services initiative looks like fantasy to me, and an initiative that’s 95 percent likely to fail. But those kinds of difficult odds never stopped a Chinese company from this kind of initiative before, and I would expect to see a few more strange initiatives coming out of 360Buy before it relaunches its IPO bid, probably sometime in the first half of this year.

Bottom line: 360Buy’s new initiative in the travel services space is almost guaranteed to fail, and could be more designed to generate hype in the run-up to a US IPO later this year.

Related postings 相关文章:

◙ E-Commerce: 360Buy Awaits IPO Window, Amazon Expands 京东IPO融资心切 亚马逊物流扩张加剧竞争

◙ 360Buy Heats Up E-Books, People’s Daily Goes to Market 京东商城高调进军电子书,人民网开启上市进程

◙ Internet Investors Seek Refuge in Big Names 互联网投资者选择性支持中国市场领头羊

 

 

Huawei and ZTE: Swapping Networking for Cellphones? 华为和中兴：转型进军手机市场？

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Telecoms superstars Huawei and ZTE (HKEx: 763; Shenzhen: 000063) continue to send out new signals underscoring how serious they are about developing their cellphone business, as both realize that growth potential could be severely limited for their traditional networking equipment business. In yet the latest signal coming from Huawei, the company is bragging that it shipped some 20 million smartphones last year, up 5-fold over the previous year. (Chinese article) That figure was enough to propel Huawei to the world’s sixth largest cellphone seller in 2011, with total cellphone sales jumping 40 percent to $6.8 billion. Of course that is still just a small part of the company’s overall sales, which are now in the $30 billion range. But Huawei clearly has big plans in the cellphone space, saying late last year it aims to become one of the world’s top 3 brands in the next 5 years. (previous post) Crosstown rival ZTE has made similar moves into the cellphone space, and has become particularly aggressive into low-end smartphone by making Android-based models that retail for less than $100. ZTE has also previously said it aims to become one of the world’s top 5 cellphone makers within the next 2 years, meaning that both of these Chinese companies could finding themselves increasingly fighting for the same customers on the global stage. The drive into cellphones, while risky and more competitive than traditional telecoms networking equipment, looks like a smart move for both companies, which increasingly realize that their traditional business is a difficult one with limited growth potential. Most of the world’s major telecoms equipment players are now struggling or have left the business outright, with names like Motorola and Nortel that were dominant players just a decade ago now non-existent. The few remaining names, including Nokia Siemens Networks and Alcatel Lucent (Paris: ALUA) have also struggled to remain profitable, with both making recent layoffs. Even Huawei itself reportedly recently delayed plans for a new factory in the important India market, where new network construction has virtually come to a halt amid a major government corruption scandal. (previous post) The networking equipment business is also notoriously cyclical, unlike cellphones that experience relatively constant demand. With all those factors in play, it’s not surprising to see both Huawei and ZTE looking to cellphones for stability, and I wouldn’t be surprised to see at least one of these 2 companies become one of the world’s top 3 brands in the next 3-5 years.

Bottom line: Huawei and ZTE are pursuing cellphones in response to higher risk and slowing growth in their networking business, with at least one likely to become a top global player in the space.

Related postings 相关文章:

◙ Huawei Discovers Cellphones 华为手机要向世界前三进军

◙ ZTE Gambles With Smartphone Share Grab 中兴通讯押注智能手机业务

◙ Huawei Puts Brakes on India Drive 华为印度建厂计划推迟

Car Sales: Domestics Down, But Not Out 汽车销量：国产车下降，接近拐点

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We’ve seen a mini flood of data come out over the past week from China’s auto makers, as they release January sales that show domestic players may finally be turning a corner after a miserable 2011 that saw them lose big market share to international rivals. What I like to call the “big 3” of Chinese domestic brands, Geely (HKEx: 175), Chery and BYD (HKEx: 1211; Shenzhen: 002594) all outpaced the broader market’s 24 percent decline for the month, as overall domestic sales tumbled due to timing of the Lunar New Year this year in January instead of the usual February. (English article) Of the big domestic 3, Chery easily looks the most promising, with sales actually gaining 17.5 percent for the month, making it one of the few non-luxury brands to post a gain. In fact, that figure is for Chery’s total sales, including both domestic and overseas, which is significant as the company has become China’s biggest auto exporter, with exports doubling over last year’s January level to now account for 12 percent of its total sales. Chery’s export drive looks like a smart direction, as its moves to find a foreign joint venture partner at home to boost its domestic sales have been a bit more problematic. Last year the company’s plans to make cars with Japan’s Subaru was rejected by the state planner, and the company’s most recent plan to make luxury cars with Jaguar Land Rover also looks questionable. (previous post) Meantime, Geely and BYD both saw their January sales drop by 16.5 percent and 15 percent, respectively. While it’s never good to see a big drop like that, both figures are still quite a bit better than the broader market’s 24 percent decline, meaning both companies may have finally reversed their downward slide for much of last year. Of course, BYD’s year-ago comparisons are relatively low now after its sales plunged in 2011, and Geely also has a similar advantage. But both companies finally seem to have realized that they need to keep making popular new models to keep their sales growing, with BYD announcing several new models late last year. Of course January is just a single month and things could easily change in the months ahead. But at least based on this early bit of data, 2012 could be the year when Chinese brands finally fight back against the big foreign names and see their market share stabilize.

Bottom line: Big Chinese auto brands could see their share of the domestic market stabilize in 2012, slowing steady gains over the last 2 years by major international car makers.

Related postings 相关文章:

◙ 2 China Car Brands Set for Renaissance? “上海”和“红旗”汽车将重出江湖

◙ Chery Finds Foreign Partner in Jaguar 奇瑞与捷豹路虎联姻前景堪忧

◙ Cars: US, Germany Clobber Japan, Domestic Rivals 美德汽车在华完胜日本和中国车商

Alibaba Looks for Value With Delisting Plan 阿里巴巴计划退市以寻求价值

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The online world has been buzzing since yesterday when Alibaba.com (HKEx: 1688), the only listed unit of e-commerce giant Alibaba Group, suspended trading of its shares pending a major announcement. Many, myself included, were eagerly awaiting an announcement from the parent Alibaba Group, which has been negotiating a buyback of the 40 percent in itself held by Yahoo (Nasdaq: YHOO); but few were expecting anything from the publicly listed Alibaba.com, which is the struggling B2B arm of the larger company. Now foreign media are citing unnamed sources saying Alibaba Group wants to privatize Alibaba.com, undoubtedly because it feels the unit is not fully appreciated by investors and could potentially drag down the parent company’s valuation as it seeks to buy out the Yahoo stake. (English article) Some recent investors have been saying since last summer that Alibaba Group could be worth as much as $30 billion, which would mark a huge increase over its value in 2005 when Yahoo purchased 40 percent of the company for just $1 billion. But with Alibaba.com valued at less than $6 billion based on its price before the Thursday trading halt, that valuation for the entire group looks difficult to justify. After all, Alibaba.com is one of the group’s oldest assets and presumably one of its most profitable, even though its growth has slowed considerably over the last year after a scandal emerged that saw the company’s CEO resign. The parent company’s other major assets include its Taobao Mall, recently rebranded as Tianmao (previous post), and its Alipay e-payments system, along with its original Taobao B2C online auctions site. But even if each of those assets is worth as much as Alibaba.com, which seems unlikely, the company would still have difficulty justifying the $30 billion valuation. The publicly listed Alibaba.com just announced today that its board will meet on February 21 to review and release the company’s latest quarterly results, which will undoubtedly show more disappointing growth. At the same time, I would expect it to announce the privatization plan, offering perhaps a premium of up to 20 percent over Alibaba.com’s last closing price as it seeks to remove its embarassingly low valuation from the market. After that happens, look for the parent company to move quickly with the privatization process so that it can completely de-list the unit before announcing its long-awaited Yahoo buyout that will give the parent company a valuation more to its liking.

Bottom line: Alibaba Group aims to eliminate an embarassingly low valuation for its Alibaba.com unit through a privatization plan.

Related postings 相关文章:

◙ Alibaba: Let’s Get This Show Finished 阿里巴巴和雅虎赶紧“离婚”吧

◙ Yahoo, Alibaba Dance Nears Finale　　雅虎应与阿里巴巴撇清干系

◙ Alibaba Scrambles to Prove High Valuation 阿里巴巴高估值或将作茧自缚

Mid-Sized Players Join China Fast Food Feast 国外中小快餐企业抢滩中国市场

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The big boys like KFC, McDonalds (NYSE: MCD) and Starbucks (Nasdaq: SBUX) aren’t the only ones hoping to feast on China’s growing appetite for fast food, with 2 mid-sized players, ice cream specialist Dairy Queen and Pizza Hut also announcing big new expansion plans to cash in on the trend. For investors, these expansions by smaller players spotlight that China offers interesting potential for not only the big names, but could also make mid-sized players an interesting bet. Then again, these more mid-sized companies come with a bit more risk, as they often lack the resources of the bigger names to execute their expansions, and are more likely to withdraw from the market at any signs of trouble, creating potentially big losses. Let’s look first at Dairy Queen, a well-known US brand that has been quietly expanding in China over the last few years. The company, owned by billionaire investor Warren Buffett, recently opened its 500th store in China, and says it plans to add another 100 stores by the end of this year, after opening 131 new stores in 2011. (company announcement) Meantime, Pizza Hut, owned by Yum Brands (NYSE: YUM) has announced it will open at  least 150 new stores this year as it expands into third- and fourth-tier cities, part of a trend that is seeing restaurant operators move into smaller, less affluent Chinese cities in pursuit of growth. Both Pizza Hut and Dairy Queen represent a group of lower-profile foreign restaurant operators that have found varying degrees of success in China, joining other similar sized players like Japan’s Yoshinoya, Hong Kong-listed Ajisen (HKEx: 538) and US pizza chain Papa Johns (Nasdaq: PZZA). A key component to the success for both the larger and smaller players is finding a strong Asia partner to help navigate the often tricky China market, where foreign companies are often subject to much more scrutiny than local companies. Ajisen got a good lesson in the potential perils of the market last year, when many Chinese consumers boycotted the chain after it falsely claimed that its soups were made with fresh ingredients, dealing a huge blow to the company’s revenue. Negative campaigns like that could easily force some of these smaller companies to incur big losses and even withdraw from the market, spotlighting one of their biggest vulnerabilities. But if they have the right partner and backing, some of these companies could also look like strong bets to profit from China’s growing appetite for western fast food.

Bottom line: New expansion plans by Dairy Queen and Pizza Hut in China spotlight the market’s big potential for mid-sized fast food companies.

Related postings 相关文章:

◙ Yum, Starbucks Forge Ahead in Face of Slowdown 百胜和星巴克逆势强劲增长

◙ Starbucks Raises Prices, But Who Cares? 没人会在意星巴克提价

◙ Growth-Hungry McDonalds Explores Risky Franchising Route

Sharks Continue to Circle China Stocks 在美上市中国企业将持续面临做空和法律诉讼压力

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The year of the Rabbit may be one that many US-listed Chinese companies would rather forget, and now it’s looking like the Year of the Dragon may offer little relief, as short sellers and class action lawyers continue their assaults. In the latest news, Muddy Waters, whose name became synonymous with short selling attacks on US-listed Chinese firms last year, has renewed its recent attack on Focus Media (Nasdaq: FMCN), while a law firm is putting out a call for investors to join its pending class action lawsuit against information technology software maker Camelot Information Systems (NYSE: CIS). Let’s look at Focus Media first, which has always been a slightly controversial company for various reasons, making it an easier target for short sellers like Muddy Waters that try to raise doubts about such companies’ accounting and other strategic issues to pressure their share prices. Muddy Waters first raised doubts about one of Focus Media’s transactions that looked unrelated to its core outdoor advertising business last year (previous post), and now has issued a new report questioning the size of its LCD screen advertising business. (Chinese article) This kind of repeated attack looks similar to another assault on a similarly controversial company, Qihoo 360 (NYSE: QIHU) by another small short seller, a company called Citron, and I suspect in both cases each short seller has bet big against its target and could lose big money is the share prices don’t come down some more. In the end I wouldn’t be surprised to see both short sellers lose big money on these bets, though not before both Qihoo and Focus suffer damage to their reputations. Meantime, a law firm is putting out a final call for plaintiffs to join its planned class action lawsuit against Camelot over a big drop in its price last year, which the law firm blames on misleading information put out by the Chinese firm. (law firm announcement) We’ve already seen a few similar lawsuits filed against US-listed Chinese firms after many saw their stocks drop dramatically last year amid a series of accounting scandals that undermined the entire sector’s credibility. In the end, this kind of lawsuit will probably result in a settlement, costing Camelot millions or even tens of millions of dollars. But over the longer term these lawsuits are likely to be relatively insignificant for larger companies like Camelot, though some smaller firms that come under similar attacks could ultimately go bankrupt and be forced to de-list.

Bottom line: Short seller and class action lawsuit attacks against US-listed Chinese firms will continue into the first half of 2012, but should start to ease after that.

Related postings 相关文章:

◙ Cleanup Resumes, Facebook Sniffs Out China Investors 在美上市的中国企业将继续面临“大清洗”

◙ Citron Keeps Up Qihoo Assault 香橼继续攻击奇虎

◙ CDC Kicks Off China Bankruptcy Parade 中华网打开赴美上市公司破产魔盒

Lenovo Results: Honeymoon Nearing an End? 联想并购後的蜜月期何时结束？

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Lenovo (HKEx: 992), arguably China’s best known consumer brand, has just released its latest quarterly results that show strong growth but lack any real excitement, as new acquisitions contribute to its top line for the first time. (company announcement) My real concern in all this is that the company could well be in a honeymoon period at this point, enjoying the immediate gains of higher revenue and profits from 2 big acquisitions last year, even as those same 2 acquisitions in the difficult Japanese and German markets are sure to start causing problems soon. On the surface at least, the results look quite solid. Revenue for the latest fiscal quarter rose 44 percent to $8.37 billion, while profit rose an even stronger 54 percent to $153 million, as the company gained sales from its new joint venture with Japan’s NEC (Tokyo: 6701) and its acquisition of Germany’s Medion. Investors didn’t seem too excited by the results, bidding up Lenovo shares slightly in morning trade in Hong Kong after the figures came out. The lack of excitement owes to the fact that Lenovo hasn’t been particularly aggressive in smartphones or tablet PCs, 2 of the big growth areas it will need to develop if it wants to remain a relevant PC leader for the years ahead. It did take an interesting move on that front last month, when it announced it would be one of the first backers for a new smartphone chip being developed by Intel (Nasdaq: INTC), the global giant better known for its PC-based chips. (previous post) Still, new models using the chip are probably still at least several months away, and will undoubtedly have many minor problems before they become a major contributor, if ever. Meantime, Lenovo has quite a few potential clouds hanging over its head that could turn into real trouble for the company. One of the latest of those emerged over the past week, when rival Acer (Taipei: 2353) filed a suit against one of its former top executives, Gianfranco Lanci, who recently moved to Lenovo to head its European operations. (Chinese article) But more worrisome in my view are the potential for problems with both the NEC and Medion acquisitions. Lenovo said last year it was considering moving some production to Japan, in a move clearly aimed at placating NEC’s Japanese customers worried about receiving inferior product after the deal. Meantime, the company will also probably be forced to maintain some production in German after buying Medion. Both  of these labor markets are famously difficult even for the most experienced companies, and Lenovo could soon discover it has taken on a bigger challenge in both than it originally thought. On the whole, I would say to look for 1 and perhaps even 2 more quarters of positive results before the new reality starts to take effect and Lenovo enters its next period  of crisis, probably by the end of the year.

Bottom line: Lenovo’s latest results show the company is still enjoying a honeymoon period from 2 recent acquisitions, but those same purchases will lead to new troubles by the end of this year.

Related postings 相关文章:

◙ Lenovo: Finally a Risk Taker In Intel Tie-Up 联想联手英特尔,终於肯冒险

◙ Lenovo Starts Year With New Europe Chief, TV Tie-Up 联想新年新气象：聘用新高管并推互联网电视

◙ Lenovo Considers Japan Production 联想向日本转移制造业务为明智公关手段

AsiaInfo, Xinhua in Latest Listings Shuffle 新华电视悄然上市 亚信联创或被摘牌

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There’s a couple of interesting new developments on the listings and de-listings front, with a unit of Xinhua making what looks like a low-key but also significant offering in Hong Kong even as one of the oldest US-listed China firms, AsiaInfo (Nasdaq: ASIA) may be preparing to de-list. The Xinhua listing represents China’s easing of restrictions for such offerings in one of its most sensitive sectors, the media; while the AsiaInfo development marks the latest chapter in a clean-up of US-listed Chinese firms, which have been plagued for much of the last year by a serious of accounting scandals. Let’s look at Xinhua first, which has done a backdoor listing for its relatively obscure TV arm, China Xinhua News Network Corp. (English article) The company said the move is part of a global expansion plan that will see it move into about 100 countries as China tries to boost its influence. The low-key move, which did not see Xinhua raise any actual funds, comes just months after both Xinhua and the People’s Daily both launched similar plans to list their web assets on China stock exchanges (previous post), clearly reflecting the fact that Beijing has given the green light for its media to start listing. That said, I would advise investors to avoid these big state names like Xinhua and People’s Daily, and look for some of the country’s more dynamic media players like Shanghai Media Group and Southern Media Group, which no doubt will soon be listing some of their assets after the big Beijing-based giants go first. Moving on to AsiaInfo, the company has announced it has hired a financial adviser after receiving an unsolicited takeover offer from a fund connected to the CITIC conglomerate. (company announcement) AsiaInfo shares have rallied quite a bit since the beginning of the year, up around 50 percent, presumably as rumors began to spread about this potential buy-out. I can’t really comment on the company’s specific financial situation as I don’t follow them closely, but clearly this offer is based on the low stock prices for many Chinese companies following last year’s sell-off after a series of accounting scandals raised questions about the entire sector. A couple of other companies, Shanda Interactive (Nasdaq: SNDA) and Grentech (Nasdaq: GRFF), have already announced plans to privatize in reaction to the sell-off (previous post), and this takeover bid looks like another attempt by a buyer to take advantage of bargain prices. Shrewd investors with time to do some research could do well this year by identifying other potential bargains, as I suspect we will see a steady string of additional buyout and privatization offers for the next few months as bargain-hunters seek to take advantage of low prices.

Bottom line: Xinhua’s backdoor IPO in Hong Kong marks the first in a wave of new media listings this year, while AsiaInfo could mark the first of many buyouts by bargain-hunting investors.

Related postings 相关文章:

◙ Xinhuanet IPO Sets Stage For Media Listings 新华网IPO或将开启媒体上市热潮

◙ 360Buy Heats Up E-Books, People’s Daily Goes to Market 京东商城高调进军电子书,人民网开启上市进程

◙ Shanda Moves Ahead With Privatization 投资者对盛大私有化仍持保留态度

SMIC Puts Turmoil Behind It — Again 中芯国际又走出内讧

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SMIC (HKEx: 981; NYSE: SMI), China’s largest semiconductor chip maker that seems to hop from one internal crisis to the next, seems to be telling the world with its latest earnings that the days of trouble will soon be behind it. (Earnings announcement) The only problem is, we’ve heard this story before after previous crises, only to see the company sink yet again when the latest crisis emerges. For the moment, at least, investors seem to be giving the company the benefit of the doubt, bidding up SMIC’s New York-listed shares by nearly 5 percent after the results were announced on New York time. The results from the latest report tell a relatively straightforward story: the fourth quarter of 2011 was one that SMIC would probably rather forget, with both profit and margins falling squarely into the negative column, as revenue also fell both on a quarter-to-quarter and year-over-year basis. Clearly things weren’t moving in the right direction during the quarter, which was one of the first after SMIC named a new CEO after a bruising power struggle during the summer that saw first its previous capable CEO ousted, followed by the departure of the man who was angling to take his spot. (previous post) The turmoil took a toll on SMIC’s performance and stock, but the company did indeed look relatively well positioned to return to focusing on its turnaround after a new CEO was named. Of course, SMIC wants people to focus on its first quarter guidance for now rather than its poor fourth-quarter results, and investors seem to be doing that. It forecast its gross margins will return to positive territory in the current quarter, while revenue is expected to return to a growth track as well. Equally important, the company’s report shows several trends that look promising for its future. In one, its customer base is becoming increasingly China-based, with China now accounting for 34 percent of its sales versus just 31 percent the previous quarter. This shift is something that SMIC should have been doing all along, as its China base is obviously a strong point, unlike the competitive US and European markets where it has to compete with much stronger rivals in TSMC (Taipei: 2330; NYSE: TSM) and UMC (Taipei: 2303; NYSE: UMC). The other trend that looks good is the growth of business from fabless chip makers, which are usuallly the most profitable customers. All of this looks good, and I have to admit I’m cautiously optimistic that SMIC has finally learned its lesson from all its internal issues and may finally be able to focus on becoming a profitable company again. Then again, the company has shown positive signs in the past, only to sink back into the red due to internal turmoil. Let’s hope this time it can finally escape that cycle.

Bottom line: SMIC’s latest earnings show encouraging first-quarter guidance, but the company will need to avoid more internal strife to complete its turnaround.

Related postings 相关文章:

◙ Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合

◙ SMIC: Under Fire From All Directions 中芯国际亏损显示其内外交困

◙ SMIC Makes the Right Move With New CEO 中芯国际终於明智换帅

Apple vs Proview: China Legal System Still Broken 苹果与唯冠iPad商标权之争或损及中国版权保护形象

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The ongoing legal tiff between Apple (Nasdaq: AAPL) and a relatively obscure Taiwanese company over the rights to the iPad name in China has mesmerized the Chinese media and Apple fans in general, but what it really shows is how badly broken the Chinese legal system is when it comes to copyright and intellectual property (IP) protection. Instead of protecting companies like Apple, which are the innovators that drive technology, this series of Chinese lawsuits is doing just the opposite, with the Taiwanese company using China’s inept legal system to try and extort money from this global giant. What’s scarier, the Taiwanese company, an affiliate of Proview Technology, could very well win the case, forcing Apple to either pay an extortionate fee for the use of the iPad name in China, or potentially to abandon the name altogether in this important market. Surely this is not what trademark protection law was meant to do. Let’s quickly review the facts in this case to show why it’s become a bit of a farce, albeit a closely watched one. Apparently the Proview affiliate registered the iPad name back in 2001 when the Taiwan parent was developing a product that clearly had no relationship to Apple’s highly popular product of the same name launched in 2010. That Proview product was no doubt a dud, and the company later sold the global rights to the name to a British firm, which ended up selling the rights to Apple. So now it seems the Proview affiliate has discovered the transfer of the iPad name was never properly executed in China. But rather than admit its fault in the matter and complete the name transfer, it is actually suing Apple in China, saying it still owns the iPad name and Apple is violating its copyright. And rather than force the Proview affiliate to correct the situation, which is what would probably happen in any Western courtroom, the Chinese courts seem to be interpreting the law quite literally and saying that Proview still owns the iPad trademark, and that Apple therefore must either license the name again or stop using it. The case isn’t over yet, with hearings taking place in several Chinese courtrooms. But if China is smart, some senior judicial officials should quickly step in and talk with the judges involved and quickly end the case in Apple’s favor or with a reasonable settlement. Otherwise they risk tarnishing the image of a Chinese copyright protection system that, while headed in a positive direction, is still rife with problems.

Bottom line: Senior Chinese judicial officials need to step in and end a trivial lawsuit against Apple over the use of the iPad name, or risk further tarnishing the country’s image for copyright protection.

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