Bottom line: Google’s establishment of China-based servers and registration of Chinese domain names associated with its app store show it could enter the local smartphone market by Lunar New Year and quickly become a significant player.
Google sets up China servers
New information on a low-profile but authoritative techie website is hinting that Google (Nasdaq: GOOG) is inching towards a return to China, but this time in the less controversial hardware and apps areas where rival Apple (Nasdaq: AAPL) has built a lucrative business. The somewhat geeky posting says Google has quietly set up several servers in China, and has registered China-related Internet domain names associated with Google Play, its main app store that is now blocked in the country.
If and when it does announce its return, which could happen before the Lunar New Year, Google is almost certain to draw criticism from some western observers. Many of those previously lauded the company for the decision to shutter its China search engine in 2010, following a high-profile dispute over censorship. Those same people could accuse Google of hypocrisy with its decision to return to China, even though other major global names like Apple and Samsung (Seoul: 005930) already operate thriving businesses in the Chinese smartphone and app markets. Read Full Post…
Bottom line: Intel’s massive spending plan to convert its Dalian CPU plant to memory chip production looks like part of its growing alliance with Tsinghua Unigroup, which is probably helping to finance the conversion.
Intel overhauls Dalian chip plant
Just days after struggling US chip maker AMD (NYSE: AMD) announced plans to largely sell off its Asia manufacturing operations, larger rival Intel (Nasdaq: INTC) is doing the opposite with plans to invest up to $5.5 billion in one of its main Chinese fabs. But in an interesting twist to the story, Intel is spending the big money to convert the fab, which was originally designed to make integrated circuits for PCs, to memory chip production.
This unusual twist is just the latest move that shows Intel is placing its bets on China, as it plays catch up to other chipmakers like Qualcomm (Nasdaq: QCOM) that have discovered the future of computing lies in the mobile telecoms space. As part of its catch-up attempts, Intel has formed a major and growing alliance with Beijing-based Tsinghua Unigroup that is squarely focused on chips used in telecoms and IT services. Memory chips would fit nicely into that equation, since such chips are also a critical part of most IT products, ranging from smartphones to complex networks. Read Full Post…
Bottom line: A new Pepsi-branded smartphone set to launch in China next week could get an initial boost from strong publicity, but will quickly fizzle due to lack of special features to distinguish it from others in the crowded market.
Pepsi phone coming to China
An entertaining new twist to China’s overheated smartphone story is coming from the soft drink sector, with word that global beverage giant Pepsi (NYSE: PEP) is preparing to enter a crowded space that hardly needs any new entrants. The headline looked somewhat strange to me, though nothing surprises me these days in a market where names like industrial equipment supplier Sany (Shanghai: 600031) and air conditioner maker Gree (Shenzhen: 000651) have all jumped on the smartphone bandwagon.
Such a bandwagon approach is quite typical for China, where local companies are always quick to join the latest trends even if they have little or no experience in the business. But foreign names are usually a little more savvy, and this particular instance was the first I could recall of a major foreign brand joining this kind of silly herd mentality that often ends in failure and big losses for the associated company. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 21. To view a full article or story, click on the link next to the headline.
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Yum Brands (NYSE: YUM) to Separate China Unit Amid Activist Pressure (English article)
Meituan, Dianping Said Seeking to Raise Up to $3 Bln (English article)
Bottom line: LeTV’s latest hired car services investment and high-profile poaching of top talent from a rival look similar to the recent rapid rise and sputtering of Xiaomi, and the company could follow a similar trajectory by this time next year.
LeTV steals top talent from Youku Tudou
After watching the meteoric rise of online video sensation LeTV (Shenzhen: 300104) over the past year, I’m quickly tiring of this company and its hyperactive diversification strategy. The latest move in that drive is taking LeTV onto the road, with word the company is investing a hefty $700 million for a controlling stake of struggling private car services firm Yidao Yongche.
At the same time, other media are reporting that LeTV has just stolen a top executive from chief rival Youku Tudou (NYSE: YOKU), which announced last week it has received a buyout offer from e-commerce giant Alibaba (NYSE: BABA). Anyone feeling a sense of deja vu from these latest 2 LeTV headlines, and from LeTV’s meteoric rise in general, would be correct. Read Full Post…
Bottom line: Shanda Games’ imminent de-listing could be followed by a behind-the-scenes consolidation by one or more savvy private equity firms to create a major new online game firm capable of challenging NetEase or even Tencent.
Shanda Games heads for de-listing door
Faded online gaming pioneer Shanda Games (Nasdaq: GAME) is finally heading for greener pastures, releasing what’s likely to be its final earnings report as its shareholders get set to vote on a plan to privatize the company. Shanda Games’ road to privatization has been long and tortured, and is only now finally coming to completion after its initial announcement nearly 2 years ago. (previous post) But that said, I do have to commend Shanda’s strong-willed founder and chief Chen Tianqiao for finally getting the job done.
From a broader perspective, Shanda’s departure continues a trend that has seen online game companies de-listing en mass, after their stocks struggled for years due to stiff competition. In an interesting twist to that trend, these gaming laggards have been one of the few groups to actually complete privatizations among the 3 dozen US-traded Chinese companies that announced such buyouts earlier this year. Read Full Post…
Bottom line: Beijing needs to accelerate reform of traditional media in the face of rising challenges from players like Alibaba and Baidu, or risk seeing many of these state-run companies fall into irrelevance.
Alibaba challenges traditional media to speed up reform
A wave of mega-mergers sweeping through China’s Internet over the last 2 years saw its biggest deal to date announced late last week, when e-commerce leader Alibaba (NYSE: BABA) offered $4.6 billion for the more than 80 percent of leading online video site Youku Tudou (NYSE: YOKU) it doesn’t already own. The move marked the latest challenge to China’s traditional media industry, which has been monopolized for years by state-run broadcasters and printed publications.
If this latest mega-deal gets completed, a new Youku Tudou with access to Alibaba’s cash and other vast resources will almost certainly accelerate its challenge to traditional media by aggressively rolling out compelling new on-demand products and premium content. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 20. To view a full article or story, click on the link next to the headline.
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Huawei Smartphone Chief Says to Pass Samsung, Apple (Nasdaq: AAPL) (Chinese article)
LeTV (Shenzhen: 300104) Invests in Private Car App Yidao Yongche (Chinese article)
Shanda Games (Nasdaq: GAME) Reports H1 2015 Unaudited Results (PRNewswire)
Xiaomi Announces Third Generation TV Model (Chinese article)
China Approves Nokia’s (Helsinki: NOK1V) $17.6 Bln Acquisition of Alcatel (English article)
Bottom line: Declining Wal-Mart China sales and Suntory’s decision to dissolve a China joint venture reflect difficulties foreign consumer names face in the fast changing market, and also challenges posed by local rivals like Bright Food.
Sales fall 6 pct at Walmart China JV stores
Two new consumer stories are shining a spotlight on the difficulties many big foreign brands are facing in China’s tough retailing market, where they compete with both homegrown giants and also smaller names that can quickly gain scale over the Internet. One story reports on falling sales at US retailing giant Wal-Mart’s (NYSE: WMT) China stores, based on rarely seen data from a local joint venture. The other reports that Japanese brewing giant Suntory (Tokyo: 2587) is putting a lid on its 3-year-old Chinese beer-making joint venture.
Meantime, a third outbound M&A story involving Shanghai-based Bright Food shines a spotlight on one of the rising local giants that is posing a growing challenge to the big western consumer names. That deal has the acquisitive Bright, which has made billion-dollar purchases in Britain and Israel, signing another smaller deal to buy half of a major New Zealand meat processor for $200 million. Bright’s agreement to buy the stake in Silver Fern Farms looks similar to WH Group’s (HKEx: 288) blockbuster deal 2 years ago that saw it purchase leading US pork producer Smithfield for nearly $5 billion. Read Full Post…
Bottom line: Alibaba could make a bid for Weibo in the next 6 months, in a deal that would share many similarities with its newly launched blockbuster offer for Youku Tudou.
Weibo next on Alibaba’s M&A menu?
China’s Internet is buzzing over the industry’s biggest acquisition to date with Alibaba’s (NYSE: BABA) offer for Youku Tudou (NYSE: YOKU), but that deal could presage an even higher-profile one that sees the fading Twitter-like Weibo (Nasdaq: WB) follow a similar fate. Or even more intriguing, Alibaba could make a potential play for Weibo’s parent and founder Sina (Nasdaq: SINA), in a move that would spell the end for China’s leading web portal and one of its oldest Internet firms.
There would be many similarities between such a deal and the Alibaba offer for leading online video site Youku Tudou deal announced late last week. Investors appear to also believe such a deal could possible, based on stock reactions to the blockbuster deal that would see Alibaba pay $4.6 billion for the more than 80 percent of Youku Tudou it doesn’t already own. Weibo shares leaped 13.4 percent after the deal was announced, second only to Youku Tudou’s own 22 percent jump. Read Full Post…
I couldn’t help but feel a bit nostalgic on reading reports this week that one of Shanghai’s Cultural Palaces in Putuo district would be shutting its doors for much-needed renovations. The story was really just a newspaper photo with a caption, underscoring just how irrelevant these Soviet-era buildings with grandiose and idealistic names have become in modern China.
Many of these buildings have long ago fallen off the map for both locals and out-of-town visitors, despite their Disney-esque quality that makes many seem like theme park attractions in today’s Shanghai. As a history lover and also someone who actually visited and used many of these establishments when they were still relevant, I would propose that local officials take advantage of this need for repairs to do something different with these sites as they undergo renovations. Read Full Post…
