Bottom line: Huawei’s accelerating smartphone sales reflect its growing momentum in China, and could prompt it to consider spinning off the unit for a potential IPO in its drive to become more transparent.
Huawei News
Smartphones power Huawei resurgence
Growing momentum for its smartphone business has become the driving force behind a resurgent Huawei, which has just reported solid first-half revenue growth that is showing signs of accelerating after a recent slowdown. That’s good news for Huawei, but less promising for domestic rivals like Lenovo (HKEx: 992), Xiaomi and Coolpad (HKEx: 2369), which are struggling for direction in a crowded Chinese smartphone market where global giant Apple (Nasdaq: AAPL) has also shown signs of a recent resurgence.
Huawei hasn’t been too generous in providing financial data for the first half of the year, saying only that revenue jumped by 30 percent to 176 billion yuan ($28 billion). (company announcement; Chinese article) For anyone who tracks the global market, that figure is already more than double the $12.5 billion in first half sales reported by Ericsson (Stockholm: ERICb), Huawei’s leading rival in its traditional networking equipment core area. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 23. To view a full article or story, click on the link next to the headline.
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Huawei Consumer Device Sales Up 69 Pct in H1, Raises Full-Year Target to $20 Bln (Chinese article)
China Mobile (HKEx: 941) Announces Salary Reduction Plan, Cuts Up to 50 Pct (Chinese article)
Former Bright Dairy (Shanghai: 600597) President Guo Benheng Probed for Corruption (Chinese article)
Mecox Lane (Nasdaq: MCOX) Receives “Going Private” Proposal at $4 Per ADS (GlobeNewswire)
Bottom line: Apple could lose its crown as China’s best-selling smartphone brand by the end of the year, as it faces growing competition from domestic names looking for a bigger slice of the high-end market.
China loses crown as top iPhone market
Global smartphone pioneer Apple (Nasdaq: AAPL) has just released its latest quarterly results, which as usual contain very selective bits of information about the China market that are revealing but make it difficult to draw very strong conclusions. One emerging trend appears to have Apple coming under growing threat from Chinese brands eying the higher end of the market. That’s my quick conclusion based on Apple’s admission that China fell to second place among its global markets in its latest reporting quarter, after briefly grabbing the top spot from the US during the previous quarter.
Of course everything is relative, and Apple still looks quite strong in China with iPhone sales in its Greater China market up an impressive 87 percent in its latest reporting quarter. (English article) But that said, there’s really no reason that the US should have retaken the top spot from China during the quarter, since both countries now receive their new iPhones at roughly the same time. Read Full Post…
Bottom line: New Oriental’s special dividend sends a signal that it has no plans to de-list from New York, even as short-sighted companies like Qihoo continue buyout plans in pursuit of higher valuations in China.
New Oriental awards special dividend
Nearly 2 weeks after the last US-listed Chinese companies announced plans to privatize, education specialist New Oriental (NYSE: EDU) is sending a different signal that indicates it has no plans to abandon its New York listing anytime soon. That signal comes in a footnote to New Oriental’s newly announced quarterly earnings, in which it declares a rare special dividend — something you wouldn’t expect a company to do if it was planning to soon de-list.
At the same time, software security specialist Qihoo (NYSE: QIHU) is reaffirming its previous plans to push ahead with its privatization scheme, even as investors remain skeptical that this particular deal could fall apart. Qihoo is easily the largest of China’s companies looking to privatize so far, and clearly investors are worried that the company won’t be able to complete its buyout worth nearly $10 billion due to the recent market volatility in China. Read Full Post…
Bottom line: Qihoo’s new Dazen smartphones stand a low chance of success, even if they provide better quality to comparably priced rivals, due to their late entry to the overheated ultra low-end of China’s smartphone market.
Qihoo unveils Dazen smartphone
About a half year after announcing its intent to enter China’s crowded smartphone space, software security specialist Qihoo (NYSE: QIHU) has unveiled its new product under a brand name that sounds clever and catchy but is decidedly downscale. Qihoo has just announced that its new smartphones will carry the brand name of Dazen, and will sell for a bargain basement price of 899 yuan, or about $150.
The move appears to be an extension of Qihoo’s longtime strategy of selling products cheaply or even giving them away for free, and then using those products as a marketing tool for its other paid products and services. But in this case the strategy of going after the ultra low end looks a bit questionable, since that part of the market is already quite crowded and many brands are believed to be losing money. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 22. To view a full article or story, click on the link next to the headline.
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Apple (Nasdaq: AAPL) CFO Says ‘Very Confident’ in China After Market Turmoil (English article)
Bottom line: Micron’s decision to discourage a buyout offer from China’s Unigroup is a bargaining tactic due to high regulatory risk, and Unigroup is likely to come back with a sharply raised offer in the next 2 weeks.
Micron discourages China bid
A week after splashing into the headlines, a potential bid by China’s Tsinghua Unigroup for Micron Technology (Nasdaq: MU) is being cast into doubt, with word that the leading US memory chip maker is worried such a deal would get vetoed by Washington on national security grounds. The development comes as a slight surprise to me, as I previously predicted that such a deal would ignite some controversy but would ultimately get approved by the Committee on Foreign Investment in the United States (CFIUS), which conducts reviews for national security risks.
It’s quite possible that Micron really doesn’t want to proceed with talks because it believes there’s a big enough chance that such a deal could get vetoed in Washington. But that said, it’s also quite possible that Micron could quickly resume the talks if Unigroup offers a higher price than the previous $21 per share being discussed, and that all of this is just a bargaining tactic. Read Full Post…
Bottom line: Tongcheng’s new fund raising and Ctrip’s launch of an offshore hotel investment fund reflect the huge amount of investor dollars flowing into China’s online travel market, which will keep competition intense for the next 1-2 years.
Tongcheng in major new funding
Two of China’s leading online travel sites are in the headlines with major new initiatives, led by a massive fund-raising and even larger promotional spending plan by aggressive up-and-comer Tongcheng. The other major headline has industry leader Ctrip (Nasdaq: CTRP) setting up a fund to invest abroad, as it looks for new growth outside its overheated home market.
The pair of stories point to the huge potential for China’s domestic travel market, but also the fierce state of competition. Such conditions spotlight the need for consolidation, which seems to show signs of coming from time to time, only to collapse due to the fiercely independent nature of the company founders who are also usually their chief executives. Read Full Post…
Call me jaded, but I’m getting just a bit tired of all the recent attention given to the Shanghai Jewish refugee story in the run-up to the 70th anniversary of the end of World War 2 in Asia. I got my latest dose of the story just this past week, when I read about a new local musical based on a story that saw more than 20,000 European Jews take refuge in Shanghai during the war.
I read about that just days after another international media friend asked me for a contact at the official Jewish Refugees Museum in the Hongkong District, seeking some wartime photos for their own story on the topic. I contacted a friend at the museum, who told me they were getting flooded with similar requests due to the war anniversary. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 21. To view a full article or story, click on the link next to the headline.
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Micron (Nasdaq: MU) Does Not Believe Deal With Tsinghua Is Possible – Sources (English article)
Huawei’s H1 Revenue Up 30 Pct Year-on-Year at $28 Bln (English article)
Travel Site Tongcheng Launches 100 Bln Yuan Promotion, Links With Wanda (Chinese article)
Uniqlo Leaves JD.com (Nasdaq: JD) After 3-Month Trial (English article)
Bottom line: A US trade group’s statement criticizing Alibaba’s anti-piracy efforts reflects widely diverging views between the company and its critics, and could see Alibaba’s name return to the annual US list of “notorious” piracy sites.
US trade group blasts Alibaba
I’ve written several times about the difficult task that leading e-commerce site Alibaba (NYSE: BABA) will face in maintaining its status as a friend of Washington in the battle against piracy, following a major scandal earlier this year involving the rampant sale of fake goods on one of its main websites. Most news has involved steps Alibaba is taking to boost its chances of staying off an annual list of “notorious” websites for piracy, which is published annually by the Office of the US Trade Representatives. But now we’re getting a taste of the opposition Alibaba will face in that battle, with a major US trade association blasting the company for shortcomings in its anti-counterfeiting policies. Read Full Post…
