Bottom line: ZTE’s new campaign in its home China smartphone market looks relatively well timed if a wave of consolidation starts by year-end, but it could miss its annual sales target if the competition doesn’t start to subside soon.
ZTE targets high-end with Axon
After quietly falling out of the top 5 in its home smartphone market over the past 2 years, telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063) is gearing up for a new push with an aim to become one of China’s top 3 players in the next 3 years. That’s the message coming from Adam Zeng, who has been working hard to breathe new life into ZTE’s smartphone business since taking over the company’s mobile device unit about a year ago.
Zeng detailed his plans for me in an interview last week, including his attempts to go upmarket with a new line of smartphones and also a broader blitz of new models slated for release in China later this year. In my view, ZTE was quite wise to scale back its smartphone campaign in China over the last 2 years, as the market became incredibly competitive with a wide range of established and new names all competing for space. Read Full Post…
Bottom line: Meituan is feeling increasing isolation as its 2 chief rivals strengthen partnerships with Baidu and Tencent, and is likely to be forced into a similar tie-up by the end of next year to maintain its industry-leading position.
Meituan feels growing isolation
Leading group buying site Meituan is finally responding to a flurry of reports involving its own finances and a new challenge coming from top search engine Baidu (Nasdaq: BIDU), releasing data that reflect its own strong growth and market dominance. At the same time, CEO Wang Xing is also shooting down rumors that his company is in the process raising $1 billion in new funds, and is repeating his previous position that his company isn’t in any hurry to make an IPO.
The sudden release of information by this low-profile company raises the bigger question of what’s the motivation behind this flurry of activity for the normally low-profile Meituan. I personally believe the company isn’t gearing up for an IPO, especially in the wake of all the market turbulence in China right now and the flood of US-listed Chinese companies that have announced plans to privatize and return home to re-list. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 18-20. To view a full article or story, click on the link next to the headline.
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AAFA Calls For New, Transparent Anti-Counterfeit Moves from Alibaba (NYSE: BABA) (press release)
Investors Prepare to Sue Dangdang (NYSE: DANG) Over Low Buyout Offer Price (Chinese article)
Bottom line: US national security regulators are likely to approve the potential purchase of Micron by China’s Tsinghua Unigroup, to demonstrate their commitment to fair trade and avoid politicizing cross-border high-tech M&A.
Micron sale likely to get US approval
In the days after reports emerged that China’s Tsinghua Unigroup was planning a bid for US memory chip giant Micron (NYSE: MU), media have been buzzing with speculation over whether Washington might veto a deal on national security grounds. I can understand the logic from both views, and some say recent US allegations of frequent hacking attacks from China could add to arguments for a veto of the deal.
But as a longtime watcher of this kind of transaction, I expect that Washington will ultimately approve the purchase to demonstrate its commitment to fair trade. Such a move would also send a strong signal to Beijing, which is showing growing signs of limiting sales by foreign technology companies in China with its recent introduction of a sweeping new national security law. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 17. To view a full article or story, click on the link next to the headline.
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Tesla (Nasdaq: TSLA) Unveils New Model X, to Go on Sale in China Next Year (Chinese article)
Bottom line: Tsinghua Unigroup could end up scrapping its plans to bid for Micron due to fears of political resistance, while a new mobile OS that it’s backing is probably getting support from Beijing but is likely to fail.
China bid for Micron meets with early resistance
The recently acquisitive Tsinghua Unigroup is in a couple of headlines today, as the politically-connected company chases its dream of becoming China’s first IT products and services giant. The first headline has the company investing $100 million in a company developing a mobile operating system (OS) that could someday rival Google’s (Nasdaq: GOOG) Android and Apple’s (Nasdaq: AAPL) iOS. The second hints at the political resistance that Unigroup could meet as it reportedly gets set to make a $23 billion bid for leading US memory chip maker Micron (Nasdaq: MU), with reports that a powerful senator has concerns about the deal. Read Full Post…
Bottom line: Hanergy shares will remain forcibly suspended until the Hong Kong securities regulator completes its investigation into price manipulation, and could ultimately return to China where oversight is far less strict.
Hanergy shares stay suspended
I had to smile when I read the latest reports that said the Hong Kong securities regulator has taken the unusual step of ordering a continued suspension of shares of solar power equipment maker Hanergy (HKEx: 566), as it continues a probe into stock price manipulation. My smile wasn’t due to the continued suspension, but rather to the reason that media reports gave for the investigation, namely the spectacular rise in the company’s price over a one-year period, followed by its even faster plunge. (previous post)
That story was actually quite well documented back in May, when Hanergy’s shares lost nearly half of their value in a single hour after rising 6-fold over the previous year, wiping out $19 billion in market value. China stock watchers will know that the reason for my smile is that this kind of meteoric rise and fall is quite ordinary just across the border in China, and seldom attracts similar scrutiny from the China Securities Regulatory Commission. Read Full Post…
Bottom line: Earlier announcers of privatization plans like Jiayuan are likely to succeed due to their more reliable funding sources, but many of the deals announced by Chinese firms in the second half of June could ultimately collapse.
De-listing bells keep ringing for Jiayuan
China’s sudden stock market rally isn’t reassuring US investors who believe that many of the most recent buy-out offers for New York-listed Chinese firms may collapse due to questionable funding. That has prompted at least 1 firm, online dating site Jiayuan (Nasdaq: DATE), to come out and openly say it is still committed to the privatization process that could ultimately end with its departure from New York and re-listing of its shares in its home China market.
The rationale for this kind of a move hasn’t changed throughout China’s massive stock market gyrations, which saw the main Shanghai index more than double over the past year at its early June peak, before crashing in a major sell-off. The crash has subsided in the last few days thanks to major intervention by Beijing, though it’s far from clear whether the selling binge is over. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 16. To view a full article or story, click on the link next to the headline.
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McCain raises concerns about possible China bid for Micron Tech (Nasdaq: MU) (English article)
Huawei Gets Permission to Manufacture Cellphones in India (Chinese article)
China’s Tsinghua Gives $100 Mln to Android Challenger (English article)
Meituan to Acquire Chinese Travel Search Engine Kuxun – Source (English article)
HK Securities Regulator Orders Halt to Trading in Hanergy (HKEx: 566) (Chinese article)
Bottom line: Walmart’s dismissal of Yihaodian’s 2 top executives marks a major shake-up due to the unit’s disappointing performance, and could be followed by closer integration with Walmart’s own China operations.
Yihaodian in management shake-up
A major shake-up has just occurred at Walmart’s (NYSE: WMT) China e-commerce unit, reflecting its disappointing progress 3 years after the US retailing giant took control of local upstart Yihaodian. The shake-up has seen the sudden resignation of Yihaodian’s 2 founders, Yu Gang and Liu Junjun, who were also the chairman and CEO, respectively. Yihaodian confirmed the departures, and said they were announced after a high-level Walmart official came to visit the company. (Chinese article)
The reports say Walmart issued a nicely worded statement on the matter, saying “A company’s founders will naturally leave after a certain stage of development, and we wish them well”. But the fact of the matter is that Yihaodian has been quite a disappointment for Walmart, which took control of the company in 2012 and has made it the central focus of its e-commerce strategy in China. Read Full Post…
Bottom line: Retailers like Yum and Mondelez are increasingly suffering from weak China sales due to a local slowing economy, and are unlikely to return to rapid growth of previous years over the short- to medium-term.
Mondelez in China shuffle
Two separate stories involving major western food retailers paint a gloomy picture for the China market, which is losing momentum in tandem with the country’s slowing economy. One headline has Yum Brands (NYSE: YUM), operator of the KFC fast food chain, announcing results that continued to be weak in this year’s second quarter, despite a major overhaul for its China operation and the fading impact of a major food safety scandal a year ago. The other news has Mondelez International (Nasdaq: MDLZ), maker of Oreos cookies, reportedly making major adjustments to its China operations, in a move that one insider says is the equivalent of lay-offs. Read Full Post…
