Auto Inventory Builds, Pain Ahead for Domestics 中国低端车库存增加 本土车企面临苦日子

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The latest signs of trouble for China’s sputtering car industry are coming from some lower-end auto dealers, who are reporting a rapid build-up in their inventories even as manufacturers keep adding new capacity planned when the sector was booming 2 years ago. The current cycle looks like a classic case of looming oversupply, caused by a sharp jump in demand around 2009 that led manufacturers to invest billions of dollars in new production facilities that are only now coming on stream. Unfortunately for the automakers, the demand that helped to push China past the US to become the world’s biggest auto market has now started to stumble as Beijing takes steps to cool the nation’s overheated economy. The latest warning sign is coming from China’s largest car dealer group, the China Automobile Dealers Association, which is saying that dealers for 3 or China’s top domestic auto brands, Geely (HKEx: 175), Chery and BYD (HKEx: 1211), now have more than 45 days worth of inventory in their showrooms. (English article) In addition, Honda’s (Tokyo: 7267) China dealerships are reporting similar inventory levels, prompting the Japanese automaker to take the unusual step of closing its China joint venture for 15 days during the recent May Day holiday. The 45-day inventory mark is important because that’s the point at which dealers start to worry that they are not selling cars quickly enough, and thus may start to offer vehicles at big discounts in order to reduce their levels. That could potentially spark a round of price wars with other dealers, who will risk seeing their own inventories rise to dangerous levels unless they start selling their cars for big discounts as well. I’ve previously said that the big domestic auto brands are likely to suffer first in the current slowdown, as they don’t have the resources or variety of new models to compete with better-funded joint ventures backed by global heavyweights like Volkswagen (Frankfurt: VOWG) and General Motors (NYSE: GM). The domestic brands also traditionally sell to the very low end of the market, and thus don’t really compete with the big global names that tend to focus on the higher end. But recent moves into the lower end of the market by names like GM and Volkswagen could make the pain even worse for the domestic brands, and indeed Geely, BYD and Chery all reported sales declines in the first 3 months of the year. Right now the higher end of the market seems to be more stable than the lower end, meaning the big foreign car makers won’t feel the same pain as the domestics for perhaps another year. But look for most of China’s big domestic brands to slip into the red in the next 12 months, and perhaps for even 1 or 2 to close or combine with rivals as the industry embarks on a needed consolidation.

Bottom line: Inventory build-ups at car dealerships for BYD, Chery and Geely indicate a price war may soon break out at the lower end of China’s car market, pushing many companies into the red.

Related postings 相关文章:

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

◙ Jaguar-Chery: Veto Ahead 奇瑞联手捷豹路虎建合资厂料难获批

◙ China Slams the Brakes on Automakers 中国为汽车行业踩刹车

 

Solar War Reignites With Big US Tariffs 美国拟对中国太阳能电池高征税

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Just when it looked like a trade war had been averted in the important solar energy sector earlier this year, the US Commerce Department has surprised everyone by recommending high punitive tariffs for China’s solar panel makers, casting a huge new cloud over this important industry. Chinese solar shares all tanked on the news, with industry leaders Suntech (NYSE: STP), Trina (NYSE: TSL) and Yingli (NYSE: YGE) all tumbling by 5 percent or more after the news came out, re-approaching all-time lows reached late last year at the height of the sector’s current downturn due a global supply glut. I have no doubt that this isn’t the end of this story, and we’re likely to soon hear an angry response from Beijing, which has taken some steps in recent months to try and show it is weaning its solar cell makers from the kinds of government-sponsored subsidies that were the source of the US complaint against a group that now supplies more than half of the world’s solar cells. In the latest development in this case, the US Commerce Department has announced that all China-produced solar cells will be subject to punitive tariffs ranging from 31 to 250 percent. (English article) That figure was sharply higher than an earlier indicator, which saw the Obama administration recommend relatively light tariffs of up to 4.7 percent after the Commerce Department first ruled earlier this year that Chinese panel makers did indeed receive unfair subsidies in the form of measures like low-interest loans from state-owned banks and export rebates. (previous post) Based on statements from Suntech and Trina it appears that these newest tariffs are both still preliminary and not final, and that most companies will be subject to the lower end of the range, or about 31 percent. But clearly this story is still not finished. It’s hard to say what is going on behind the scenes, as the earlier low tariffs and this latest round of much higher recommendations send clearly different signals. I suspect the earlier lower numbers were designed to send a signal to Beijing that a trade war could be averted if China took steps to reduce its government support for the sector. If that’s the case, then perhaps this latest round of recommendations is designed to show Beijing that it needs to move more quickly in weaning its solar companies from state support or risk seeing its companies subjected to these higher tariffs that could seriously hurt development of the global industry. Without access to more information it’s difficult to guess intelligently what’s really happening here. But having followed this conflict for nearly a year now since it first broke out, I still predict it will eventually be settled in a way that makes everyone somewhat happy, but also forces both sides to make sacrifices. In China’s case, the country needs to move more quickly with new high-profile steps to show it is ending its unfair subsidies. If it does that, I could still see the US imposing the previously discussed lower tariffs when it announces its final decision.

Bottom line: The latest twist in the US trade war with China over support for its solar panel makers may be a pressure tactic to make Beijing move more quickly to end unfair subsidies.

Related postings 相关文章:

◙ Suntech, Canadian Solar in Latest PR Moves 尚德电力和Canadian Solar就西方倾销顾虑作出回应

◙ Solar Tariffs: US Takes Middle Road 太阳能关税：美国采取折中路线

◙ New Solar Storm Brews in Europe 欧盟或发起反倾销调查 中国光伏业再蒙阴影

Youku and Dangdang: Stuck in the Red 优酷和当当：生存在亏损

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Two of China’s money-losing Internet companies to make New York IPOs at the height of an investor frenzy for their shares in 2010 have posted more losses, though e-commerce firm Dangdang (NYSE: DANG) and online video leader Youku (NYSE: YOKU) appear to be moving in different directions in their quest for profits. Let’s look at Dangdang first, which was profitable when it first went public, but slipped deeply into the red last year as competition intensified with other names like Jingdong Mall in China’s crowded e-commerce market. Dangdang posted its third consecutive quarterly loss in its latest reporting period, losing $15.8 million to be exact. (results announcement) Investors certainly didn’t seem to like the news, bidding down Dangdang shares by 16 percent after the numbers came out. But from my perspective, the numbers actually do appear to show that Dangdang may have turned the corner and its situation may be improving, which is good not only for the company but also for the broader e-commerce space where most players are now losing money as they fight for market share. In terms of actual numbers, Dangdang’s first-quarter loss was actually an improvement from the previous quarter, when it lost $21 million. Furthermore, the company’s gross margins also improved to 14.2 percent from a low of 10.5 percent in the previous quarter, though the figure is still well below the nearly 20 percent figure from a year earlier. It’s too early to say if Dangdang is back on the road to profitability, but if it can sustain this latest trend into the current quarter it could actually have a chance of returning to the black by the end of the year. That situation contrasts sharply with Youku, which reported its net loss more than tripled in its latest reporting quarter, even as revenue more than doubled for the period. (results announcement) The cause for the big jump in net loss appears to be ballooning costs, with operating costs up 140 percent while administrative expenses tripled. Rapidly rising costs isn’t necessarily a bad thing for a company at Youku’s stage of development, but only if that rate of increase is roughly comparable to the revenue growth rate. Ideally, costs should grow more slowly than revenue, showing a company is achieving better margins as it gains bigger scale. But in this case the opposite seems to be true for Youku, with costs growing much more rapidly than revenue. Further clouding the issue, Youku forecast revenue in the current quarter would only rise 90-100 percent, a slowdown from the 111 percent growth rate in the first quarter. Investors also punished Youku stock, which fell 10 percent before the results came out though its shares rebounded slightly in after-hours trading. Youku’s problems are only likely to grow as it prepares to merge with rival Tudou (Nasdaq: TUDO), which will bring together 2 very different corporate cultures. All that said, if I were an investor in these companies, I would say the outlook definitely looks much brighter for Dangdang than Youku over the next 12 months.

Bottom line: Dangdang could return to the profit column by the end of this year as e-commerce competition eases, while Youku may have to wait a year or more for its first profits.

Related postings 相关文章:

◙ Rumored Tie-Up to Challenge Youku-Tudou 腾讯、搜狐和百度或结盟 挑战优酷-土豆联姻

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

◙ Tudou, Youku: Stormy Marriage Ahead 优酷土豆“联姻”：想说爱你不容易

News Digest: May 18, 2012 报摘： 2012年5月18日

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The following press releases and media reports about Chinese companies were carried on May 18. To view a full article or story, click on the link next to the headline.

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◙ US Imposes Anti-Dumping Duties on Chinese Solar Imports (English article)

◙ China Car Dealerships Struggle as Stockpiles Increase (English article)

◙ Youku (NYSE: YOKU) Announces Q1 Unaudited Financial Results (PRNewswire)

◙ Tencent (HKEx: 700) to Put E-Commerce, Soso, Weixin into New Company – Source (Chinese article)

◙ Phoenix New Media (NYSE: FENG) Reports Q1 Unaudited Financial Results (PRNewswire)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

China Mobile Nears iPhone Deal 中国移动引进iPhone在即

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My headline for this post may be a little misleading, as I’m purely guessing based on the latest media reports that China’s dominant wireless carrier China Mobile (HKEx: 941; NYSE: CHL) may soon sign a long-anticipated deal to sell an Apple (Nasdaq: AAPL) iPhone that can run on its struggling 3 network based on a homegrown Chinese technology. In fact, the actual news in this case is relatively simple, with China Mobile’s new Chairman Xi Guohua telling investors at the company’s annual meeting in Hong Kong that he is talking with Apple about developing an iPhone for a technology called TD-SCDMA, which is the basis for China Mobile’s 3G network. (English article; Chinese article)  Xi, who took over as China Mobile’s chairman in March after the retirement of his long-serving predecessor Wang Jianzhou, didn’t say very much more on the subject, except to add that there were no guarantees that a deal would be reached. The 2 sides had actually previously talked about a TD-SCDMA iPhone as much as a year ago, but they never reached a deal for reasons that were never disclosed. My guess is that the conservative Wang wanted Apple to take most of the risk for developing the TD-SCDMA iPhone, figuring that Apple wouldn’t mind spending lots of its own R&D dollars to develop a model for the world’s largest mobile carrier with more than 600 million subscribers. If that was the case, Apple clearly balked at taking such risk by itself and the 2 sides never reached a deal that would have clearly benefited both, especially China Mobile as it steadily lost 3G market share to more aggressive rivals China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA), which both offer iPhones for their networks. But the situation may have taken a major turn in March when Wang finally retired after months of rumors, leaving Xi to finally take the reins of a company that has seen its growth slow to a crawl in the last 3 years under Wang’s conservative leadership. Not long after Wang left,  Apple’s Tim Cook came to China for his own first visit since taking over as the company’s chief executive from Steve Jobs. (previous post) Media closely followed Cook’s trip, which included meetings with top government and industry leaders even though no mention was ever made of a visit to China Mobile. Still, I am quite sure that Cook must have met with Xi and other top China Mobile executives during the visit, with discussion of restarting the stalled TD-SCDMA iPhone talks most likely high on the agenda. Unlike Wang, Xi must realize that his company needs to take some major action to develop its 3G business, which is where the future of mobile communications lies. China Mobile already has a huge cash pile that it never seems to spend or return to investors, and I suspect that a newly empowered Xi will finally be willing to spend some of that money to share more of the risk with Apple for developing a TD-SCDMA iPhone. If that’s the case, look for the 2 sides to make rapid progress in their current talks and announce a long-delayed and much needed iPhone deal in the next 2-3 months, which could greatly boost China Mobile’s prospects in the 3G space and its broader overall outlook.

Bottom line: Apple’s stalled iPhone talks with China Mobile appear to have restarted under the carrier’s new, more progressive leadership, with a long awaited deal possible in the next 2-3 months.

Related postings 相关文章:

◙ New Developments, Including iPhone Deal, Heat Up 3G, 4G 中国电信iPhone销售和日益升温的3G、4G最新进展

◙ Apple CEO Cook Stirs Up Guessing Firestorm 苹果CEO库克低调访华意欲何为？

◙ China Telecom Turns Up Volume in 3G Drive 中国电信计划一鼓作气 3G市场欲再下一城

 

Tencent: Preparing for Breakup? 腾讯或为分拆铺路

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Tencent (HKEx: 700) is in the headlines today after releasing quarterly earnings that showed its profit continues to slow, but what caught my eye was another unrelated report saying that China’s leading Internet company is planning a major reorganization. I’ll discuss details of the reports in a moment, but from a bigger picture perspective I have to suspect that this reorganization — if it’s really happening — may be the prelude to a much bigger story that could see Tenent split up into several different companies in the next couple of years, either through its own initiatives or possibly under government pressure depending on the outcome of an ongoing anti-monopoly case. If such a split-up were to happen, investors in the current Tencent could reap big rewards by finding themselves holding stock in a number of promising smaller independent companies, including ones built around its highly successful online games and social networking businesses. Let’s look at the reorganization news first, as clearly that’s the most interesting. According to Chinese media reports, which cite unnamed industry sources, the reorganization now underway would see Tencent divide itself into 6 major groups, including one focused on social networking and another on interactive entertainment. (English article). Long-time followers of Tencent will recall the company started out as an instant messaging specialist that went on to leverage its dominant QQ service to enter a wide array of other Internet spaces, from online games, to search, video and e-commerce. The company is now China’s largest Internet firm, with a market capitalization of nearly $52 billion. The only other Internet firms that even come close to that are online search leader Baidu (Nasdaq: BIDU), with a market cap of about $43 billion, and privately held e-commerce leader Alibaba, which is thought to be worth about $30 billion. Unlike Baidu and Alibaba, which are both focused around a single core area, Tencent’s businesses are quite diverse, which is why a break-up would make more sense to let each separate business are improve its focus and sink or swim by itself. Impetus for such a move may not only be coming from within Tencent, but could also soon come from the government, depending on the outcome of an important anti-monopoly case now being heard in Guangdong province. That case, which opened last month, saw another Internet firm accuse Tencent of using its monopoly status in instant messaging to unfairly dominate other areas as well. (previous post) If Tencent loses that case, which could easily happen, it will suddenly come under big pressure to remedy its monopoly status, which could make a break-up more likely. Meantime, I should also take a quick look at Tencent’s latest quarterly results, which showed that its first quarter net profit grew an anemic 2.8 percent, even as revenue grew a much bigger 52 percent. (results announcement) The weak profit growth despite the big rise in revenues probably reflects Tencent’s highly diversified nature, which includes big new revenues but also big new spending on new businesses. That’s all the more reason the company should break itself up and make each of its different units stand alone as separate entities. Such a move would benefit not only the company itself, but also would satisfy critics of its anti-competitive behavior.

Bottom line: Tencent’s reported reorganization could be a prelude to a break-up, which would benefit investors and appease critics of its anti-competitive behavior.

Related postings 相关文章:

◙ Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？

◙ Disney, Tencent Tie-Up to Animate China 迪斯尼、腾讯合作研发动漫

◙ Tencent Shakes Up Search, Group Buying 腾讯搜搜、高朋网巨

Ctrip Profit Slows Amid Online Travel Rush 在线旅游热潮中携程利润放缓

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A number of interesting news bits are coming from the online travel space, led by the latest quarterly results from industry leader Ctrip (Nasdaq: CTRP) that show competition is rapidly heating up in this space, where another up-and-comer named Tujia.com has just received new venture funding. After dominating China’s online travel space for years, Ctrip and eLong (Nasdaq: LONG) are getting a recent wave of new competition from others finally waking up to the potential of the online travel sector, fueled by demand from more and more Chinese who have extra money and time to spend on travel. That demand has helped to propel a new field of rivals, including online travel site Qunar, which itself received a major investment from online search leader Baidu (Nasdaq: BIDU) late last year. (previous post) Others moving aggressively into the space include e-commerce giant 360Buy, which also calls itself Jingdong Mall, and now Tujia.com, which specializes in vacation packages. (previous post) Let’s take a quick look at Ctrip’s results, which show the company’s revenue grew a respectable 19 percent in the first quarter, even as profit tumbled 28 percent. (results announcement) A look at the numbers shows that reduced commissions are partly behind the profit decline, as hotels and airlines come under pressure to boost their own profits and also have more platforms to sell their products from. But the big reason for Ctrip’s profit decline appears to be sales and marketing expenses, which jumped nearly 50 percent and now account for more than one-fifth of total revenue. Clearly Ctrip is having to spend a lot more to maintain its growth than it did in the past, reflecting the growing competition in the market that is only likely to get worse, putting further pressure on profits. For the moment at least, investors seem to like what they see in these latest results, initially bidding up Ctrip shares as much as 5 percent after the report came out, though now they are up only 2 percent in after-hours trade. From my perspective, this kind of increased sales and marketing spending will be critical for Ctrip to maintain its market-leading position, and for that reason I wouldn’t be too concerned just yet by this profit erosion. But at some point the company will have to return to profit growth, or risk being abandoned by investors. Meantime, Tujia has just landed a new round of venture funding, with Ctrip itself as one of the investors, along with US travel site operator HomeAway (Nasdaq: AWAY) and US investment firms Lightspeed Venture Partners and CDH Investments. (announcement) No terms were given in the announcement, but I would expect this round is probably in the $10-$20 million range, and the presence of so many high-profile investors means that Tujia should be well positioned to grow in its niche area of providing vacation packages, and could make a New York IPO in the next couple of years. With all these fast-rising players in the market, look for everyone to feel the heat in terms of falling margins, and perhaps even a merger or 2 involving one or more of the big names in the next couple of years.

Bottom line: Ctrip’s latest results reflect intensifying competition in the online travel space, with some consolidation likely in the next 2 years.

Related postings 相关文章:

◙ Baidu’s Qunar: Going Places 百度投资的去哪儿网：前途无量

◙ Jin Jiang Looks for Room at the Global Lodge 锦江集团寻求跻身国际高端酒店之列

◙ 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

News Digest: May 17, 2012 报摘： 2012年5月17日

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The following press releases and media reports about Chinese companies were carried on May 17. To view a full article or story, click on the link next to the headline.

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◙ Tencent (HKEx: 700) to Restructure – Sources (English article); Gives Q1 Results (HKEx announcement)

◙ China Mobile (HKEx: 941) in Talks With Apple (Nasdaq: AAPL) on iPhone Cooperation (English article)

◙ Ctrip (Nasdaq: CTRP) Reports Q1 Financial Results (PRNewswire)

◙ Ex-Google Chief Li Kaifu: Most Cellphones Developed by Internet Companies Will Fail (Chinese article)

◙ Lightspeed China Partners Invests in Tujia.com (Businesswire)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Baidu Smartphones Set to Stumble 百度进军智能手机市场或以失败告终

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I don’t like to sound too negative for 2 days in a row, but one day after predicting failure for PC giant Lenovo’s (HKEx: 992) new smart TV initiative I have to give a similar forecast for the recent rush into smartphones by a growing number of Chinese Internet players, with search leader Baidu (Nasdaq: BIDU) leading the charge. Chinese media have been buzzing for the last few days about Baidu’s new offering, a low-end smartphone that runs on the company’s self-developed operating system and was co-developed with TV maker Changhong (Shanghai: 600839). (Chinese article; English article) Baidu’s move follows the announcement of similar self-developed smartphones from online game specialist Shanda and Internet security firm Qihoo 360 (NYSE: QIHU), and the latest reports that online game specialist NetEase (Nasdaq: NTES) may also be getting into the space. (English article) Let’s have a closer look at the Baidu smartphone initiative, as that one is the most advanced, following the previous roll-out of an original Baidu model that failed to gain much attention under a partnership with Dell (Nasdaq: DELL). This latest tie-up with Changhong differs from the Dell model in that it is significantly cheaper, costing just 899 yuan, or about $140. I’ve looked at pictures of the new phone, and while a photo doesn’t always tell the full story, the handset truly does look clunky and cheap. I’m a bit surprised that Baidu is partnering with such unexperienced companies, first with Dell and now Changhong, in this initiative that is no doubt costing a lot of money. Dell is more known for its computers than cellphones, though the 2 product types do share some similarities. Changhong is known almost exclusively for its TVs, which have almost nothing in common with smartphones. That said, I really don’t expect much if any success for this new Baidu-Changhong model, which will have to compete with much more attractive low-cost smartphones from fast-growing domestic firms ZTE (HKEx: 763; Shenzhen: 000063) and Huawei, which mostly use Google’s (Nasdaq: GOOG) popular and reliable Android operating system. In fact, Baidu’s initiative looks like an attempt to imitate Google with Android, acknowledging the increasing importance of the mobile Internet. I applaud Baidu for putting big resources into this important new area, but honestly believe its smartphone initiative is set for failure. If Baidu wants to increase its chances of success, it could start by partnering with a major smartphone maker rather than Changhong, though I suspect many such players would be reluctant to form such a tie-up. Meantime, I would make similar predictions for the other smartphone initiatives from Shanda, Qihoo and now NetEase. I’m not sure why all these companies are taking such steps, as the smartphone market is already quite crowded with much more experienced and resource-rich players like Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). Perhaps all these companies just have too much money and are looking for a place to spend it.

Bottom line: Baidu’s smartphone initiative is likely to fail due to competition and inexperience, but could stand a better chance of success with better manufacturing partners.

Related postings 相关文章:

◙ Huawei Follows ZTE to Lower Profits 继中兴之后华为利润也降低

◙ ZTE Results: Waiting for Returns 中兴坚持低成本手机策略 亟需尽早盈利

◙ Nokia Bets on China Telecom 诺基亚联手中国电信

News Corp Makes New Play for China 新闻集团入股博纳影业集团

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Rupert Murdoch isn’t giving up on China’s difficult media market despite his numerous setbacks there, with word that his flagship News Corp (Nasdaq: NWSA) is buying 20 percent of Bona Film (Nasdaq: BONA), one of the nation’s few privately held movie distributors. But if past experience is any indicator, this latest tie-up could also be doomed for disappointment due to the nature of the investment. Murdoch was once one of China’s most bullish media investors, seeing huge potential in its market of 1.3 billion viewers. But the company, now at the center of an unrelated hacking scandal in Britain, largely abandoned the market 2 years ago after many failed ventures, mostly caused by News Corps’ own overzealousness and Beijing’s equally strong reluctance to open the sensitive sector. The main difference this time seems to be strong signals from Beijing that it’s finally preparing to liberalize the sector, including a big new opening to foreign investment. Let’s look at the actual news, which says that News Corp will acquire the stake from Bona’s chief executive. (English article) No other terms were given, but based on Nasdaq-listed Bona’s latest market value, that would translate to a purchase price of about $75 million. From an investor’s perspective, this deal does indeed look like an interesting play into a sector that could soon see rapid expansion. China’s movie market is already the world’s second largest after the US, with the majority of revenue coming from US films. What’s more, the market could soon be set for big new growth, following China’s relaxation earlier this year of a strict quota that previously only allowed the import of 20 foreign films each year. Under the new quota, the number will rise to 34, or about 40 percent higher than the previous total. If ticket sales rise by a similar amount, that could translate to nearly a $3 billion box office next year, a healthy boost from the $2.1 billion for 2010. This latest tie-up follows a number of previous failures for News Corp, including its operation of a TV station that never gained an audience and which it sold a couple of years ago. Other News Corp investments in Internet company NetEase (Nasdaq: NTES) and Phoenix Satellite Television (HKEx: 2008) were successful in terms of financial returns, but were also largely failures in helping News Corp gain access to China. Frankly speaking, this latest tie-up looks most similar to the earlier Phoenix one, which saw News Corp also sign on as a strategic minority investor, only to be largely ignored by the company’s charismatic founder and chief executive Liu Changle. I suspect the same will happen in this latest tie-up, since founders of Chinese companies often like to run their own shows and don’t seem to like listening to so-called strategic investors, regardless of how much experience those investors bring. If that’s the case, look for another frustrating tie-up for News Corp in terms of expanding its China presence, though it will probably earn a nice return on this modest investment.

Bottom line: News Corp’s return to China with a new investment in a film distributor is likely to earn good financial returns, but will ultimately end in frustration in terms of as a strategic tie-up.

Related postings 相关文章:

◙ Disney, Tencent Tie-Up to Animate China 迪斯尼、腾讯合作研发动漫

◙ More Media IPOs From People’s Daily, Shopping Channel 电视购物，继人民日报后又一计划上市的媒体

◙ QVC Opens Shop in China QVC与中央人民广播电台合作运营电视购物频道

Sina Wows With Loss, Weibo Gains 新浪亏损而股价大涨，微博有收获

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When is a loss a good thing? In my opinion the answer should be “never,” but investors seem to be taking a different view based on the share price reaction for leading web portal Sina (Nasdaq: SINA) following release of its latest quarterly results. (results announcement) Frankly speaking, I don’t see why investors are getting so excited. Perhaps the results weren’t as bad as many had feared, and perhaps some are encouraged by the progress in monetizing Weibo, Sina’s wildly popular microblogging service that recently passed the 300 million user mark, with more than half of active subscribers accessing the service over mobile phones and tablet PCs. (Chinese article) Whatever the reason, Sina’s shares are up about 7 percent in after-hours trading, though that’s coming off the lowest levels the stock has seen in more than a year. Let’s take a look at the actual results for a better view of what to me looks like a weak quarter. Sina took a rare swing into the red in the first 3 months of the year, reporting a $13.7 million loss versus a $15 million profit a year earlier. But most worrisome was the fact that Sina also reported an even rarer operating loss of $18.1 million for the quarter. Equally worrisome in the latest results were the sharp slowdown in advertising, one of Sina’s main revenue sources, which grew just 9 percent. Other reports point out the advertising slowdown was already a known factor, and that the company’s net loss for the quarter was actually slightly better than analyst forecasts, which could account for the optimistic reaction to the company’s share price. Furthermore, the company also forecast that its advertising revenue growth should rebound slightly in the current quarter meaning it doesn’t see the situation deteriorating in the next few months. From a broader perspective, I said last week that I liked Sina’s plans to roll out a points rating system for Weibo that would allow users to judge each others’ credibility, which seemed like a good proactive move to address Beijing’s concerns about the spreading of false rumors on the microblogging site. (previous post) That kind of action will be especially important as Sina tries to turn Weibo into a profit engine, since the company seems to be taking a lax attitude towards implementing a real-name registration requirement for the service mandated by Beijing. In fact, the regulatory risk factor probably remains the biggest danger for Sina going forward, as Beijing could theoretically order Sina at any time to immediately close all accounts that haven’t registered by their real names, which I would expect is at least half of the 300 million users. All that said, look for a mild rebound in Sina shares over the next few weeks on this latest report, though that could easily change if any new negative sounds come out of the government in Beijing.

Bottom line: A jump for Sina shares based on its latest results is probably due to relief that the numbers weren’t worse than expected, with a modest rally likely in the next couple of months.

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