ICBC Boosts BEA Ties; Buyout Ahead? 工商银行促进与东亚银行关系：未来完全收购？

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Chinese lenders are in the headlines today with news that the US has given the green light for 3 of China’s top 4 banks to establish a presence in the world’s largest banking market, including approval for ICBC’s (HKEx: 1398) $140 million purchase of 80 percent of the US unit of Hong Kong’s Bank of East Asia (HKEx: 23). (English article) But while many are looking at the bigger picture, applauding this long-awaited opening of the US to Chinese banks, I’m more interested in the growing relationship between ICBC, China’s largest bank, and Bank of East Asia (BEA), one of Hong Kong’s largest and oldest family owned banks. ICBC’s relationship with BEA dates back at least 3 years, with the 2009 announcement that ICBC would purchase a similar 70 percent of BEA’s Canadian unit for about $80 million. The finalization of this latest agreement to purchase a majority of BEA’s US unit would make ICBC the controlling owner of BEA’s former North American business, with BEA remaining as a junior partner with minority stakes in both the US and Canada. This approach looks similar to what ICBC has done in Africa and Latin America, where it has forged a similar relationship with Standard Bank (Johannesburg: SBKJ) by first buying a 20 percent stake in the South African lender in 2007, and then last year purchasing a majority of Standard Bank’s Argentine unit. (previous post) I personally like this approach, as it has allowed ICBC to enter new markets in Africa, South America and now North America by buying existing assets from banks that have already established a presence in those markets. In both cases, ICBC has also wisely chosen to keep its foreign partner in the equation after its purchases by allowing Standard Bank and BEA to both remain as minority shareholders. This strategy allows ICBC to draw on its partners’ expertise in those markets, while also allowing ICBC to use its own huge resources to expand these new units. The big difference between BEA and Standard Bank is in their size. While Standard Bank was valued at about $28 billion at the time of ICBC’s stake purchase in 2007, BEA is much smaller, with a market capitalization of about $8 billion. That difference leads me to wonder if this new romance between ICBC and BEA could eventually lead to an outright marriage between the pair in the next 2 years, which strategically looks like a very nice fit. In fact, BEA has been frequently named as a takeover target due to its size and strategic location, with a base in Hong Kong and strong ties to China and North America. Those ties could look especially attractive to ICBC, which only has a limited presence in Hong Kong and is now using BEA’s North American ties to enter the US and Canada. It’s probably still too early to say if this budding romance will really end in a marriage, but if these recent partnerships in the US and Canada work out well, I would put the chances for such a tie-up in the next few years at more than 50 percent.

Bottom line: ICBC’s latest tie-up with Bank of East Asia in the US is part of a smart overseas investment strategy that could end up in a marriage between the 2 banks.

Related postings 相关文章:

◙ ICBC Discovers China’s Latest Low-Cost Export: Currency 工行将从非洲人民币结算业务中获益

◙ ICBC Sees Potential in Argentina 中国工商银行：阿根廷市场有潜力

◙ Bank of China Considers Offshore I-Banking 中国银行考虑收购RBS投行资产

News Digest: May 11, 2012 报摘： 2012年5月11日

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The following press releases and media reports about Chinese companies were carried on May 11. To view a full article or story, click on the link next to the headline.

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◙ Proview Refuses Apple (Nasdaq: AAPL) $100 Mln Offer for iPad Trademark – Source (Chinese article)

◙ Yum (NYSE: YUM) to Open Restaurants in Suning (Shenzhen: 002024) Stores (English article)

◙ ICBC (HKEx: 1398) Gets Fed Nod as Chinese Banks Seek US Growth (English article)

◙ SEC Charges Deloitte Shanghai with Refusal to Produce Documents (SEC announcement)

◙ SMIC (HKEx: 981) Reports Q1 Results (HKEx announcement)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Welcome to the US Dollhouse, China Mobile 中移动和万达进军美国料将失败

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There are several interesting developments today on big-name Chinese firms moving into the US, highlighting both the opportunities but also the risks for increasingly assertive Chinese names looking to expand into a market that is at once the world’s largest but also highly suspicious of China. Leading the news is dominant wireless carrier China Mobile (HKEx: 941; NYSE: CHL), whose US expansion aspirations are reportedly running into trouble over familiar security concerns. (English article) That report is followed by another one saying Wanda Group, a real estate developer and owner of China’s largest movie theater chain, is in talks to buy some or all of AMC, operator of the second largest US movie theater chain. (English article) And last but not least, long-frustrated telecoms equipment maker Huawei appears to have found a new backdoor into the US through a new tie-up with local company Synnex (NYSE: SNX) to sell its enterprise products in the world’s biggest market. (English article) Let’s look at the China Mobile and Wanda-AMC developments first, as they’re certainly the newest and each provides an interesting challenge that many will be watching in the months ahead. US media are reporting that US national security officials, concerned about the potential for cyber-spying, may deny China Mobile’s recent request to provide mobile service between the US and China and to build facilities in the US. Their main concern is that China Mobile could use the US presence to gain access to local infrastructure that could then be used for spying and to steal intellectual property. This particular concern has become a popular refrain for Chinese telecoms firms trying to enter the US, with both Huawei and rival ZTE (HKEx: 763; Shenzhen 000063) both being denied access to the market numerous times due to similar concerns over the last year. Whereas Huawei and ZTE have both made significant efforts to improve their US images and ease spying concerns, I suspect that China Mobile has done little or nothing in this regard and for that reason its request is very likely to be vetoed. Meantime, other US media reports say that Wanda is talking with AMC’s private equity owners about buying some or all of the US theater chain, in discussions that began a year ago but have become more serious since then. Anything involving Chinese ownership in the US media space is also likely to be sensitive, despite China’s recent opening of its own media sector by allowing big names like Disney (NYSE: DIS) and DreamWorks Animation (NYSE: DWA) to form new animation joint ventures. Accordingly, I would also give this deal a good chance of failure, higher than 50 percent, both due to such sensitivities and also Wanda’s inexperience at this kind of overseas M&A. Lastly there’s Huawei, which is the most experienced in the US after a number of high-profile failed attempts to enter the market in the last 2 years. I quite like this deal with Synnex, which will see the US company sell Huawei routers and switches to US businesses for use in their internal networks, putting it in direct competition with Cisco (Nasdaq: CSCO). These kinds of smaller sales are much less likely to attract controversy than Huawei’s previous efforts to build bigger mobile networks in the US, and thus could actually succeed and give Huawei its first chance to make a serious inroads to the elusive market.

Bottom line: New efforts by China Mobile to enter the US and a Chinese real estate firm to buy US theater operator AMC are likely to fail due to sensitivities, while a new Huawei initiative could succeed.

Related postings 相关文章:

◙ Albaba Hires Big Gun in US Image Drive 阿里巴巴重金聘请美国前高官 启动形象改善工程

◙ Beijing Help Undermines Huawei Image Drive 中国商务部替华为出面或适得其反

◙ Huawei-Motorola Rumors Look Logical 华为收购摩托罗拉手机业务传言看似合情合理

Hotels: Room for Consolidation 经济型酒店行业或加速整合

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China’s second and third biggest US-listed hotel firms, 7 Days (NYSE: SVN) and China Lodging (Nasdaq: HTHT), have just released their latest quarterly results, showing that growth has returned to the industry after a difficult 2011, but that competition remains stiff with room for more consolidation. The results are really quite a mixed bag, but both companies showed healthy revenue growth, with Seven Days’ top line up 30 percent and China Lodging, operator of the Hanting hotel chain, up an even stronger 53 percent. (7 Days announcement; China Lodging announcement) But their bottom lines both looked quite weak, with 7 Days reporting a small profit of about $3 million while China Lodging slipped into the red with a loss of about $1.5 million. In terms of outlook, both companies saw revenue growth continuing at about 30 percent, the result of aggressive expansion and growing demand from newly affluent Chinese consumers with extra money to spend on traveling. In terms of broader context, the budget hotel industry is clearly not a very profitable one, as reflected by China Lodging’s reporting of a loss and the fact that 7 Days’ profit was just 3.5 percent of total revenues. Shareholders seem to have liked the 7 Days results a bit more, bidding up the company’s shares 4 percent after it announced the figures while China Lodging’s shares were unchanged. Still, shares of both companies now trade near 52-week lows, reflecting the challenging environment for a sector that is both promising in terms of growth but also quite competitive and in need of consolidation. The sector turned in a disappointing 2011 after a boom the previous year when occupancy and room rates soared largely due to a big jump in business in Shanghai during the city’s World Expo. We started to see some consolidation after that, with industry leader Home Inns (Nasdaq: HMIN) buying smaller chain Motel 168 for about $500 million last year, and 7 Days buying another small chain called Huatian for a more modest $20 million. (previous post) But with many of the big global names like France’s Accor (Paris: AC) and Britain’s InterContinental (London: IHG) also getting into the budget space, competition is likely to remain intense. Accordingly, look for more consolidation to occur, with smaller money-losing chains the likeliest targets and even a bigger name like China Lodging potentially getting purchased over the next 2 years.

Bottom line: The latest results from 7 Days and China Lodging show a growing but highly competitive budget hotel sector, with accelerating consolidation likely in the next 2 years.

Related postings 相关文章:

◙ China Lodging: Rebound Ahead 中国经济型酒店业绩回升在望

◙ Hotel Consolidation Moves Ahead With 7 Days Deal 七天连锁酒店收购表明酒店业整合继续

◙ Home Inns Finds Room at Motel168 After All 如家最终收购莫泰168

Sina Gets Proactive on Weibo 新浪微博的积极举措

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Finally we’re seeing leading web portal operator Sina (Nasdaq: SINA) take some proactive measures to clean up its popular but controversial Weibo microblogging service, in a refreshing and much-needed change to its reactive approach of only taking action after Beijing’s steady stream of new restrictive policies. This is exactly the kind of approach Sina needs to be taking to convince Beijing that it can responsibly manage this wildly popular Twitter-like service, and also to give its own users a valuable new tool to help them distinguish truth from the many fictitious rumors that frequently circulate on the site. Let’s look at the actual news, which has domestic media reporting that Sina will roll out a points rating system for Weibo users to help everyone judge the credibility of other users on the site. (English article) Everyone will start off with a perfect rating of 100, and then people who consistently post false information or engage in other “bad behavior” will have points deducted. This kind of rating system is already a common tool on many web sites, especially e-commerce sites whose operators use such scores to help buyers determine which sellers are credible and likely to provide good customer service. Sina’s move comes a half year after Beijing first ordered microblogging sites to register all their users with their real names, a directive aimed at curbing the rampant rumor-mongering that now takes place on the site. (previous post) None of the microblogging sites have commented directly on how many of their users have provided their real names to date, even though Beijing initially set a March deadline for all users to register with their real names. Previous indications have said the number of people who have registered with their real names is relatively low, with reports in March saying Sina had registered just 60 percent of its more than 200 million users with their real names at that time. (previous post) I suspect that even that number was an exaggeration, and the number is probably less than 50 percent, though Beijing has yet to comment on what may happen next for all of those users who have yet to provide real names. This new point system may help to ease some of Beijing’s concerns, as people will be less likely to believe postings from people with lower scores, and thus equally unlikely to transfer those people’s Weibo postings. As a result, people with low scores will gradually be ignored by the broader microblogging community, helping to improve the overall quality of the messages on Weibo in general. I like this new system, and hope that Sina continues to refine it and take other proactive measures to provide a truly useful and credible service in this increasingly influential medium. Of course such improvement will also make the site more attractive to advertisers and paying customers, which will help when Sina eventually spins off Weibo into a separate publicly listed company.

Bottom line: Sina’s roll out of a point system for Weibo is a smart move that will ease Beijng’s rumor mongering concerns, and also improve quality of the microblogging community.

Related postings 相关文章:

◙ China’s Microblog Crackdown Continues 中国继续加强微博管控 新浪或受冲击

◙ New Crackdown Spotlights Social Networking Risk 新的打压凸显社交网络风险

◙ Real Name Registration: Burden or Not for Weibo? 实名制会否成为新浪微博的负担？

News Digest: May 10, 2012 报摘： 2012年5月10日

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The following press releases and media reports about Chinese companies were carried on May 10. To view a full article or story, click on the link next to the headline.

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◙ Fears of Spying Hinder US License for China Mobile (HKEx: 941) (English article)

◙ Sina (Nasdaq: SINA) Adopts Point System to Regulate Microblogger Behavior (English article)

◙ Huawei Signs US Distribution Deal With Synnex (NYSE: SNX) (English article)

◙ 7 Days (NYSE: SVN) Announces Unaudited 2012 Q1 Financial Results (PRNewswire)

◙ Sinopec (HKEx: 386), PetroChina (HKEx: 857) Facing Processing Losses on Price Cut (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Energy: Good for Builders, Bad for Sellers 中国电力行业：电价管制转变外资投资方向

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A couple of new deals in the Chinese power sector are casting a spotlight on both the difficulties and big profit potential in the space, the result of contradictions between lingering price controls from the socialist era and the ongoing rapid build-up of the nation’s energy sector to feed its fast growing economy. In the “difficulties” column, we’re hearing news that US power plant owner and operator AES (NYSE: AES) is selling off most of its Chinese assets, including stakes in a coal-fired power plant and also in a wind power joint venture. (English article) In the “big profit potential” column, meanwhile, General Electric (NYSE: GE) has just announced it will buy 15 percent of XD Electric Group (Shanghai: 601179), a Chinese maker of equipment used in building power plants and grids, for $535 million. (English article) Let’s look at the AES deal first, which clearly illustrates the lack of appeal that China has for power plant operators. News of AES’s intentions first emerged last fall, when foreign media reported the company had hired an investment bank to find buyers for its China assets that it valued at up to $400 million (previous post) Clearly demand for the assets wasn’t quite what AES or its investment bankers were hoping for, as it only managed to generate $134 million through the sale of 3 assets. The company only named the buyer for one of the deals, which saw it sell its stake in a power plant to its Chinese joint venture partner; but I suspect that the buyers in all 3 deals disclosed in the announcement were Chinese, reflecting the lack of interest in such assets from foreign buyers. The reason for the lack of interest is rather straightforward. Power plant operators produce power by burning coal or oil, which they must buy on the open market where prices have soared in the last year. Unfortunately for those producers, China keeps strict control over the prices at which they can sell to their customers, mostly consumers and businesses, and seldom grants major rate hikes even when coal and oil prices rise. As a result, operators of Chinese power plants, including big domestic names like Huaneng (HKEx: 902; Shanghai: 600011), have seen their profits shrivel in the current climate of high oil and coal prices. Foreign companies like AES need to show their investors a certain level of return on their investments, and clearly they weren’t getting the returns they wanted on these China assets, hence their decision to sell. Until China adopts a more flexible pricing system, look for more such sales from the few other foreign power plant operators in the market, with little or no interest in new projects from overseas investors. Meantime, the situation is just the opposite for GE, which is plowing a hefty sum of money into the very same power generating sector, only this time into the manufacturing space by buying into a company that makes equipment to help build new power plants and connect them to the national grid. This strategy looks like a much safer bet right now than investing in power plants, as the main risk is directly tied to growth in demand for new power, which in turn is directly tied to broader economic growth. In the case of China, the economy has been growing by around 10 percent annually for much of the last 5 years, even though that rate has slowed slightly to around the 8 percent range as exports to the US and Europe slow due to their weak recoveries and Beijing takes steps to cool China’s own overheated property market. Still, those kinds of growth rates mean that demand for new energy should also grow by similar levels, meaning demand for building new plants should be strong. That means XD Electric’s business should also be strong for the foreseeable future, and could even improve with its new connections and access to better technology from GE. Look for more of this kind of M&A in the years ahead, as foreign investors in the energy sector increasingly realize the safest bets are those tied to helping build and maintain the nation’s growing power grid, while the least attractive are those too closely linked to older state-set pricing regimes.

Bottom line: Foreign power investors will move towards plant construction and maintenance in the years ahead, and avoid investments that expose them to strictly controlled power prices.

Related postings 相关文章:

◙ Powerless AES Looks to Bow From China 爱依斯出售中国发电业务 凸显行业严酷形势

◙ Int’l Miners Dig For China Dollars 外资希望搭载中国矿企全球并购的顺风车

◙ Cash-Rich China Eyes More Global Energy Assets　　财大气粗的中国企业着眼更多全球资源并购

 

Sharp Explores China Cellphone Tie-Up 夏普联手富士康打造低端手机

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There’s an interesting story out today saying that fading Japanese electronics giant Sharp (Tokyo: 3128) is exploring the possibility of a cellphone tie-up with Taiwan’s Foxconn (HKEx: 2038), the latest wrinkle in a story that is seeing a growing number of Japanese firms hand over many of their struggling consumer electronics to Chinese firms that specialize in low-cost manufacturing. The latest media reports indicate that talks are very preliminary, saying only that top executives from Foxconn and Sharp met in Beijing this week to discuss such a tie-up. (English article; Chinese article) It adds that Foxconn could find such a tie-up attractive as it seeks to develop its own brands and move away from its core contract manufacturing, a low-margin business that sees it make products for other companies such as Apple’s (Nasdaq: AAPL) popular iPhones. For Sharp, such a tie-up would be part of its ongoing strategy to either sell or outsource many of its less profitable businesses to other firms. In this case, Sharp is still clearly a recognizable name in the cellphone space, but it’s also a decidedly second-tier player and its cellphone operations are probably not very profitable. That could be a good fit for Foxconn, which could significantly lower Sharp’s manufacturing costs and also has good resources for developing new products. In fact, this deal, if it happens, would look strikingly similar to a growing relationship between Chinese PC specialist Lenovo (HKEx: 992) and Japan’s NEC (Tokyo: 6701). That relationship began last year when NEC and Lenovo formed a joint venture that saw Lenovo take over the operation of NEC’s PC operations. (previous post) Like Sharp in cellphones, NEC is a relatively well known PC brand, but also a decidedly second-tier player that is rapidly losing relevance outside its home Japan market. After that tie-up was formed, NEC announced later in the year that it was re-entering the China cellphone market after withdrawing several years earlier. (previous post) There were few details in that announcement, but the timing so close after the PC tie-up with Lenovo led me to speculate that NEC was going to rely heavily on Lenovo’s well-established sales channels in China to relaunch its cellphones in the market. I further speculated that if NEC was successful in gaining some market share, it could eventually put its cellphone business into another joint venture with Lenovo, effectively handing over the brand to the Chinese firm. Such a move would certainly make sense for Lenovo, as it wants to rapidly build up its cellphone business but has had trouble developing its own brand, especially at the higher end of the market where it faces still competition from names like Apple, HTC (Taipei: 2498) and Samsung (Seoul: 005930). I would give these latest talks between Sharp and Foxconn a 50-50 chance of resulting in a new joint venture, and would look for more similar tie-ups in the next couple of years.

Bottom line: Sharp’s cellphone talks with Foxconn have a 50-50 chance of producing a joint venture, and reflect the growing ties between Chinese and Japanese electronics makers.

Related postings 相关文章:

◙ Lenovo Sister Firm Looks to Japan, Taobao Quits “围城”日本：弘毅想冲进去 淘宝想撤出来

◙ NEC China Cellphones: New Lenovo Tie-Up? NEC计划重回中国手机市场 或与联想联姻

◙ Lenovo-NEC: Let the Defections Begin 联想与NEC结盟注定失败

Shanda Cloudary Wows Investors With Profit 盛大文学利润令投资者惊叹

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Despite a dismal climate for US-listed Chinese stocks, online entertainment specialist Shanda appears to be moving ahead with a long-delayed IPO for its Cloudary online literature unit by attempting to wow investors with something they haven’t seen in a while: a profit. If Cloudary does indeed make it to market, it would become only the second Chinese firm to make a public listing in New York this year, as US investors have largely shunned Chinese stocks following a series of accounting scandals last year. The only company to make an offering so far this year has been a money-losing online discount retailer named Vipshop (NYSE: VIPS), whose March IPO was a resounding flop. (previous post) Another money-losing firm, auto rental specialist China Auto was all set to make a New York IPO to raise around $100 million last month, when it abruptly halted the deal due to anemic demand just before its shares were set to price. (previous post) Shanda had indicated earlier this year it was planning to refile for the Cloudary IPO, which it had to abort last summer after sentiment turned sharply negative due to all the accounting scandals and a constant stream of short seller attacks. Now it has submitted a new filing to the US securities regulator, surprising everyone by announcing that Cloudary posted its first-ever profit of about $3 million in the first quarter of 2012. (Chinese article) If that’s true, the company would indeed have a rare asset in its profitable bottom line, contrasting sharply with most of the Chinese companies that have gone public over the last year and a half, starting in late 2010 when such firms were an investor favorite. Names like online video site Youku (NYSE: YOKU) and social networking site Renren (NYSE: RENN) all have yet to report a profit despite making public offerings during that period, and online retailer Dangdang (NYSE: DANG), one of the few profitable companies at the time of its offering, has fallen deeply into the loss column since then due to stiff competition. So against that backdrop, Shanda’s Cloudary offering actually could look quite attractive and may potentially even draw some moderate investor interest if it moves ahead. When news of this offering first surfaced last year, I said it actually looked relatively attractive, as online literature was a growing area, driven by a boom in demand from users of e-readers, smartphones and tablet PCs looking for material to read on these mobile devices. Furthermore, Shanda appears to be a relative leader in the area, and could earn a premium for being the first to make an IPO in this category. Of course the big risk could be that Shanda, aware that investors aren’t interested in money-losing companies, has used accounting tricks to make Cloudary profitable for this latest reporting quarter, and that the company could slip back into the loss column in the current quarter. I suspect the truth is somewhere in between, that Cloudary is probably still losing money but is perhaps is quite close to becoming profitable on a sustained basis perhaps by the end of this year. All that said, look for investors to show some moderate interest in this offering when it moves forward, providing a welcome relief for the beleaguered IPO market.

Bottom line: Shanda Cloudary’s latest regulatory filing including a first-quarter profit shows it is moving ahead with its New York IPO plan, which could attract moderate interest from investors.

Related postings 相关文章:

◙ IPO Chill Bites LaShou, China Auto 中资企业赴美上市连遭冷遇

◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

News Digest: May 8, 2012 报摘： 2012年5月8日

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The following press releases and media reports about Chinese companies were carried on May 8. To view a full article or story, click on the link next to the headline.

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◙ Lenovo (HKEx: 992) to Launch Mobile Devices Facility in Central China (English article)

◙ GE (NYSE: GE) to Buy 15 Pct of China’s XD Electric (Shanghai: 601179) (English article)

◙ HTC Selects Spreadtrum’s (Nasdaq: SPRD) TD-SCDMA Baseband for Smartphone Series (PRNewswire)

◙ Alibaba Investigates Taobao Staff Bribes (English article)

◙ Shanda Cloudary Posts First-Ever Profit of $3 Mln in Q1 (Chinese article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Sohu’s Sogou Still Looking for Search Bite 搜狗壮志难酬

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You have to admire the dogged determination of Sogou, the online search unit of web portal Sohu.com (Nasdaq: SOHU) that, after nearly a decade in business is still just a bit player in its space. Despite its lack of progress, Sogou is now telling the world about its latest strategy to steal market share from Baidu (Nasdaq: BIDU), the China Internet search giant which controls more than 70 percent of the market. (English article) The only problem with this latest plan is that most of us have heard this kind of talk before from Sogou, and the result is always a lack of any real progress. Let’s look at this latest plan, which has Sogou’s CEO saying the unit will rely on searches that focus on users’ needs rather than the more commonly used keyword approach used by most major search engines. He added that Sogou still isn’t profitable, and gave what looks like an impossible target of controlling 15 percent of China’s online search market by next year. All this sounds remarkably familiar to forecasts Sohu founder Charles Zhang gave me in an interview way back in 2006, a year or 2 after Sogou’s launch. At that time he boldly predicted his new unit could take around a third of China’s online search market within a few years. Of course that never happened, and Sogou now controls just around 2 percent of the market. Zhang loves to trumpet Sogou’s recent gains, which saw his search engine post revenue growth of more than 200 percent last year. Those gains did indeed look impressive, though when you’re coming off such a small base it’s certainly not impossible. But even that growth is showing signs of stalling, with the company recently predicting that Sogou’s revenues would just double in the current quarter. (previous post) I don’t want to dampen Sogou’s aspirations too much, especially since I think that China really needs a good competitor to challenge Baidu. But that said, Sogou might do well to take a look at Soso, the search engine unit of Tencent (HKEx: 700), China’s largest Internet company. Despite gaining success in many of the areas it has entered, Tencent failed to make much of an impact in online search despite major investment in Soso, which 6 years after its founding has even less market share than Sogou. After wavering on the future of Soso, Tencent reportedly decided just a week or 2 ago to sharply cut back the unit rather than close it outright, with plans to slash about half of its workforce. (previous post) Perhaps Sogou would be well advised to make similar plans, though Sohu hasn’t shown any signs of abandoning this money-losing unit. Then again, following a recent online video tie-up between Tencent and Sohu aimed at competing with the new industry leader formed by the marriage of Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) (previous post), maybe we’ll see a similar Sohu-Tencent tie-up in online search.

Bottom line: Sohu’s determination to keep funding its money-losing Sogou search engine seems destined to fail, and it might be better served by closing the site or looking for a merger partner.

Related postings 相关文章:

◙ Sohu Disappoints Again, LDK Cuts Inspire 搜狐再次令人失望，江西赛维裁员鼓舞人心

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

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市