Apple Suffers Setback in China Lawsuit Loss 苹果在华商标侵权案初尝苦果

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Apple (Nasdaq: AAPL) may be able to bully big names like Samsung (Seoul: 005930) by suing them in Western courtrooms over intellectual property (IP) infringement claims, but it may find the tactic more difficult to pursue in China, where it has just lost a major trademark lawsuit to a much smaller Taiwanese player. According to domestic media reports, a court in the southern boomtown of Shenzhen has ruled against Apple, the world’s biggest tech company, in a lawsuit it brought against Proview (HKEx: 334) claiming infringement of its iPad trademark. (English article)  The case looks a bit complex, as Proview apparently registered the iPad name all the way back in 2000, well before iPads or even iPhones existed. Apple sued Proview in Britain in 2006 over the matter, claiming the Taiwan company was no longer using the name and thus had lost the rights to it. But clearly the matter was never fully settled, leading to the latest action in Shenzhen. Proview is a relatively big Taiwanese company, but still nowhere near as large as Samsung, which is being sued by Apple in various courts throughout the world over IP infringement allegations related to Samsung’s use of Google’s (Nasdaq: GOOG) Android operating system in its smartphones. Back in September, Apple filed for and received a number of Chinese patents related to its IP and trademarks, leading me to suspect it was planning to bring its “fight them with litigation” approach to China, targeting not only Samsung but also a wide range of domestic handset makers including Lenovo (HKEx: 992) and ZTE (HKEx: 763; Shenzhen: 000063) that also produce models using Android. (previous post) This setback for Apple in Shenzhen shows that the Chinese courts may not be as receptive to Apple’s bullying tactics as some Western courts, which may make the company think twice about its use of litigation as a tool in China for its ongoing global anti-Android drive.

Bottom line: Apple’s loss of a trademark infringement case in Shenzhen means it may have a difficult time bringing its litigious anti-Android campaign to China.

Related postings 相关文章:

◙ Apple Prepares to Bring Anti-Android Drive to China 苹果计划在华反击Android

◙ Apple Prepares to Take on China Pirates 苹果开始接受人民币付款购买应用软件

◙ Apple Overlooks China — Again 苹果再次撇开中国内地市场

China OKs Nestle Buy, Opens Door for Big Brand M&A

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Following its landmark decision last month to let KFC operator Yum Brands (NYSE: YUM) purchase Little Sheep (HKEx: 968), China’s largest hot pot chain, Beijing has once again approved another foreign acquisition of a domestic big brand, this time allowing Nestle (Switzerland: NESN) to buy candy maker Hsu Fu Chi (Singapore: HSFU), a move that should encourage more such M&A. (English article) China’s controversial 2009 decision to veto the purchase of leading domestic juice maker Huiyuan (HKEx: 1886) by Coca Cola (NYSE: KO) sent a chill through the cross-border M&A market for major Chinese brands, as many interpreted the move — theoretically made on anti-monopolistic concerns — as a nationalistic reaction by Beijing technocrats reluctant to see a promising domestic name swallowed up by a foreign multinational. The veto created so much concern that it took more than 2 years for another company, Yum, to try a similar acquisition, again testing Beijing’s commitment to free trade and openness to letting its healthy companies get acquired by foreigners. This rapid succession of approval for the acquisition of Little Sheep followed by Hsu Fu Chi, Nestle’s biggest purchase in China to date, seems to indicate that China will take a more balanced approach to foreign M&A of its healthy brands in the future, which could provide a nice lift for stocks in other listed big brands like Huiyuan that enjoy a strong reputation in China. Of course, China will now expect reciprocal treatment in the West, such as for Shanghai-based food maker Bright Food’s pending acquisition of Australia’s Manassen, announced in August. (previous post)  I don’t see any problems for this kind of cross-border M&A in popular consumer areas like food and restaurants, though the tech space may continue to be sensitive as evidenced by the derailment of Huawei’s planned purchase of a small US tech firm early this year. (previous post) All that said, this latest approval by China’s anti-monopoly regulator should breathe some healthy new life into cross border M&A in the consumer sector, bringing good news for both acquirers and acquisition targets both inside and outside China.

Bottom line: China’s approval of the sale of a leading candy maker to Nestle reaffirms its new commitment to allowing big consumer brands be purchased by Western firms, paving the way for more such acquisitions.

Related postings 相关文章:

◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢

◙ Bright Finally Finds Tasty M&A in Australia’s Manassen 光明食品终於觅得“佳偶”

◙ Huawei quits 3Leaf buy, but stay tuned for more

Buffett Brightens Solar Prospects 巴菲特进军太阳能 行业美好前景可期

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The solar world is all abuzz this morning with news that billionaire Warren Buffett is taking a big bet on solar energy with his decision to buy a $2 billion solar power plant in California, a 550-megawatt project called Topaz, and what it might mean for the embattled sector. (English article) What it says is that under current conditions, which include healthy government incentives, this kind of investment will yield solid enough returns to satisfy someone like Buffett, who known to carefully analyze all of his investments before plunking down his shareholders’ dollars. That decision should prove encouraging to other potential investors in and builders of solar energy farms, and theoretically could provide huge new demand for solar panel makers who would supply those projects. The main problem, of course, is that this particular project is in the United States, where last week a trade panel made a preliminary ruling that China unfairly subsidies its solar panel makers — a decision that could result in big punitive tariffs for Chinese firms like Suntech (NYSE: STP), Trina (NYSE: TSL) and Yingli (NYSE: YGE), which collectively supply over half of the world’s solar panels. (English article) That uncertainty was apparent in shareholder reaction to Buffett’s move, with Trina shares unchanged in Wednesday trade, while Yingli was up slightly and Suntech gained a healthy 6 percent. Beijing has lobbied strongly against the punitive tariffs, and considering the importance both Beijing and Washington place on developing alternate energy, I’m fairly confident they will find a solution that will avert a prolonged solar trade war. That said, this latest Buffett investment looks like good news all around for solar cell makers in the longer term, though they could suffer in the shorter term when the US issues punitive tariffs, which looks almost inevitable.

Bottom line: Warren Buffett’s new investment in solar energy bodes well for panel makers in the long term, but they will still suffer short-term when the US issues punitive tariffs in a trade dispute with Beijing.

Related postings 相关文章:

◙ China Retaliates With Own US Solar Probe 中国启动对美可再生能源补贴调查

◙ Solar Slips Squarely Into the Red 太阳能行业陷入全线亏损

◙ Beijing, Yingli Send Mixed Solar Signals 英利和中国政府似乎“背道而驰”

 

 

News Digest: December 8, 2011

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

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◙ Alibaba Wants to Buy Back Yahoo (Nasdaq: YHOO) Stake For $13 Bln – Source (Chinese article)

◙ China Approves Nestle’s (Switzerland: NESN) Candy Maker Purchase (English article)

◙ Apple (Nasdaq: AAPL) Loses iPad Trademark Lawsuit in Shenzhen (English article)

◙ Buffett Makes a Big Bet on Solar (English article)

◙ China Factory Unrest Spreads Amid Economic Uncertainty (English article)

China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

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A leaked memo from China Mobile (HKEx: 941; NYSE: CHL), if it’s true, is providing an embarrassing look at the spectacular failure of the company’s sputtering 3G service. According to the memo, the country’s dominant mobile carrier now has a paltry 3.5 million data card users, representing a tiny portion of its 640 million total users, even though data services are supposed to be a key future growth driver. (English article) Making the situation even more embarrassing, only about half of those data card users were using China Mobile’s 3G service, while the rest were using its older 2G network. So that means that even though China Mobile reported having 45 million 3G subscribers at the end of October, only 1.7 million of those, or less than 4 percent, were using the service primarily for its Web surfing capabilities, which is what data cards are designed for. So my question to China Mobile is: what exactly are the other 43 million 3G users subscribing to? My guess is that many of them are really just 2G users who have paid a minimal fee, or possibly no fee at all, to upgrade to 3G packages that China Mobile is promoting less to build up the business and more to satisfy Beijing that it is working to justify its expense of more than $10 billion to build its 3G network. To be fair, China Mobile has been handicapped from the start in 3G by Beijing’s decision forcing it to build a 3G network based on the homegrown TD-SCDMA standard, which is only used in China and suffers from a wide range of technical problems, not to mention a scarcity of handsets that can operate on the system. The company has shown recent signs of stepping up its 3G campaign as a new generation of leadership moves in with the expected retirement of longtime Chairman Wang Jianzhou. If these new leaders are smart, they will aggressively work to fix the 3G glitches and improve coverage to build up China Mobile’s data card users, which would help to not only provide a lucrative new revenue source but also convince consumers that the company has a viable 3G offering to compete with rival products from China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU).

Bottom line: A leaked memo from China Mobile showing very low 3G data card subscribers underscores the company’s pathetic progress in promoting 3G to date.

Related postings 相关文章:

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

◙ China Mobile’s TD 3G Fading Fast 中国移动3G网络前景黯淡

◙ China Mobile: Poor 3G Approach Yields Weak Results 中移动3G策略不当 拖累公司三季度业绩

 

Qihoo, Vancl Fend Off New Attacks 奇虎、凡客和人人承受压力

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Chinese Web firms continue to come under attack as they stare at a Web bubble that is showing early signs of bursting, with listed companies fending off assaults from short sellers and others struggling to retain employees amid the latest rumors of cash crunches and layoffs. The latest trio to face such assaults include web security software firm Qihoo 360 (NYSE: QIHU), leading clothing retailer and IPO candidate Vancl, and struggling social networking services site Renren (NYSE: RENN), which are all putting out various fires in their ranks. Qihoo, after coming under attack from a small research house called Citron last month (previous post) questioning many of its user numbers, has come under assault again by Citron with more similar allegations. Qihoo has come out with its own statement blasting Citron and explaining to worried investors why all its numbers are accurate. (company announcement) I previously said I wouldn’t be surprised if Citron’s claims are at least partly accurate (previous post), though investors so far seem to be giving Qihoo the benefit of the doubt. The company’s stock still trades at around $18, not far from the level it was at when Citron issued its first report and far higher than the $5 per share that Citron estimated Qihoo shares were worth. Meantime, Vancl is fending off reports from an anonymous blogger that it is facing a cash crunch as it repeatedly delays its planned New York IPO. (Chinese article) Vancl has denied the posts, which apparently carry some credibility due to the recent departure of a company vice president and reports in September that it was cutting 5 percent of its workforce. (previous post) Reports earlier this week that Vancl has just received $230 million in new venture funding (previous post) would seem to indicate the company has ample cash for now, but clearly it is feeling pressure to raise even more as competition rages in China’s e-commerce space. Last but not least there’s Renren, which is reportedly getting ready to offer its shares to all employees to let everyone “enjoy the company’s success.” (Chinese article) The only problem is that Renren’s shares now trade at about $3.50, or one-quarter of their $14 IPO price in May. To me this plan looks like desperation in a bid to retain Renren workers, many of whom are probably having doubts about their company’s future.

Bottom line: Assaults on Qihoo 360, Vancl and Renren are the latest signs of turbulence as China’s Internet bubble starts to burst, with many more to come.

Related postings 相关文章:

◙ Report Takes Wind Out of Inflated Qihoo 奇虎遭遇Citron釜底抽薪

◙ China Internet Bubble Sees Vancl Dressing Down 中国互联网泡沫见证凡客裁员

◙ Renren Results: A Mixed Bag for Everyone 人人网业绩：苦乐参半

Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

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It seems that while I’ve been talking for months about the huge potential for video program makers due to demand from online video sites, a steady stream of just such companies have been making low-key IPOs in  China. Truth be told, most of these companies look like very regional players connected to larger state-owned groups, but nonetheless they could still provide an interesting investment proposition for those with access to China’s stock markets. In the latest of such offerings, a company called Jishi Media, based in northeastern Jilin province, is getting ready to apply for a domestic listing, Chinese media are reporting. (Chinese article) The offering  would follow a relatively high-profile recent listing for another regional player, Jiangsu Phoenix Publishing (Shenzhen: 601928), and other recent offerings by names like Central China Land Media (Shenzhen: 000719), Zhejiang Daily Media (Shanghai: 600633) and Shanghai Worldbest (Shanghai: 600757). Another interesting play could be Toonmax, the animation arm of Shanghai Media Group, China’s second largest media company, which one of my sources also tells me is seeking to make a listing. These companies complement bigger names like US listed Phoenix New Media (Nasdaq: FENG) and Huayi Brothers (Shanghai: 300027), which in my view are better bets due to their national scope. But that doesn’t mean that some of these regional players might not make interesting bets, especially a relatively big name like Animax whose programs would undoubtedly provide high quality offerings for China’s hungry stable of online video channels like Youku (NYSE: YOKU), Tudou (Nasdaq: TUDO) and Sohu (Nasdaq: SOHU), which have all recently signed a number of high profile deals to offer movies and TV programs from major Hollywood studios. I wouldn’t be surprised to see 1 or 2 of these smaller regional programers emerge as big names in the future, much the way regional TV station Hunan Broadcasting has become one of China’s most popular stations by offering popular programs combined with strong marketing.

Bottom line: A growing number of media firms making domestic IPOs could provide an interesting investment option, capitalizing on strong demand for programming from online video sites.

Related postings 相关文章:

◙ Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代

◙ Tudou Surprises With Profit, Licensing Deal 土豆网意外扭亏为盈视频分享市场的好兆头

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

 

News Digest: December 7, 2011

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The following press releases and media reports about Chinese companies were carried on December 7. To view a full article or story, click on the link next to the headline.

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◙ GM (NYSE: GM) China Sales Growth Accelerates as Auto Demand Shrinks for Ford, Honda (English article)

◙ 54% of China Mobile (HKEx: 941) Data Card Users on 2G Networks – Memo (English article)

◙ Qihoo 360 (NYSE: QIHU) Responds to the Citron Report (PRNewswire)

◙ Merck Establishes New MSD R&D Asia Headquarters in Beijing (Businesswire)

◙ Samsung (Seoul: 005930) Plans Flash Chip Line in China (English article)

Internet Investors Seek Refuge in Big Names 互联网投资者选择性支持中国市场领头羊

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Financing for Chinese web firms may have slowed as the country’s Internet bubble starts to burst, but a couple of major new deals show it certainly hasn’t stopped, with investors simply becoming more selective about who they support. The latest deals have seen Internet heavyweight Tencent (HKEx: 700) raise a hefty $600 million in its first US dollar bond offering, while leading clothing retailer Vancl has reportedly raised $230 million in new venture funding. Let’s look at the Tencent deal first, whose $600 million was at the lower end of its original plan to raise anywhere from $500 million to $1 billion. (English article) The fact that the figure came in at the low end shows investors are still somewhat wary of Chinese Internet firms, which have been the source of a series of recent accounting scandals on Wall Street. Concern is also no doubt high that China’s overheated Internet sector could be nearing a correction. Lastly, some investors might also be concerned about potential overseas acquisitions that Tencent might be eying for this new money. The company has previously courted dubious overseas acquisitions including News Corps’ (Nasdaq: NWSA) faded MySpace social networking service, even though it ultimately lost out in that bidding war. But that doesn’t mean that Tencent won’t bid for more troubled overseas Internet assets. Meantime, Vancl’s securing of this latest funding probably comes as a welcome relief for a company that has had to repeatedly delay a planned US initial public offering due to very weak sentiment towards China Internet stocks amid the recent string of reporting scandals. (English article) Several companies have gone ahead with IPOs despite the current negative climate, mostly with poor results. Vancl clearly isn’t as badly in need of cash as these other companies, and its receipt of these new funds should help it to buy more time until the IPO climate hopefully improves next year. All this shows that investors are still willing to support premium Chinese Internet names, though don’t look for many start-ups to receive major funding or make public offerings in the next 6 months.

Bottom line: New major fund raising by Tencent and Vancl show investors are willing to fund premier Internet names, though younger firms are likely to see far less investor interest in the next 6 months.

Related postings 相关文章:

◙ China Internet Bubble Sees Vancl Dressing Down 中国互联网泡沫见证凡客裁员

◙ 360Buy $5 Bln IPO Plan Looks Like Desperation 京东商城50亿美元上市计划凸显绝望

◙ Xiu.com Funding Puts Glamor in Online Fashion 服饰类网站前景看好

Saab Rescue Gets New Life With Bank of China Role

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The never-ending saga of a plan by 2 obscure Chinese firms to rescue dying Swedish automaker Saab has taken an interesting twist, with foreign media reporting that one of the Chinese partners has dropped out of the rescue group and been replaced by banking heavyweight Bank of China (HKEx: 3988; Shanghai: 601988). Under the original plan that stood little or no chance of success (previous post), the 2 Chinese firms, Youngman Lotus Automobile and Pangda Automobile (Shanghai: 601258), had been working for months on securing hundreds of millions of dollars in financing to rescue Saab, even as the Swedish company’s former owner, GM (NYSE: GM), was threatening to veto such a deal. I had said that even Youngman and Pangda could secure the necessary funding, their plan would ultimately get vetoed by Beijing due to inexperience of the 2 Chinese companies and Saab’s highly complex situation. But now the exit of Pangda and entry of Bank of China has completely changed the complexion of this rescue plan, and indicates that someone in Beijing may actually want to see the deal succeed. Foreign media say that under the deal now being discussed, Bank of China would replace Pangda, and collectively with Youngman would own just under 50 percent of Saab after providing their rescue financing. (English article) This new deal contains two elements lacking in the previous deal, giving it a much higher chance of success. From a financing standpoint, Bank of China’s participation guarantees the availability of needed funds, which are likely to run in the hundreds of millions of dollars. But perhaps more important, the participation of well-connected Bank of China gives the deal a much better chance  of winning necessary government approval. Clearly Beijing has taken an interest in this deal, though I’m not sure why as Saab still  has many structural issues that GM and others with much more experience failed to solve. Perhaps Beijing is just interested in Saab’s intellectual property, following the purchase 2 years ago of several older Saab model designs by Beijing automaker BAIC. Regardless of the reasoning, this latest rescue package looks to have a much better chance of success, meaning Saab may yet survive to see at least the end of 2012.

Bottom line: A Chinese plan to save Swedish automaker Saab stands a much better chance of success following the new entry of Bank of China into the rescue partnership.

Related postings 相关文章:

◙ More Stumbles for Saab Rescue, 360Buy IPO 搭救萨博和京东商城IPO两计划注定命运多舛

◙ Message to Saab: Don’t Count on China 萨博不应指望中国注资

◙ BAIC – Scavenging for Parts in IPO Run-Up

Sinopec Latest Victim of Environmental Scrutiny 中石化管道工程因环保计划不足被叫停

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The days when China’s big state-owned energy firms could do whatever they wanted without regard for the environment may be in the past, as reflected by a new setback for Sinopec (HKEx: 386; NYSE: SNP), China’s top oil refiner. China’s environmental protection agency, exercising its newfound authority following a new call to protect the environment, has officially ordered Sinopec to halt work on a 2 billion yuan pipeline it was building in the southern city of Zhanjiang, citing lack of a sufficient environmental protection plan. (government announcement) The news will hardly be welcome for Sinopec, and spotlights the growing risk that the company and fellow energy majors PetroChina (Shanghai: 601857; HKEx: 857; NYSE: PTR) and CNOOC (HKEX: 883; NYSE: CEO) will face in the future from an increasingly assertive regulator empowered by Beijing’s to clean up China’s badly polluted environment. This setback for Sinopec, which was first suggested in mid-November (English article), is just the latest in a growing string of government actions that have seen polluting factories, many of them inefficiently run using outdated equipment, shut down over the last year after their damaging ways were exposed. In one of the highest profile cases, CNOOC and US partner ConocoPhillips (NYSE: COP) have been dogged for much of the past half year by persistent leaks at their joint venture oil drilling operation in the Bohai Bay off the northeast Chinese coast. (previous post) A steady stream of reports about environmental damage from the leaks have appeared in the Chinese media, prompting CNOOC and ConocoPhillips to set up funds to clean up the mess and compensate victims. What all of this says is that all the energy majors will face the very real prospect of environmental liability in all of their future domestic operations, which will undoubtedly create major new costs that will put further pressure on their already-strained bottom lines.

Bottom line: The suspension of work on a Sinopec pipeline under government orders spotlights the growing exposure that energy firms are facing from environmental liability.

Related postings 相关文章:

◙ Pricey M&A, Cheaper Gas Undermine Sinopec 溢价收购和成品油降价 中石化面对双重利空

◙ Stumbling CNOOC Replaces Chief Executive 中海油换将李凡荣接棒CEO

◙ CNOOC Woes Spotlight Environmental Perils