China Mobile (NYSE: CHL; HKEx: 941) is pushing ahead with its 4G trial expansion, even after signs the regulator won’t give licenses for another 2-3 years at the earliest. One of my sources tells me China’s phone giant, which is hemorrhaging market share to rivals Unicom (NYSE: CHU; HKEx: 762) and China Telecom (NYSE: CHT; HKEx: 728) in the 3G space, awarded contracts to build trial networks for its TD-LTE technology in six or seven cities late last week. According to him, contract winners include the usual suspects, Huawei, ZTE (HKEx: 763; Shenzhen 000063), Nokia Siemens and Datang; one surprise may have come when global powerhouse Ericsson (Stockholm: ERICb) failed to make the cut, but that has yet to be confirmed. Regardless, the fact that China Mobile is pressing ahead with a major expansion of 4G trials shows it’s determined to bring TD-LTE to market sooner rather than later. I see a battle shaping up between them and the regulator, which is clearly more inclined to give the industry more time to get its 3G networks up and running before moving to 4G.
Bottom line: Look for China Mobile to spar with the telecoms regulator over timing for 4G licenses, with the regulator’s go-slow approach likely to win the battle.
Just when you thought you couldn’t get enough controversy from IPO-bound Qihoo, the security software maker has landed in the middle of another storm, which just reinforces my view that this is a company to avoid at all costs. According to Chinese media, a rival named Rising is accusing Qihoo, which is raising up to $200 million with an NYSE listing, of tailoring its flagship Qihoo 360 Safe product to effectively lock out any other security software on a person’s PC once the 360 is up and running. (English article; Chinese article) Rising held an emergency press conference to discuss the matter, similar to what Tencent (HKEx: 700) did late last year when Qihoo tried a similar stunt. Both Tencent and Rising, and undoubtedly countless others, have filed complaints with relevant Chinese authorities. I wouldn’t be at all surprised if Qihoo significantly scales back its IPO or shelves it altogether after this latest in a long string of scandals, as I honestly can’t believe that any savvy investors would want to touch this company.
Bottom line: Avoid Qihoo’s IPO if you like your money
There’re some interesting items out there on the latest China moves by two of the world’s top PC makers, Acer (Taipei: 2353) and Dell (Nasdaq: DELL). First Acer, the more dynamic of the two. It should come as no surprise to anyone that Chinese media are reporting that Acer has cut 10 percent of its China staff, nearly all of it from its “tie-up” with (aka takeover of) Founder’s PC business (Chinese report). This kind of hatchet job is exactly what Acer did when it bought Gateway’s PC business in the US, i.e. it bought the company for its name and distribution channels and then quickly dismantled the rest of it. That strategy seemed to work quite well in the US, so I suspect it could work equally well in China. Now Dell. It seems Michael Dell was in town for the ground-breaking of a new plant — Dell’s second in China — in Chengdu. (English article) I suppose this move shows Dell’s commitment to China’s hinterland, which of course is what Beijing wants as it tries to develop less affluent coastal areas. In an interview with China Daily, Michael Dell also said his company is shifting its China focus from the highly competitive consumer space back to the enterprise sector which made Dell so successful in the first place. Smart move, Michael.
Bottom line: Acer and Dell are both making important shifts in their China strategies that could help them steal share from market leader Lenovo (HKEx: 992)
The following press releases and media reports about Chinese companies were carried on March 25. To view a full article or story, click on the link next to the headline.
◙ Unicom (HKEx: 762; NYSE: CHU) in talks to get Sony Ericsson flagship 3G phone (Chinese article)
◙ The List of Top 500 Chinese Real Estate Enterprises Released, in Which Vanke (Shenzhen: 000001) Ranks First and Evergrande Ranks Second (English press release)
Looks like Chen Tianqiao’s Shanda (Nasdaq: SNDA) has been caught running gambling tables for Chinese Internet punters — a revelation that can’t be good for this company already trying to figure out exactly where it should focus its energies.It seems the media police, otherwise known as CCTV, has run an expose that caught one of Shanda’s units in the act. (English article; Chinese article) I’ve seen these kinds of exposes before, two of which dealt a sharp short-term blows to Sina (Nasdaq: SINA) and Focus Media (Nasdaq: FMCN) for promoting such unworthy causes as fortune telling and fake medical services. Never mind that this Shanda unit may be a small part of its overall business, as advertisers and other merchants will now avoid the company for fear of angering government officials. Watch for Shanda’s top and bottom lines to take a beating in the coming year.
Bottom line: Shanda’s business will take a hit for the next 2-3 quarters after CCTV uncovered online gambling at one of its units.
Since everyone is writing about Apple (Nasdaq: AAPL) and its new iPad these days, YCBB is going to jump on the bandwagon and give our quick take on things in China. Specifically, we noted with interest that China was NOT on the list when Apple announced the first 25 countries for the international launch of its latest hot product this week. (English news release) To be fair, no Asia countries were on the list of 25 and only Hong Kong, Korea and Singapore were on the list for the next round of releases in April (strangely, Japan wasn’t on the list either). All this goes to show that China, while full of potential, still probably lacks the sales that these other markets can provide, even though everyone wants to own one. In the shorter term, this could play well to some of the other tablet PC followers, including Korea’s Samsung (Seoul: 005930) and especially home-grown leader Lenovo (HKEx: 992), whose extensive sales network in China could boost the chances of success for its upcoming LePad 2.
Bottom line: China has yet to achieve big-league status in Apple’s eye, leaving the local tablet PC market open to the likes of Lenovo and Samsung.
There’s some interesting news out there regarding online travel pioneer Ctrip (Nasdaq: CTRP), which Chinese media say is adding the restaurant business to its menu of services. (English report; Chinese report) Now normally I’m not a big fan of Chinese industry leaders that look for new growth outside their core areas, but in this case I think that Ctrip’s move may actually be a good one. After all, this is one of the few cases of a Chinese Web company that ventured from its original roots to become successful in another related area. In this case I’m talking about Ctrip’s move from its original online hotel booking service into airline booking, which now makes up a big chunk of its business. Restaurants are sort of related to its two current mainstays, as travelers often want to find good places to eat. I also like Ctrip’s go-slow approach to adding new businesses, unlike other me-too Internet companies like Shanda (Nasdaq: SNDA) and Baidu (Nasdaq: BIDU), that keep venturing into new business areas every few months, mostly without success.
Bottom line: Ctrip’s move into the restaurant space is a smart one, and could easily fatten up its top and bottom lines in the next few years.
It seems that Baidu’s (Nasdaq: BIDU) little Robin Li is at it again trying to steal another idea from elder brother Google (Nasdaq: GOOG). This time Chinese media are reporting the chairman and founder of China’s Google knock-off is planning to enter the ultra competitive mobile OS business, going head-to-head with the likes of Google’s very popular Android system and Apple’s (Nasdaq: AAPL) popular OS for iPhones. (Chinese article) To put it bluntly, this effort sounds almost as ludicrous as earlier reports that Chinese computer giant Lenovo (HKEx: 992) was also developing an OS to use in its mobile phones. I say “almost” because at least Baidu does have some experience in software development, while Lenovo has little or none. Still, given its very late arrival to the scene, coupled with the fierce competition in this space and its poor track record at anything outside its core search business, Baidu’s attempt in this area is almost doomed to failure from the start.
Bottom line: Any attempt by Baidu to develop a mobile OS could cost it tens or even hundreds of millions of dollars, and will quickly end in failure.
There’s an interesting report in today’s China Daily saying steel titan Baosteel (Shanghai: 600019) is taking its first small step outside China with plans to build a beverage can factory in Vietnam to better serve the thirsty Southeast Asia market. Details in the report, citing an unnamed senior official, are thin, except for the factory’s location. But this is exactly the kind of move that Baosteel and other expansion-minded Chinese firms need to make it they want to become global players. Vietnam is close enough to home to be comfortable for Baosteel, and it’s a developing market similar to China’s own. What’s more, Baosteel already operates a similar plant making cans in China for Pepsi (NYSE: PEP) and Coke (NYSE: KU), two beverage giants that can provide valuable support in a new market like Vietnam. I’m guessing initial investment in this plant is probably small, but it’s easily expandable and is exactly the kind of investment that could yield handsome returns for Baosteel in the next few years.
Bottom line: Baosteel’s move into Vietnam is a smart first step outside China that should yield strong returns in the next few years and serve as a springboard into other global markets.
There are a couple of tidbits coming from ZTE (HKEx: 763; Shenzhen: 000063), both of which hint at pressure the company must be feeling from investors after posting results last week that showed sharply slowing growth. (English results; Chinese results). In the first piece of news, we learn that ZTE is launching a US portal: clearly a move aimed at making people believe it thinks it can crack this difficult market in the near future. In the second, Chinese media are reporting the company has fired its India chief (Chinese report), a clear response to the company’s weak performance lately in this once promising market. As I’ve said before, I do think ZTE will eventually crack the US market, though not for at least a year and possibly longer. India also looks tough, and it’s going to take more than firing one executive to revive its fortunes there. In the meantime, it’s also going to take more than this kind of news to revive ZTE’s bottom line, which looks set for more slow-growth for at least the next year.
Bottom line: ZTE’s superficial efforts to restart its growth won’t pay any dividends in the near-term.
There’s an interesting (and probably largely overlooked) press release out there saying that IT services provider VanceInfo (NYSE: VIT) has acquired Oracle’s (Nasdaq: ORCL) IT China consulting arm, a company called Bright Consulting, for a modest $700,000. Sure, that figure isn’t going to raise any eyebrows and Bright Consulting itself generated an equally modest $1.5 million in revenue last year, according to the press release. So why am I writing about this deal? For this reason: As the world’s largest maker of business software, Oracle has enormous resources that it can provide to little VanceInfo to help this Chinese firm boost Oracle’s presence in China. Clearly Oracle wasn’t gaining much traction in the consulting arena on its own, hence its wise decision to let a homegrown Chinese firm take over that part of the business. If this relationship works out, the future could indeed be bright for VanceInfo.
Bottom line: VanceInfo will reap handsome rewards from its new relationship with Oracle.
Telecom (NYSE: CHT; HKEx: 728) in the 3G space, awarded contracts to build trial networks for its TD-LTE technology in six or seven cities late last week. According to him, contract winners include the usual suspects, Huawei, ZTE (HKEx: 763; Shenzhen 000063), Nokia Siemens and Datang; one surprise may have come when global powerhouse Ericsson (Stockholm: ERICb) failed to make the cut, but that has yet to be confirmed. Regardless, the fact that China Mobile is pressing ahead with a major expansion of 4G trials shows it’s determined to bring TD-LTE to market sooner rather than later. I see a battle shaping up between them and the regulator, which is clearly more inclined to give the industry more time to get its 3G networks up and running before moving to 4G.
According to Chinese media, a rival named Rising is accusing Qihoo, which is raising up to $200 million with an NYSE listing, of tailoring its flagship Qihoo 360 Safe product to effectively lock out any other security software on a person’s PC once the 360 is up and running. (
This kind of hatchet job is exactly what Acer did when it bought Gateway’s PC business in the US, i.e. it bought the company for its name and distribution channels and then quickly dismantled the rest of it. That strategy seemed to work quite well in the US, so I suspect it could work equally well in China. Now Dell. It seems Michael Dell was in town for the ground-breaking of a new plant — Dell’s second in China — in Chengdu. (English article) I suppose this move shows Dell’s commitment to China’s hinterland, which of course is what Beijing wants as it tries to develop less affluent coastal areas. In an interview with China Daily, Michael Dell also said his company is shifting its China focus from the highly competitive consumer space back to the enterprise sector which made Dell so successful in the first place. Smart move, Michael.
It seems the media police, otherwise known as CCTV, has run an expose that caught one of Shanda’s units in the act. (
Since everyone is writing about Apple (Nasdaq: AAPL) and its new iPad these days, YCBB is going to jump on the bandwagon and give our quick take on things in China. Specifically, we noted with interest that China was NOT on the list when Apple announced the first 25 countries for the international launch of its latest hot product this week. (
to become successful in another related area. In this case I’m talking about Ctrip’s move from its original online hotel booking service into airline booking, which now makes up a big chunk of its business. Restaurants are sort of related to its two current mainstays, as travelers often want to find good places to eat. I also like Ctrip’s go-slow approach to adding new businesses, unlike other me-too Internet companies like Shanda (Nasdaq: SNDA) and Baidu (Nasdaq: BIDU), that keep venturing into new business areas every few months, mostly without success.
It seems that Baidu’s (Nasdaq: BIDU) little Robin Li is at it again trying to steal another idea from elder brother Google (Nasdaq: GOOG). This time Chinese media are reporting the chairman and founder of China’s Google knock-off is planning to enter the ultra competitive mobile OS business, going head-to-head with the likes of Google’s very popular Android system and Apple’s (Nasdaq: AAPL) popular OS for iPhones. (
except for the factory’s location. But this is exactly the kind of move that Baosteel and other expansion-minded Chinese firms need to make it they want to become global players. Vietnam is close enough to home to be comfortable for Baosteel, and it’s a developing market similar to China’s own. What’s more, Baosteel already operates a similar plant making cans in China for Pepsi (NYSE: PEP) and Coke (NYSE: KU), two beverage giants that can provide valuable support in a new market like Vietnam. I’m guessing initial investment in this plant is probably small, but it’s easily expandable and is exactly the kind of investment that could yield handsome returns for Baosteel in the next few years.
As I’ve said before, I do think ZTE will eventually crack the US market, though not for at least a year and possibly longer. India also looks tough, and it’s going to take more than firing one executive to revive its fortunes there. In the meantime, it’s also going to take more than this kind of news to revive ZTE’s bottom line, which looks set for more slow-growth for at least the next year.
There’s an interesting (and probably largely overlooked) press release out there saying that IT services provider VanceInfo (NYSE: VIT) has acquired Oracle’s (Nasdaq: ORCL) IT China consulting arm, a company called Bright Consulting, for a modest $700,000. Sure, that figure isn’t going to raise any eyebrows and Bright Consulting itself generated an equally modest $1.5 million in revenue last year, according to 
