Foot-dragging by China’s anti-trust regulator as it considers Nokia Siemens Network’s $1.2 billion bid for Motorola’s (NYSE: MOT) networking business has the fingerprints of China’s top two networking equipment makers, ZTE (HKEx: 763; Shenzhen: 63) and particularly Huawei, all over it. NSN just announced yet another delay for its Motorola purchase pending a drawn-out approval process by Chinese regulators. (English article) Such foot-dragging seems to have become the modus operandi for the regulator, which has developed a habit of delaying whenever it sees a deal it doesn’t like for whatever reason, and eventually letting such deals die on the vine with little or no explanation. Recent losses of major U.S. deals for both Huawei and ZTE are no doubt stoking the Chinese regulators’ ill feelings towards the NSN-Motorola deal, and an ongoing Huawei lawsuit against Motorola likely isn’t helping the matter. Of course, all of this is politics and has little or nothing to do with the anti-trust functions the regulator is supposed to fulfill. If this is a sign of things to come, China is sure to come under fire for its growing willingness to block global m&a under a process that is completely opaque and smacks of politics.
VERDICT: China will drag its feet on this one but will ultimately approve it or risk facing the wrath of governments in both the U.S. and Europe.
After numerous false starts in its journey to market, e-commerce site Dangdang (NYSE: DANG) finally seems to have hit its stride and is showing no signs of fading, at least not based on its latest results and guidance for the first quarter. (results release) The company, forever an IPO wannabe until it finally took the plunge last year on the NYSE, posted strong growth in revenue and profit in 2010, with the exception of fourth-quarter profit which actually fell for unspecified reasons related to “promotional costs”. But overlooking that for now, the company is also forecasting 50 percent revenue growth in the first quarter. Unlike some other companies, Dangdang isn’t giving outlook for the full year, which is probably wise considering the volatile situation in China as Beijing tries to cool the economy. But for the most part, these guys seem to have gotten the formula right, and could well end up becoming China’s Amazon (Nasdaq: AMZN) and even challenging Alibaba Group’s Taobao, which has suffered a blow to its prestige recently after is Alibaba.com (HKEx: 1688) CEO resigned due to fraudulent vendor activities.
VERDICT: Dangdang looks like one of the best plays out there into China e-commerce right now
U.S. listed Chinese companies issued the following releases on March 10. To view the full releases, go to www.prnewswire.com and enter the company’s name in the search box.
** Dangdang (NYSE: DANG) Announces Fourth Quarter and Fiscal Year 2010 Results
** China Ming Yang Wind Power (NYSE: MY) Reports Fourth Quarter And Fiscal Year 2010 Results
** China Lodging Group (Nasdaq: HTHT) Reports Fourth Quarter and Full Year 2010 Financial Results
** Yingli Green Energy (NYSE: YGE) to Host Mathare Football for Hope Center ‘Switching On’ Ceremony
So, now we hear that Sogou, Sohu’s (Nasdaq: SOHU) search engine wannabe, is losing money hand over fist, while Shanda Interactive (Nasdaq: SNDA), which can’t decide exactly what it wants to be, may be mulling a foray into online group buying similar to U.S. phenomenon Groupon. First Sogou, whose Chinese name, which translates to “search dog”, may be closer to the truth than it realizes. Sohu has been trumpeting this venture for five years now, and yet after all that time it has yet to take a significant bite out of the search market, still dominated by Baidu (Nasdaq: BIDU) and lost $27 million last year, even more than its $20 million loss the year before (English article). Meantime, other media reports are saying Shanda has purchased a Web address that translates to “group discount”, leading many to speculate the comany may be preparing to enter this business. (English article) Come on, guys. Sohu may have made a good move into online games a few years back with Changyou (Nasdaq: CYOU), but it needs to read the writing on the wall with Sogou, which has morphed into a money eating machine. Likewise with Shanda, group buying sites have become the flavor of the day in China, and there’s no indication whatsoever that Shanda has what it takes to compete with Groupon or any other big guns that have launched China group buying sites.
Budget hotel operator 7 Days (Nasdaq: SVN) has just released its fourth-quarter results and 2011 outloook (results release), and I have to say it looks a bit zippier than industry leader, Home Inns (Nasdaq: HMIN), which reported last week (results release). Whereas Home Inns posted growth mostly in the 10-25 percent range and forecast similar numbers this year, 7 Days is seeing growth more in the 30-plus percentage range. Part of the difference certainly comes from size, as 7 Days is coming off a smaller base. Home Inns also tends to be more conservative, though that can’t explain the difference in historical numbers from 2010. I’ve previously disclosed that I own some shares in Home Inns, as they’re the sector leader and I do like this sector. But perhaps the more up-and-coming 7 Days, which plans to open 290 hotels this year,versus the 270 new hotels planned in 2011 for Home Inns, might make the former a better bet for growth-minded investors. Then again, many a company has stumbled on overly aggressive expansion.
Since I’m writing this from a Starbucks (Nasdaq: SBUX) in Shanghai, I figured I’d start the day with a posting on the ubiquitous coffee chain’s plans for a major expansion in China — and its chances for success. The China Daily reports that Starbucks, following in the footsteps of other big global names like Nokia (Helsinki: NOK1V) and Dell (Nasdaq: DELL), is preparing to blaze a trail into China’s 2nd and 3rd tier cities, with plans to open 1,500 new stores by 2015. This kind of hyper expansion sounds very typically Starbucks, and its success or failure will depend highly on getting the recipe right for cities that are far more cost sensitive than Beijing or Shanghai. The report says Starbucks will develop more cakes and tea drinks as part of the drive, presumably to better suit smaller town tastes and wallets. Let’s face it: people go to these stores as much as a social thing as they do for the food, so there’s no reason people in smaller towns won’t want to socialize. The main issue will be getting the price right, as no one in these towns will want to spend a third of their monthly paycheck simply for the right to socialize.
U.S. listed Chinese companies issued the following releases on March 9. To view the full releases, go to www.prnewswire.com and enter the company’s name in the search box.
** Suntech (NYSE: STP) Reports Fourth Quarter and Full Year 2010 Financial Results
** 7 Days Group (NYSE: SVN) Announces Unaudited 2010 Fourth Quarter and Full Year Financial Results
Just two weeks after US electronics powerhouse Best Buy (NYSE: BBY) pulled the plug on its namesake stores in China, toy giant Mattel (NYSE: MAT) is doing the same for its flagship House of Barbie store in Shanghai, leaving its leading doll as the latest casualty in the China retail market. (English article; Chinese article) While these two cases do reflect the cutthroat nature of China retail, Mattel’s pullback also shines a spotlight on what the Chinese are and aren’t willing to spend their hard-earned money on when it comes to big brands. While they’re willing to fork over hundreds or even thousands of dollars for that latest Gucci or Louis Vuitton bag or Longines watch, toys for the youngsters are quite a different matter. In fact, to my limited knowledge there are no “designer” toy brands in China yet, which shows where many parents’ minds are when it comes to their kids: they would rather spoil them with little emperor designer clothes or tutoring lessons at a nearby cram school than the latest designer doll or model car. If those trends continue, it could be a while still before Barbie or any other premium toy makes significant headway in China.
Lenovo’s (HKEx: 992) name may contain the Latin word for “new”, but this company’s me-too strategy is showing it is hardly an innovator worthy of its position as the world’s fourth biggest PC seller. In the latest case of its follower approach, the company announced its going to launch the LePad 2, an updated version of its tablet PC. Uh, does this sound just a tiny bit familiar to anyone? If they’re going to so blatantly follow tablet PC leader Apple (Nasdaq: AAPL), at least they could wait more than a week after Apple’s big iPad 2 announcement to announce their own latest me-too product. I do like the fact that Lenovo is trying to develop its own “Le” line of products, including LePads and LePhones, to become more diversified in keeping with the times. But again, just take out the “Le” and substitute an “i” and … you get the picture. What’s more, the Apple products have a huge following in China, where Lenovo derives half of its revenue, while the Le monniker leaves most people scratching their heads. If Lenovo really wants to have a serious future in the global computing business, it’s going to have to step up its game a notch.
Let’s start the day with a look at online game operator Perfect World (Nasdaq: PWRD) which blitzed the market overnight with not one but three announcements on 1) it’s far-from-perfect fourth-quarter results; 2) a $100 million share buyback; and 3) new agreements to license some of its upcoming games to companies in Vietnam and Thailand. (results announcement) The Q4 numbers were hardly encouraging, with revenue and profit both dipping, reminiscent of what we’ve seen from other leaders in the past like Shanda (Nasdaq: SNDA) and The9 (Nasdaq: NCTY). Whereas the former has bounced back somewhat after it found some new big titles, the latter has largely languished since losing its hit (borrowed) World of Warcraft franchise. Perfect World would have us believe it is poised for comeback with a stream of new self-developed titles coming up, and I do like it’s proactive strategy of looking to license those titles to outside operators sooner rather than later to diversify its revenue. Its $100 million buyback is another bet that it believes it is poised for comeback. I’d say it’s certainly worth giving them a chance, though perhaps just for this year, to see if they can bring a little more perfection back to their ailing top and bottom lines.
U.S. listed Chinese companies issued the following releases on March 8. To view the full releases, go to www.prnewswire.com and enter the company’s name in the search box.
** Bristol-Myers Squibb and WuXi PharmaTech (NYSE: WX) Announce Collaboration for a New Analytical and Stability Testing Facility
** Home Inns (Nasdaq: HMIN) Reports Fourth Quarter and Full Year 2010 Financial Results
** Perfect World Announces Fourth Quarter and Fiscal Year 2010 Unaudited Financial Results
** Perfect World (Nasdaq: PWRD) Announces Share Repurchase Program
** Youku (NYSE: YOKU) Upgrades Fingerprinting System for Tougher Copyright Protection Measures
** Perfect World (Nasdaq: PWRD) Announces Recent Business Developments
** Youku (NYSE: YOKU) Joins Broad Coalition in Support of UGC Principles
Chinese regulators’ ill feelings towards the NSN-Motorola deal, and an ongoing Huawei lawsuit against Motorola likely isn’t helping the matter. Of course, all of this is politics and has little or nothing to do with the anti-trust functions the regulator is supposed to fulfill. If this is a sign of things to come, China is sure to come under fire for its growing willingness to block global m&a under a process that is completely opaque and smacks of politics.
After numerous false starts in its journey to market, e-commerce site Dangdang (NYSE: DANG) finally seems to have hit its stride and is showing no signs of fading, at least not based on its latest results and guidance for the first quarter. (
So, now we hear that Sogou, Sohu’s (Nasdaq: SOHU) search engine wannabe, is losing money hand over fist, while Shanda Interactive (Nasdaq: SNDA), which can’t decide exactly what it wants to be, may be mulling a foray into online group buying similar to U.S. phenomenon Groupon. First Sogou, whose Chinese name, which translates to “search dog”, may be closer to the truth than it realizes. Sohu has been trumpeting this venture for five years now, and yet after all that time it has yet to take a significant bite out of the search market, still dominated by Baidu (Nasdaq: BIDU) and lost $27 million last year, even more than its $20 million loss the year before (
comany may be preparing to enter this business. (
this year, 7 Days is seeing growth more in the 30-plus percentage range. Part of the difference certainly comes from size, as 7 Days is coming off a smaller base. Home Inns also tends to be more conservative, though that can’t explain the difference in historical numbers from 2010. I’ve previously disclosed that I own some shares in Home Inns, as they’re the sector leader and I do like this sector. But perhaps the more up-and-coming 7 Days, which plans to open 290 hotels this year,versus the 270 new hotels planned in 2011 for Home Inns, might make the former a better bet for growth-minded investors. Then again, many a company has stumbled on overly aggressive expansion.
Since I’m writing this from a Starbucks (Nasdaq: SBUX) in Shanghai, I figured I’d start the day with a posting on the ubiquitous coffee chain’s plans for a major expansion in China — and its chances for success. The China Daily reports that Starbucks, following in the footsteps of other big global names like Nokia (Helsinki: NOK1V) and Dell (Nasdaq: DELL), is preparing to blaze a trail into China’s 2nd and 3rd tier cities, with plans to open 1,500 new stores by 2015. This kind of hyper expansion sounds very typically Starbucks, and its success or failure will depend highly on getting the recipe right for cities that are far more cost sensitive than Beijing or Shanghai. The report says Starbucks will develop more cakes and tea drinks as part of the drive, presumably to better suit smaller town tastes and wallets. Let’s face it: people go to these stores as much as a social thing as they do for the food, so there’s no reason people in smaller towns won’t want to socialize. The main issue will be getting the price right, as no one in these towns will want to spend a third of their monthly paycheck simply for the right to socialize.
Shanghai, leaving its leading doll as the latest casualty in the China retail market. (
showing it is hardly an innovator worthy of its position as the world’s fourth biggest PC seller. In the latest case of its follower approach, the company announced its going to launch the LePad 2, an updated version of its tablet PC. Uh, does this sound just a tiny bit familiar to anyone? If they’re going to so blatantly follow tablet PC leader Apple (Nasdaq: AAPL), at least they could wait more than a week after Apple’s big iPad 2 announcement to announce their own latest me-too product. I do like the fact that Lenovo is trying to develop its own “Le” line of products, including LePads and LePhones, to become more diversified in keeping with the times. But again, just take out the “Le” and substitute an “i” and … you get the picture. What’s more, the Apple products have a huge following in China, where Lenovo derives half of its revenue, while the Le monniker leaves most people scratching their heads. If Lenovo really wants to have a serious future in the global computing business, it’s going to have to step up its game a notch.
