Bottom line: A potential future spin-off of Yum’s China operations looks like a good move that would give the new company more focus, while McDonald’s China franchising drive also looks good if it can find the right partners.
Investors eye spin-off for Yum’s China unit
China was once the hot story for fast food companies like KFC and McDonald’s (NYSE: MCD), as Chinese consumers flocked to the concept of reasonably priced food that was served quickly in attractive restaurants with friendly workers. But that story has become quite stale in recent years, leading this pair of global heavyweights to look for new China stories to pump up their local business and excite investors.
KFC has been trying to achieve that goal through a major overhaul of its China restaurants over the past year, and now is back in the headlines as some investors call for its parent, Yum Brands (NYSE: YUM), to split off its China operations into a separate company. Meantime, McDonald’s is trying to bring some excitement back to its China story by rapidly accelerating the expansion of its traditional franchised store model in the market. Read Full Post…
Bottom line: 3 new $100 million fundings reflect the recent popularity for Chinese tech and media start-ups among investors, pushing valuations up to unrealistic levels for these young companies that operate in mostly niche areas.
E Daijia wins big new funding
I can remember a time not long ago when $100 million seemed like a huge figure for start-ups raising new funds, and such amounts were quite infrequent. But in today’s overheated Chinese tech world, that figure is in 3 separate headlines this week, including 2 involving the hot area of location-based services (LBS). That pair of items has ride-sharing app Dida Pinche and mobile chauffeur app E Daijia each reaching the coveted $100 million mark in their third and fourth funding rounds, respectively. Meantime, the new sports unit of fast-rising video superstar LeTV (Shenzhen: 300104) has also just won its own $100 million in new funding, reportedly from one of China’s richest men. Read Full Post…
Bottom line: Lenovo has done remarkably well since defying skeptics with its landmark IBM PC buy a decade ago, and could stand a 50-50 chance of remaining relevant a decade from now in the fast-changing world of high-tech gadgets.
Lenovo celebrates a decade since landmark IBM buy
Global PC leader Lenovo (HKEx: 992) is commending itself on how far it has come since its landmark purchase of IBM’s (NYSE: IBM) PC business 10 years ago, setting it on a path that has made it the world’s top computer seller. (company announcement) I’ll admit I was a skeptic at the time of the IBM deal in 2005, and have become much more bullish on Lenovo since then. Still, the company hasn’t completely convinced me that it has the necessary skill and vision to move past its global PC crown, which is fast becoming yesterday’s news as traditional computers rapidly lose ground to newer devices like smartphones and tablets.
Before I look at the challenges that Lenovo is facing, I want to start by personally congratulating the company on its huge accomplishments over the last decade since it announced it would purchase IBM’s storied PC business for $1.25 billion. I and many others predicted at the time that Lenovo could stumble badly with the move, since it had no experience at running such a major foreign business that was clearly in decline and need of restructuring. Read Full Post…
Bottom line: LeTV’s new smartphones should generate major buzz when they go on sale this weekend and could easily sell 1 million units in their first 3-4 months, challenging domestic “cool” incumbent Xiaomi.
LeTV takes pre-orders for new smartphones
Smartphone sensation Xiaomi has emerged as one of China’s hottest tech names in the last few years with its cool and trendy image, focusing its sights largely on global leaders Samsung (Seoul: 005930) and especially Apple (Nasdaq: AAPL) as it looks for a place on the global stage. But this globally-minded company could soon have to watch its back as well, with the recent meteoric rise of LeTV (Shenzhen: 300104) as the newest hipster in town.
LeTV went largely unnoticed for the first part of its life, when it was mostly an Internet-based provider of video content similar to YouTube. But it has zipped into the spotlight over the last year, first as it posed a serious challenge to China’s traditional broadcasters and now as it rolls out its own new line of smartphones. Read Full Post…
Bottom line: A deal designed to avoid punitive tariffs on Chinese solar panels exported to Europe is rapidly collapsing, with new anti-dumping tariffs likely to be imposed by the end of the year.
New clouds loom in EU-China solar war
A looming clampdown on Chinese solar panels in Europe is rapidly accelerating, with word that the EU will review part of a landmark 2013 agreement that initially helped to prevent a trade war but is showing rapid signs of unraveling. The case centers on the prices of Chinese solar panels, which are typically much lower than their western counterparts due to a wide array of Beijing policies to support the sector.
The US levied punitive tariffs on Chinese panels to address the situation. The EU was set to do the same when several top politicians stepped in and pushed both sides to reach a compromise deal to avoid such action. That deal saw the Chinese manufacturers agree to raise their prices to levels comparable to products from the west. But no sooner did the deal take effect, then the Chinese companies began undermining the agreement by finding ways to secretly refund money to their European customers. Read Full Post…
Bottom line: Citic Capital and Fosun are expanding their tastes beyond the traditional Chinese preference for distressed assets, reflecting growing sophistication and diverging strategies of China’s emerging private equity buyers.
Citic Capital in group buying OmniVision
Chinese private equity is in a few major headlines this week, picking up assets in the technology, insurance and retail sectors in the US and Japan. The wide range of deals and geographies reflects the diverging strategies of some of China’s emerging private equity giants, which are rapidly developing their own individual personalities on the global stage. Citic Capital is behind 2 of the latest deals, picking up a retail asset in Japan and a US company that specializes in imaging technology. Meantime, Fosun International (HKEx: 656) has made a major new purchase in the US, offering to buy the remaining stake in an insurer that it first invested in last year. Read Full Post…
Bottom line: Gree’s launch of a smartphone line is far too late and could signal the start of a major shake-out for the sector, while ZTE’s move into Japan will be tough but could reap big rewards if it can gain traction.
Gree starts shipping smartphones
You know China’s smartphone market is due for a major correction when a stodgy home appliance maker like Gree (Shenzhen: 000651), better known for its air conditioners, enters the market. But that’s exactly what’s happened, in a move that has the word “dud” written all over it. Meantime, the more established smartphone maker ZTE (HKEx: 763; Shenzhen: 000063) is making a risky but wiser move by targeting the lucrative but often ignored Japanese market, as it looks for growth alternatives outside a Chinese market that is the world’s largest for smartphones but also incredibly competitive. Read Full Post…
Bottom line: A new e-commerce joint venture by Japan’s Itochu and Thailand’s CP Group marks the latest major advance for China’s fledgling free trade zone program, whose policies should eventually expanded to the entire country.
Itochu forms new venture in Shanghai FTZ
China’s fledgling Free Trade Zone (FTZ) program got a new boost last week when a group of corporate giants from Japan, Thailand and China announced a major new retailing joint venture in the original zone in Shanghai. That news came just a week after a major expansion of the Shanghai zone, and the announcement of a plan for 3 additional FTZs in other parts of China.
This sudden expansion of the FTZ program is a welcome development for the many private companies whose growth plans have been stymied for years by China’s huge bureaucracy. That group includes not only big multinationals like Amazon (Nasdaq: AMZN) and HSBC (HKEx: 5; London: HSBA), but also a growing number of homegrown private giants like JD.com (Nasdaq: JD) and Alibaba (NYSE: BABA), which also harbor global aspirations. Read Full Post…
Bottom line: The revocation of global certification for Qihoo’s security software by 3 European bodies will undermine the company’s credibility and hamper its drive to go global, putting pressure on its stock for the next few months.
European bodies revoke Qihoo accreditation
Security software specialist Qihoo 360 (NYSE: QIHU) is finding itself in the middle of a global scandal, with word that several European accreditation bodies have refused to certify its core security software products due to the company’s misleading business practices. The case comes as an embarrassment to Qihoo, which is used to and largely ignores such scandals when they occur in its home market where such practices are relatively common.
But as Qihoo and its peers attempt to go global, they are quickly discovering that many of the things they do at home fall well below the standards set by global bodies, especially in the west. That won’t be too helpful for Chinese tech giants like Qihoo, Baidu (Nasdaq: BIDU), Xiaomi and Alibaba (NYSE: BABA), which are all trying to show the world and investors that they can compete outside their highly protected home market where standards are often a bit lower than in the west. Read Full Post…
Bottom line: Tsinghua Unigroup is likely to win the bidding for a controlling stake in HP’s China-based networking equipment unit, and could help HP consolidate its place as one of China’s leading IT service providers.
Bidding war breaks out for HP asset sale
Hewlett-Packard (NYSE: HPQ) is finding itself in a rare position of power in China, with word that an unusual bidding war has broken out as it looks for a partner to buy a controlling stake in its locally-based networking equipment unit. The development could bring not only a windfall in terms of money HP will get for its H3C Technologies unit, but will also allow it to choose between 2 potent partners to help consolidate its place as one of China’s leading IT services providers.
HP is in the process of splitting itself into 2 as part of a broader restructuring announced last fall. In this case the China-based H3C networking equipment venture would almost certainly go into its new HP Enterprise unit, focused on products and services for corporate customers. The other main unit under the break-up will include HP’s older PC and printer businesses, which will go by the name HP Inc. Read Full Post…
The following press releases and media reports about Chinese companies were carried on May 1-4. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
Walmart (NYSE: WMT) To Boost Sam’s Club China Stores By 60 Pct Over 3 Years (Chinese article)
WuXi PharmaTech (NYSE: WX) Announces Receipt Of Buyout Proposal (PRNewswire)
Itochu, CP Group In E-commerce Venture With Chinese Firms In Shanghai FTZ (English article)
ZTE (HKEx: 763) Taps Japan To Help Sell 60 Mln Handsets Globally (English aritcle)
‘Cheating’ Chinese Antivirus Firm Qihoo 360 (NYSE: QIHU) Blames Cultural Differences (English article)
