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LaShou: On the Cusp of Implosion? 拉手网或已面临生死抉择

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New developments are happening rapidly at group buying leader LaShou, which appears to be on the cusp of a meltdown as it runs out of money in the brutally competitive sector. As many of us prepare for the May 1 Labor Day holiday that marks the start of spring, many who follow this company may be wondering if LaShou will still be in business by summertime. In the latest development of this fast evolving story, domestic media are reporting a mass resignation of many top LaShou executives in recent days, including its top regional managers in Shanghai and Beijing, as well as a vice president. (Chinese article) That exodus would come only days after the company reportedly cut 40 percent of its technical staff in what looks like a desperate attempt to conserve cash. (previous post) These kinds of drastic cuts and resignations may indeed save cash, but if they continue there may not be any company left to operate. The rapid series of events seems to point to a company in crisis, which has  been building for more than a year as a natural clean-up takes place in China’s overcrowded and unruly group buying space. LaShou made headlines a year ago when the company, then just 1 year old, raised a cool $100 million from a group of investors hoping it would become the next Groupon (Nasdaq: GRPN), the US company that pioneered the group buying concept. (previous post) Back then it was saying it wouldn’t make an IPO for at least the next 1 to 2 years. But then investor sentiment abruptly cooled toward the sector as competition heated up, leaving LaShou and many of its peers short of cash after most expanded rapidly earlier in the year. LaShou tried to raise new funds through a New York IPO last fall, but had to indefinitely postpone the plan after the US securities regulator reportedly voiced concerns about its accounting. The company was reportedly trying to relaunch its IPO in the last few weeks; but we have yet to see any public filings and if these latest reports are true I seriously doubt anyone will want to invest even if it does file for an IPO. Clearly things are happening rapidly now, which means we will probably see LaShou either close or merge with a rival in the very near future — in what would be the biggest consolidation move to date in the group buying space. A number of companies have already merged or are on the brink of closure, so LaShou certainly wouldn’t be the first in this latest trend, though it would certainly be the most dramatic. If I were betting, I would predict the chances of a merger are better than 50 percent, with a profitable rival like Dianping or even a non-group buying company like Baidu (Nasdaq: BIDU) or Tencent (HKEx: 700) stepping in to acquire the company for a very low price. Then again, there is also the very real chance that LaShou could close, though I would put that chance at 30 percent or less. Either way, I would be surprised if this company is still in business as an independent group buying site by the time summer arrives.

Bottom line: A new exodus of top executives at LaShou reflects an accelerating cash crunch, with an an acquisition of the company the most likely outcome within the next 1-2 months.

Related postings 相关文章:

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

◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速

◙ Investors Shun Struggling Groupon.cn, Yaodian100 投资者规避挣扎中的团宝网和耀点100

Retail: Tesco Goes Online, Perry Ellis in New JV 零售：乐购推出网购，派瑞•艾力斯成立合资企业

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Let’s start off this Friday before the long Labor Day weekend with a couple of retail items, one from British grocery giant Tesco (London: TSCO) in the online space and another from mainstream clothing maker Perry Ellis (Nasdaq: PERY), which is entering China with a new joint venture. The Tesco plan attests to the incredible popularity of buying things over the Internet in China. As an American living in China, I’ll be the first to say the growing Chinese fondness for buying things online is quite unlike anything I’ve ever seen in the west. Nearly anything can be ordered over the Internet these days, from a McDonalds (NYSE: MCD) hamburger to books, clothing and just about any other merchandise you can think of. Now Tesco will be adding grocery store items to that list, according to a media report citing a company spokeswoman. WalMart (NYSE: WMT) is also playing in the online grocery game through its investment in Yihaodian, while Carrefour (Paris: CA) is developing the space through a tie-up with a Thai partner. This kind of online service differs from many more traditional ones because deliveries take place very soon after an order is placed, and same-day delivery is essential. But the economics for this kind of initiative seem to work in China, thanks to its high population density and the fondness for shopping online to avoid the throngs of people and long lines at grocery stores. I would expect this kind of initiative to be quite successful if Tesco and other big names can execute their plans well, perhaps meaning trouble for smaller operators like Lianhua (HKEx: 980). The other retail news will see Perry Ellis form a joint venture with local partner China Outfitters (HKEx: 1146) to open new stores selling the US company’s Manhattan brand. (company announcement) The partnership will initially focus on big cities like Beijing and Shanghai, with the first store set to open by the end of this year. This tie-up looks a lot like another one announced last November by Gap (NYSE: GPS), another mainstream US retailer, which said it planned to have 15 stores in China by the end of its current fiscal year and 45 within a year of that. (previous post) The arrival of these more mid-range retailers reflects the emergence of a growing middle class in China, who like to enjoy higher quality products like fashionable clothing and pricey lattes from Starbucks (Nasdaq: SBUX) but don’t want to pay the big prices for luxury brands. Perry Ellis and the Gap are joining even bigger chains like H&M (Stockholm: HMb) and Uniqlo (Tokyo: 9983) in their China expansions, and I don’t really see any problems yet as this segment of the market is growing so quickly it can probably support quite a number of well-run players. Look for more similar mainstream foreign clothing chains to join this trend in the next couple of years, and also for possibly 1 or 2 to withdraw as they discover that a big market doesn’t necessarily guarantee success.

Bottom line: Tesco’s testing of online sales reflects the popularity of e-commerce in China, while Perry Ellis’ new joint venture reflects the big opportunity offered by a growing middle class.

Related postings 相关文章:

◙ E-Commerce: 360Buy Explores IM, Wal-Mart Gets Serious 京东商城内测即时通讯工具,沃尔玛有意控股一号店

◙ Gap’s China Plan: Chasing the Middle End Gap锁定中国中产阶层

◙ McDonalds, Carrefour Latest Targets in Consumer Assault 家乐福、麦当劳被中国政府“点名

New China Noise in iPad Dispute Bad for Apple 政府官员发表评论对苹果iPad之争不利

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The latest noise coming from the high-profile trademark dispute over the iPad name doesn’t look too good for Apple (Nasdaq: AAPL), whose assertion that it legally owns the iPad name in China is being undermined by comments from one of the few government officials to comment on the matter. I wouldn’t read too much into the comments, as China often engages in this kind of media-based debate to gauge public sentiment on less sensitive commercial issue. Still, the fact that a government official is making comments that appear to favor the plaintiff in the matter, in this case a near-bankrupt company called Proview, indicate that a ruling against Apple is a distinct possibility. Then again, the comments could also be a quiet pressure tactic to get Apple to negotiate, which it has reportedly been reluctant to do as it believes it will win the case and doesn’t want to appear to be getting blackmailed. Let’s look at the actual comments, which have a senior official from the State Administration for Industry and Commerce saying that Proview is the legal registrant of the iPad name in China. (English article) In fact, anyone who has followed this case closely already knows that this is true. Based on my understanding, Proview was obligated by a larger global agreement several years ago to transfer the iPad name to Apple in China, but then the transfer failed to take place for what may have been technical reasons. So now instead of honoring its previous obligations, Proview is taking advantage of the situation to try and get Apple to buy the iPad name again, only this time for a much bigger price. The whole case is taking place in a South China courtroom, where the judge is apparently trying to mediate the dispute to find a solution that will make everyone happy. But Proview lawyers have indicated that Apple doesn’t want to negotiate. The US tech giant has also used other channels outside the courtroom to make its case, including a recent visit to top leaders by Apple CEO Tim Cook, and its recent decision to withhold its latest iPad from China until the dispute is resolved. (previous post) This latest comment from the government official doesn’t really state anything new, but the fact the official made the comment at all means the government probably wants Apple to show a little more willingness to negotiate in the case and provide everyone with a face-saving compromise. If Apple refuses to do that, it could very well find the court ruling against it, meaning legal iPads may not be available in China — which now accounts for a fifth of Apple’s sales — for a long time.

Bottom line: The latest comments from a government official in the iPad trademark dispute may be aimed at pressuring Apple to negotiate a settlement in the case.

Related postings 相关文章:

◙ Apple Pressures Beijing With iPad Snub 苹果在华不售新iPad向中国政府施压

◙ Apple Feasts on China, Baidu Burps 苹果在华享受盛宴，百度盛宴停顿

◙ More Proview Empty Talk in iPad Dispute 唯冠寻求禁售新款iPad将是徒劳之举

 

IPOs: Fosun Pharma Tries Again, China Auto Stalls 上市：复星医药再次尝试，神州租车紧急暂停

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The prolonged winter for Chinese stocks listing overseas is clearly continuing, based on the latest IPO news that has seen one company delay its planned New York offering while another is making a second try at a Hong Kong listing. What’s perhaps significant in both of these cases is that neither company is a riskier tech start-up, and instead both come from mature industries with more dependable track records, meaning this IPO winter could be longer and deeper than many initially expected. The first development has seen auto rental specialist China Auto delay its already late New York IPO due to anemic demand; while the second has seen drug maker Fosun Pharmaceutical relaunch its own Hong Kong IPO after abandoning the deal last year. Let’s first look at China Auto, whose last-minute decision to delay its IPO should come as a surprise to no one. (Chinese article) Signs of trouble were already emerging earlier this week for what would have been the second offering this year by a Chinese firm in New York, where investor sentiment remains weak following a series of accounting scandals last year. Foreign media previously reported the offering, which initially hoped to raise up to $300 million when China Auto made its first public filing in January, was getting anemic demand and that buyers had ordered only half of the shares for sale just a day before the offering was set to price. I predicted the offering could ultimately raise around a quarter of its original target, and now it appears perhaps even that was an optimistic forecast. (previous post) In light of this latest delay, I wouldn’t be surprised if China Auto abandons the offering completely and waits for sentiment to improve. Meantime, Fosun Pharmaceutical has been approved to raise up to $800 million in a Hong Kong offering, according to numerous media reports. (English article) Anyone with a long enough memory might recall that Fosun Pharmaceutical originally filed to make a Hong Kong IPO worth up to $1 billion a little more than a year ago, but then never completed the plan. (previous post) No reason was ever given for the withdrawal of last year’s plan, which should have been attractive as it offered a window into China’s fast-growing health care industry. Clearly sentiment was much better at this time last year, so the fact that Fosun Pharma is relaunching its IPO in such a weak climate now probably reflects that it desperately needs cash. If that’s the case, look for this offering to also meet with weak demand, and for the company to ultimately raise far less than the $800 million it is targeting.

Bottom line: The latest IPO developments from China Auto and Fosun Pharma indicate the current winter for Chinese overseas IPOs could last for at least a few more months.

Related postings 相关文章:

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

◙ IPOs: China Auto Slashes, People’s Daily Marches Ahead IPOs:神州组车减，人民网启动

◙ Fosun Pharma Offers Window to China Healthcare Reform

Perfect World Plays On Brazil 完美时空开拓巴西市场

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China’s online game operators contending with a fiercely competitive home market are trying a number of tricks to bring back some excitement to their business and sluggish stocks, as evidenced by an interesting new overseas licensing deal from Perfect World (Nasdaq: PWRD). I previously applauded NetEase (Nasdaq: NTES) as one of the sector’s more interesting names for its ability to develop its own popular games, and now would similar kudos to Perfect World, which is looking beyond its home market with this new deal to offer one of its own self-developed titles in Brazil. (company announcement) The deal will see Perfect World license its new “Forsaken World” title to a local operator for unspecified terms. “Forsaken World” marks an interesting milestone for Perfect World, as it is one of the company’s first online games developed by a multinational team, which probably means a team led by managers from the US or Europe. That move sounds strikingly familiar to a similar one by rival The9 (Nasdaq: NCTY), which in December announced a landmark deal to offer “Firefall”, the first major title developed by its own recently acquired US-based team, to a Singapore company that planned to operate the game in several Southeast Asian markets. (previous post) While NetEase has been able to build its business by creating popular games based on Chinese themes such as the classic novel “Journey to the West,” such titles have relatively limited appeal outside China and thus can’t really be used to generate profits through licensing deals in other countries. By contrast, this new generation of Chinese-owned titles developed by Western-based teams has much bigger potential as such games typically are designed by teams with more international experience in creating games that can appeal in many markets. I also like the fact that both The9 and now Perfect World have chosen developing markets like Southeast Asia and Brazil to launch this new crop of titles developed by their international teams, as such markets tend to be less competitive than the West and the Chinese firms can also offer some expertise to their licensing partners in areas like technical operations and payments for these less developed markets. Investors seem to like this new, more international focus, bidding up The9 shares some 40 percent since it announced its Southeast Asia deal last year. Perfect World’s shares are also up about 30 percent over the same period, though it’s latest announcement didn’t do much to boost its stock, perhaps because the company is already one of China’s most outwardly focused online game firms. Still, this newer focus on developing titles with more international appeal should help both of these companies find stable growth over the longer term by giving them a dependable revenue source from licensing fees, helping them to diversify beyond their own crowded home market.

Bottom line: Perfect World’s new licensing deal in Brazil marks an important step in global diversification, a longer-term move that more Chinese online game operators need to take to survive.

Related postings 相关文章:

◙ Online Games: Where’s the Excitement? 中国网游企业增长有限

◙ The9 WoWs Wall Street With New Deal

◙ NetEase: Still a Gamer With WoW Renewal　　网易续签《魔兽世界》运营权

MoneyGram In Latest Financial Services Move 速汇金携手中行 提供汇款服务

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After years of watching the major global banks first pile into China only to more recently retreat, it’s refreshing to see a new wave of lower-key investments and tie-ups coming into the country again from second-tier players with more realistic expectations for the market. The latest in this string of lower-profile deals has MoneyGram (NYSE: MGI) signing a deal to provide its specialty money-transferring services through Bank of China’s (HKEx: 3988; Shanghai: 601988) more than 10,000 branches nationwide. (company announcement) The deal sharply expands a previous tie-up that had the pair offering MoneyGram’s services at a much smaller 240 Bank of China branches in Beijing, and is clearly targeted at the growing number of Chinese living overseas, who now send an estimated $57 billion home each year. The deal follows another similar expansion of a tie-up between MoneyGram and ICBC (HKEx: 1398; Shanghai: 601398), another of China’s top 4 banks, aimed at money transfers between Japan and China. Other interesting lower-key deals in recent months have included an investment in a domestic electronic payments company called Lianlian by American Express (NYSE: AXP) (previous post), and several major tie-ups between foreign banks with UnionPay, China’s operator of a financial settlements network similar to the Cirrus and Plus networks operated by MasterCard (NYSE: MA) and Visa (NYSE: V). PayPal, the electronic payments arm of online auctions specialist eBay (Nasdaq: EBAY) has also indicated it wants to delve further into China’s domestic e-payments market, stating very clearly on several recent occasions that it has applied for a new round of licenses soon to be offered for such services. (previous post). While names like MoneyGram, PayPal and even American Express aren’t as high-profile as the more familiar global banking giants, their quieter and relatively cautious advance is a refreshing and strong contrast to big names like Citigroup (NYSE: C), Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS), which have all recently  retreated from a market that all previously hyped as full of potential with its billion-plus consumers. Citi recently sold its long-held stake in a regional Shanghai bank, while Bank of America and Goldman have sold off most or all of their stakes in China Construction Bank (HKEx: 939; Shanghai: 601939) and ICBC, respectively. (previous post) Citi, Bank of America and Goldman were all quite bullish on China’s potential when they made their investments around 5-6 years ago; but since then they’ve discovered the tie-ups didn’t really help them to build up their China presence, and most finally sold their stakes to raise cash to bolster their balance sheets after the global financial crisis. I personally think these smaller, more targeted investments from the likes of MoneyGram, American Express and PayPal are much more realistic than the bigger headline-grabbing purchases of the big global banks, and would fully expect to see an acceleration in similar moves from other smaller global players in the next 2 years.

Bottom line: MoneyGram’s latest tie-up with Bank of China looks like a smart, targeted play at China’s financial services market, with more smaller, low-key deals likely in the next 2 years.

Related postings 相关文章:

◙ AmEx Chases E-Payments With Lianlian Link 美国运通联手中国连连集团

◙ Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票

◙ New UnionPay Tie-Up Boosts US Presence in IPO Run-up 中国银联携手US Bancorp 未来有望两地上市

Apple Feasts on China, Baidu Burps 苹果在华享受盛宴，百度盛宴停顿

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I’ll start off today with 2 earnings stories from companies moving in opposite directions: one from Apple (Nasdaq: AAPL), whose China sales have exploded on the back of its hugely popular iPhones, and the other from online search leader Baidu (Nasdaq: BIDU), whose rapid growth is showing signs of having peaked. Let’s look at Apple first as that’s the story that has the world buzzing the most, with the company reporting quarterly earnings that beat Wall Street forecasts and dispelled doubts that its popular iPhones and iPad tablet PCs were losing their appeal. (English article; Chinese article) China was the story within the story this time, with the Greater China region accounting for a whopping $7.9 billion of Apple’s sales for the quarter, or a fifth of its $39.2 billion in revenue. That huge figure came largely on the back of a 4-fold surge in iPhone sales. While the latest China numbers were huge, there’s every indication that they will continue to grow in the current quarter thanks to a new partnership with China Telecom (HKEx: 728; NYSE: CHA), the most aggressive of China’s 3 telcos, which began selling the iPhone in early March, or right at the end of the first quarter. (previous post) Apple had previously only sold iPhones in China through Unicom (HKEx: 762; NYSE: CHU), China’s second largest mobile carrier. Additional upside could come from settlement of an ongoing trademark dispute over the iPad name, which recently prompted Apple to delay selling the newest iPad model in China. (previous post) I would expect that dispute to be settled as soon as the end of the current quarter, paving the way for sale of the latest iPad in China as early as July or August. Meantime, Baidu has also just announced results that have failed to impress investors, who have bid down the company’s stock by around 10 percent in after-hours trading. Some are blaming the share sell-off on Baidu’s second-quarter outlook that was below market forecasts, but from my perspective the entire report looks relatively uninspired. (company announcement) The company said its profit and revenue both grew about 75 percent in the quarter from the previous year — figures that would look great for any other company besides Baidu. The profit growth is roughly comparable to a 77 percent profit jump in the previous quarter, although revenue growth slowed from the previous quarter’s 82.5 percent gain. Also slightly worrisome was one of the first negative growth figures I’ve seen from this company in its core advertising business, with Baidu reporting that revenue per online marketing customer fell 7.6 percent in the first quarter of this year versus fourth quarter levels. All of this indicates that an advertising slowdown that I’ve been predicting for the last 8 or 9 months is finally arriving, and that Baidu’s growth has peaked and will soon start to slow considerably.

Bottom line: Apple’s explosive China growth could accelerate on the back of a recent new iPhone deal and resolution of a trademark dispute, while Baidu’s growth appears to have peaked.

Related postings 相关文章:

◙ Apple Pressures Beijing With iPad Snub 苹果在华不售新iPad向中国政府施压

◙ Baidu Diversification Sputters With E-Commerce Flop 乐酷天将关停 百度电商战略再折戟

◙ Apple Bytes: Labor, a State Visit and Baidu 库克中国行猜想：他在下一盘很大的棋

Baidu Diversification Sputters With E-Commerce Flop 乐酷天将关停 百度电商战略再折戟

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Internet giant Tencent (HKEx: 700) might want to take a look at online search leader Baidu (Nasdaq: BIDU), as the former defends itself in a lawsuit accusing it of using its hugely popular QQ instant messaging platform to dominate other areas of the Internet. Just days after the opening of a trial in a Guangdong court accusing Tencent of abusing its QQ monopoly status, word has emerged that Baidu will close its latest e-commerce site, called Lekutian, less than 2 years after launching the service with Japanese e-commerce leader Rakuten (Tokyo: 4755). For anyone who has failed to miss the connection, my point is this: having monopoly status in one area of the Internet doesn’t necessarily guarantee success in other areas — a reality that Baidu illustrates after numerous failed initiatives outside its core search business. Let’s take a look at the facts first. Rakuten has said it will shutter Lekutian due to stiff competition in China’s overcrowded e-commerce space (English article), and a visit to the site reveals the closure will come this Friday. Confirmation of the closure comes after rumors had swirled for the last month over the future of the site, which Baidu and Rakuten launched with fanfare in 2010 just as more established e-commerce players like 360Buy and Dangdang (NYSE: DANG) were starting to raise hundreds of millions of dollars in new funds for aggressive expansions. Just 2 weeks ago, domestic media reported that Lekutian was making large layoffs and preparing for a major directional shift that would see it focus on its Japanese roots to offer more Japanese products. (previous post) The company denied the layoff reports though it did openly talk about the shift to a more Japanese flavor. Clearly Rakuten was having second thoughts about the shift even then, and has decided to shutter the business altogether, in what looks like a wise move to me that will inevitably see Baidu take yet another charge, probably in the tens of millions of dollars, when it announces its second quarter results in July. I say “another” charge, as this failure is hardly new for Baidu, which has yet to find success outside its core search business despite numerous attempts. Its first major e-commerce initiative, a service called You’a, never gained any traction and was later quietly folded into other services after the Lekutian venture was announced. Last year Baidu also quietly shuttered its Twitter-like microblogging service, which again failed to compete with rivals, including Sina’s (Nasdaq: SINA) wildly popular Weibo. (previous post) Baidu’s main overseas investment, a Japanese search site, has also been largely a flop, failing to gain much traction in that competitive market. All of these flops for a company with near-monopoly status in China’s lucrative online search market are all the more interesting in light of the Tencent trial, which began last week as the result of a lawsuit filed by Internet security software specialist Qihoo 360. (previous post) Qihoo alleged that Tencent used QQ’s near monopoly status in instant messaging to dominate other areas, such as the online game space. I would tend to agree with Qihoo’s argument that companies that dominate one space like Tencent do have an unfair advantage when developing related spaces, and should be legally restricted from using that advantage to stifle competition. At the same time, Baidu, which controls more than 70 percent of the online search market, the legal definition of a monopoly, certainly shows that just having domination in one area doesn’t guarantee success in others. I attribute Baidu’s lack of ability to parlay its search dominance into other areas to a general inability to execute new business plans, even though it clearly has many advantages over its rivals. At the end of the day, its inability to develop new businesses does work to Baidu’s advantage in one sense, since Qihoo and any other rivals will never accuse it of using its near monopoly status in search to unfairly dominate other areas of the Internet. But at the same time, its repeated failures to diversify also leave Baidu highly vulnerable to lawsuits from the anti-monopoly regulator itself, which has voiced dissatisfaction in the past and could easily take legal action to bring more competition to China’s online search market this year or next.

Bottom line: Baidu’s latest e-commerce failure reflects an inability to parlay its online search dominance into new areas, as it remains open to anti-trust action due to its monopoly in search.

Related postings 相关文章:

◙ Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？

◙ Baidu’s Strong Growth Underwhelms 百度业绩持续强劲增长将投资者期望抬升过高

◙ Baidu Dreams of Brazil 百度试水巴西

China Mobile Takes the Bus 中移动将在北京公交车内提供wi-fi网络

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Rather than delve into the latest lackluster results from China Mobile (HKEx: 941; NYSE: CHL), I’ll focus my latest look at China’s perennial laggard telco today on an interesting new initiative that is seeing the company launch wi-fi service on buses. But before I begin with the bus talk, I should at least mention quickly that China Mobile released its latest quarter results last Friday, which showed its profit continued to rise at an anemic rate, 3.5 percent to be exact, missing analyst expectations in the swansong earnings report under recently retired Chairman Wang Jianzhou. (company announcement; English article) Now that I’ve mentioned the boring results, which should come as a surprise to no one, let’s move on to the bus initiative that has seen China Mobile’s Beijing subsidiary team with the local bus operator to develop wi-fi access for commuters, starting with service on the capital’s perpetually congested second ring road. (English article) This latest  initiative is part of the company’s broader wi-fi plans announced last year to setting up 1 million hot spots by 2014, as it tries to create an interesting high-speed Internet offering to compensate for its inferior 3G product based on a problematic homegrown Chinese technology. (previous post) I said last year the ambitious wi-fi build-out was misguided, as hot spots are highly localized and thus far less reliable than a 3G product that can be accessed nearly anywhere in a major city. But that said, I really do like this latest bus initiative for several reasons, including the fact that it’s quite creative and unlike anything I’ve seen before. But creativeness aside, the main attraction of this product is that it could be highly appealing to the thousands and thousands of Beijing commuters who spend 2 hours or more on buses each day in their trips to and from work on the nation’s capital’s perpetually jammed streets. A hot spot in a coffee shop or convenience store isn’t all that interesting, as many such stores already offer their own wi-fi service for free. But no such services are available on most buses and subways, even though these forms of public transport are the place where many people spend their third biggest amount of time each day, behind only their homes and offices. What’s more, time spent on buses and subways is generally considered wasted or idle, making it perfect for people who want to read the latest news or play games with their friends over the Internet. The keys to this initiative’s success will be two-fold. Technology will be the most critical, as consumers won’t embrace this product if they continually lose their signals or have to battle slow Internet speeds. Second will be pricing. To succeed, this product will have to be priced significantly lower than existing 3G services — perhaps as little as half the price — since traditional 3G is more reliable and can also be used for voice calls. Still, despite these technological and pricing challenges, I have to commend China Mobile this time for an interesting initiative that shows it is trying to regain some of the ground it is fast losing to rivals China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU).

Bottom line: China Mobile’s new wi-fi bus initaitive looks like an interesting move with a 50-50 chance of success, targeting commuters with lots of idle time for web surfing.

Related postings 相关文章:

◙ China Telecom Joins Hot Spot Frenzy Wifi热潮兴起 中国电信与中国移动谁将胜出？

◙ China Mobile Wi-Fi Play Misguided 中移动：百万WiFi热点？

◙ 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

Luxury Cars Headed for Overheating 豪华车市场步入过热

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China’s luxury car sector is showing all the signs of overheating, as both domestic and foreign auto makers spend hundreds of millions of dollars to invest in a vast consumer market whose fast growth makes it increasingly vulnerable to bubbles in many areas. As the annual Beijing Auto Show begins this week, news has emerged that Nissan (Tokyo: 7201) plans to start production of its Infiniti cars in China, seeking to tap strong demand for luxury brands in the world’s largest auto market. (English article) Nissan’s plan comes just a week after US auto giant General Motors (NYSE: GM) announced a similar plan to produce its own luxury Cadillac brand in China. (previous post) Even domestic names are getting in on the act, with brands like Geely (HKEx: 175) and Chery making recent moves that indicate they want to enter the space. It’s easy to see why all the luxury brands are piling into China, where a growing number of affluent consumers are happy to pay big bucks to show off their newly wealthy status. After two years of breakneck growth fueled by government incentives, China’s broader auto market grew by an anemic 2.5 percent last year as the nation’s economy slowed due to global weakness and cooling measures by Beijing. Despite that slowdown, luxury car sales continued to boom, notching solid double-digit gains for the year. That growth has continued into the first quarter of 2012, even as the broader market contracted 3.4 percent in the same period. First-quarter sales for industry leader Audi (Frankfurt: VOWG) jumped 40 percent, while rival BMW (Frankfurt: BMW), the market’s second largest player, also notched healthy growth of 28 percent. While Cadillac and Inifiniti prepare to start local production, the existing luxury players are also all investing big money on their own expansions. Audi currently plans to more than double its annual capacity to 700,000 units per year from the current 300,000, and BMW is embarking on a similar plan that will see it spend 1 billion euros. Adding to the looming glut is Beijing, which has shown a previous inclination to protect domestic industries and to intervene in markets that appear to be overheating. Beijing showed its intentions for the luxury car space earlier this year when it published a preliminary list of approved models for purchasing by government departments – a big buyer of such vehicles for status-conscious officials. (previous post) In what came as a surprise to many, the list excluded all foreign brands, a huge exclusion for government agencies that now purchase $13 billion in cars a year. That provision was designed to help domestic automakers, but also provided a clear signal that Beijing wants to clamp down on luxury vehicle purchasing by government agencies as it seeks to address public perceptions of corruption and wasteful government spending. There’s every indication that demand won’t be able to keep up with the current breakneck expansion of capacity for the luxury car market, both due to natural limitations as well as this kind of government intervention. When that happens, the big automakers will quickly find they’ve spent hundreds of millions of dollars to build massive new capacity that could end up sitting idle for years until demand finally catches up with the current big wave of new investment.

Bottom line: China’s luxury car market is in the process of overheating, which will leave automakers with large amounts of excess capacity when the market slows over the next 2 years.

Related postings 相关文章:

◙ GM Discovers China Luxury Market — Finally 通用汽车在华投产凯迪拉克 亡羊补牢犹未为晚

◙ China Puts the Brakes on Luxury Cars 中国公务车拟告别豪华车

◙ Luxury Cars Zoom, But Who Profits?

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

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China’s displeasure at the ability of Twitter-like microblogs to quickly and efficiently spread rumors is heading into a new phase, with word that Beijing is ordering all search engines to stop including microblog posts in their results. (English article) Details are scant and there’s no official confirmation from Beijing, but the reports say an official at the Data Center of China Internet said on his own microblog that the move has been ordered by relevant government offices effective immediately, a move that would deal yet another blow to Sina (Nasdaq: SINA) as it tries to commercialize its wildly popular Weibo microblogging service. Weibo and its peers have had a difficult time these last few months, as Beijing tries to rein in this popular medium that allows anyone to say anything they want and see their messages instantly passed on to thousands of other subscribers, often leading to huge waves of protest or criticism of various social problems and government shortcomings. Late last year the government rolled out a new rule requiring all microblog users to register with their real names, in a bid to curtail rumor-mongering by people who could say anything they wanted with no fear of being identified. (previous post) More recently, the government ordered Weibo and another popular microblogging service operated by Tencent (HKEx: 700) to shut down part of their services after they helped to spread false rumors that army troops were entering Beijing amid the Communist Party’s latest internal power struggle. (previous post) This latest initiative, if it’s true, looks like just the latest step in the drive to reduce the influence of microblogs by making their messages unavailable to people using Internet search engines. While a large number of Weibo viewers get their news directly off Weibo itself, I suspect a large number of people also view Weibo posts as a result of web searches, as such posts are often indexed by the search engines. This latest initiative should have little effect on the search engines themselves, but could significantly reduce traffic to Weibo by halting all referrals from the search engines. That will come as the latest headache for Sina as it tries to commercialize Weibo, as the lower traffic volumes will make the service less attractive to advertisers that are one of the biggest potential revenue sources. If Beijing continues to impose more and more restrictions on Weibo like this, look for the service, once considered full of potential, to eventually wither and maybe even die in what would be a huge setback for Sina.

Bottom line: Beijing’s latest order banning microblog posts from search results is the latest setback for Sina’s Weibo, which is being by a growing list of government restrictions.

Related postings 相关文章:

◙ 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？

◙ Microblog Clampdown: Only Chapter 1? 实名制向网络行业吹去冷风