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Amazon Name Shift Signals China Ramp-Up 亚马逊改名背后折射中国野心

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It’s difficult to read too much into a simple name change, but US e-commerce leader Amazon’s (Nasdaq: AMZN) decision to rebrand its China operation as Amazon China, combined with the opening of a major new facility, appears to signal a major ramp-up in its Chinese business. If true, that could mean bad news for established players like Dangdang (NYSE: DANG), 360Buy and Alibaba’s Taobao Mall, as Amazon has far more resources than most of these Chinese companies and, unlike most of them, is quite profitable. But let’s look at the news first. Domestic media are reporting that more than 5 years after purchasing Chinese online merchant Joyo.com, Amazon has finally decided to rebrand the company as Amazon China, from its previous name of Joyo Amazon. (English article) Amazon is making the change as it opens its 10th China facility, a massive 120,000-square-meter warehouse in the city of Kunshan, near Shanghai and within easy driving distance of hundreds of millions of consumers in the affluent Yangtze River Delta area. The new facility increases Amazon’s warehouse space in China by almost 50 percent, and quadruples its space in the Yangzte River Delta area. That kind of rapid ramp-up, combined with the name change, strongly indicate the company is planning a major boost in its China operations, just as the market appears to be getting overheated with rampant competition from a big field of young start-ups like 360Buy, which wants to make a multibillion-dollar IPO to recoup some of the $1 billion-plus in investor dollars it has received to date. (previous post) Amazon’s timing also looks good with regard to Taobao Mall, one of the few profitable companies in the space, which is going through a credibility crisis after many of its smaller merchants rebelled following a steep fee hike. (previous post) All that said, look for Amazon, riding high on the popularity of its Kindle e-readers and newly launched tablet PCs, to become an increasingly hot name in the China e-commerce space over the next 2 years at the expense of existing players.

Bottom line: Amazon’s rebranding of its China business and opening of a major new facility indicate a coming ramp-up of its Chinese business, further heating up the ultra-competitive market.

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

◙ Albaba Faces New Assaults From Merchants, 360Buy 阿里巴巴受到中小商户和京东商城的双重夹攻

◙  More Internet Froth in Alibaba Valuation, Dangdang Price War 阿里巴巴估值奇高凸显网络泡沫

Baidu, ZTE Earnings: More of the Same 百度和中兴财报：看上去没变化

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Chinese firms are flooding the market with third-quarter results, with industry bellwethers Baidu (Nasdaq: BIDU) and ZTE (HKEx: 763; Shenzhen: 000063) both reporting figures that show continuation of recent trends. First Baidu, which reported a healthy rise of around 80 percent in both revenue and profit, as it banked on strong demand for ads on its search site, China’s dominant player with more than two-thirds of the market. (company announcement) Baidu further predicted that revenue will continue to grow at similar rates in the fourth quarter, as healthy demand continues. I previously predicted a sharp slowdown in ad spending could be looming as a much-needed correction looms for China’s overinflated Internet bubble, but clearly Baidu is seeing no signs of that yet. I still think such a correction is coming, and will hit Baidu’s top and bottom lines when it does; but despite signs of trouble from the group buying sector and some e-commerce firms, we won’t see the first real signs of a downturn until the first or most likely the second quarter of next year. As to ZTE, the company also reported third-quarter revenue grew at a healthy 37 percent, accelerating from the first half of the year as it focused on building up its cellphone business, which was up more than 50 percent in the first 9 months of 2011. (Chinese article) But while revenue rose, its third quarter profit fell by nearly 40 percent, also accelerating from the first half of the year, as it continued its risky strategy of grabbing global market share for its handset business by selling its low-end smartphones at prices near or perhaps even below its costs. This strategy could work in the end if ZTE can raise its prices after it gains market share. But it could also backfire if consumers come to associate the company with cheap products and aren’t willing to pay a premium for its cellphones. The company’s heavy reliance on Google’s (Nasdaq: GOOG) Android smartphone operating system also puts it at risk of potential lawsuits from Apple (Nasdaq: AAPL), which has already files similar suits against some other major cellphone makers.

Bottom line: The latest Baidu and ZTE results show continuation of recent trends, though the former remains at risk due to a possible Internet bubble, and the latter from a risky expansion strategy.

Related postings 相关文章:

◙ Baidu Mobile OS, Homepage Revamp Look Like Dicey Bets 百度新举措旨在冒险一搏

◙ Low-Cost Apple iPhone to Bite ZTE, Lenovo 苹果推低端iPhone 冲击中兴和联想

◙ ZTE Gambles With Smartphone Share Grab 中兴通讯押注智能手机业务

Little Sheep Left Waiting at Regulator’s Door 小肥羊仍在监管机构大门外苦等

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More than half a year after announcing its plan to purchase top Chinese hot pot chain Little Sheep (HKEx: 968), Yum Brands (NYSE: YUM), owner of the KFC and Pizza Hut chains, has learned it will have to wait just a bit longer for the anti-monopoly regulator’s decision on the deal — an potentially ominous sign for a regulator that has shown a past tendency to consider nationalistic elements alongside commercial ones in such deals. But at the end of the day, the fact that the regulator hasn’t vetoed this deal yet indicates some debate is probably taking place in the organization, and I still think the chances of an approval are greater than 50 percent, especially as China tries to show its commitment to fair trade in light of US Congress legislation that would punish Beijing for manipulating its currency. According to a new statement filed by Little Sheep to the Hong Kong Stock Exchange, the initial 30 day period for China’s Commerce Ministry to consider Yum’s purchase, worth some $500 million, ended on July 27. (company announcement) The ministry elected to extend that period by another 60 days, which again ended on September 27. Still lacking a final determination, the regulator again exercised its final option for another 60 day extension, meaning a final decision should come by late November. So what does all of this mean? Shareholders clearly don’t think it bodes well, bidding down Little Sheep stock by 12 percent to HK$5.39, or 17 percent below Yum’s offer price of HK$6.50 after the announcement. From a monopolistic standpoint, Yum is clearly China’s largest restaurant operator and would add to that position, but only slightly, by buying Little Sheep. But based on past behavior, I suspect nationalistic concerns are more at play here, as Little Sheep is China’s biggest hot pot chain and a promising home grown brand. Still, I think that at the end of the day fair trade advocates at the Commerce Ministry will win out to their nationalistic peers in this decision, as China seeks to show the world it is willing to play by global rules, and we should see an approval of this deal just before the late November deadline.

Bottom line: Delays in government clearance for Yum’s pending purchase of Little Sheep indicate internal debate at the anti-monopoly regulator, but the deal should finally get a green light next month as China tries to show its commitment to fair trade.

Related postings 相关文章:

◙ Yum China: Little Sheep Getting Tangled in Trade Friction? 百盛收购小肥羊案卷入中美贸易摩擦？

◙ Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊

◙ China’s Heavy Hand Leaves Investors Wary on YUM’s Little Sheep Buy 百胜难吞小肥羊

Nokia Looks For Fresh China Start With New Country Chief 诺基亚中国区新官欲扭颓势

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The struggling Nokia (Helsinki: NOK1V), which once dominated China’s cellphone market, is looking to rekindle excitement there not only with new smartphones using Microsoft’s (Nasdaq: MSFT) Mango operating system, but also a brand new China chief to repair its badly damaged reputation among domestic handset sellers. The company has announced that Gustavo Eichelmann, a 7-year company veteran, will take over at the helm of Nokia’s China operations to try and halt a recent skid in its largest global market. (Chinese article) Not coincidentally, the announcement comes as Nokia made a highly-anticipated unveiling of its first new smartphones using Microsoft’s Mango (English article) — a huge bet for the company as it seeks to regain share in the lucrative smartphone segment where it has become a relative bit player to the likes of Apple (Nasdaq: AAPL), HTC (Taipei: 2498) and Samsung (Seoul: 005930). Eichelmann’s past includes a number of high profile spots, including top management positions in the company’s global sales and channel divisions and head of global customers relations for Vodafone (London: VOD), the world’s biggest mobile carrier. His solid credentials will be sorely needed in China, where Nokia took a beating earlier this year after many of its domestic vendors found themselves with big piles of unsold unpopular handsets forced upon them after years of bullying by the world’s largest cellphone maker. (previous post) The group rebelled at the time, refusing to accept more phones for fear that Nokia’s increasingly unpopular models wouldn’t sell, leaving them with even more inventory. Eichelmann’s strong background in vendor relations should help him to repair his company’s damaged reputation with vendors, especially if the new Mango models are well received and demand is strong. But the company will also have to improve its middle- and lower-end models as well to compete in China’s fiercely competitive market, limiting Eichelmann’s chances for success.

Bottom line: Nokia’s naming of a new China chief with a strong vendor relations skills could help fix  its damaged reputation if can get back in the business of developing popular cellphones.

Related postings 相关文章:

◙ Nokia Facing China Backlash After Years of Dominance 诺基亚手机在华“失宠”

◙ Apple on a China Roll, Ambushing Nokia, Lenovo 苹果伏击诺基亚和联想 在华发展势如破竹

◙ Guest Post: Move Over Nokia and RIM, Here Comes HTC

 

Solar Fight Sees Accusations Flying 中美太阳能纠纷引发口水大战

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The last few days have seen an overwhelming flood of new chatter in the war of words between Chinese and Western solar cell makers, with China’s commerce ministry also voicing its views on this case that looks set to become a major battleground in the free trade debate. After US solar firms filed a formal anti-dumping complaint in the US last week against their Chinese rivals, China’s commerce ministry quickly and predictably fired back that the complaint was groundless, and warned that any punitive action could result in a damaging trade war that could hurt the global economy. (English article) At the same time, 3 top Chinese players, Suntech (NYSE: STP), Yingli (NYSE: YGE) and Trina (NYSE: TSL), all chimed in with various guarded statements saying it was too early to worry just yet. Meantime, the group leveling the accusations, led by the US arm of German solar cell maker SolarWorld (Frankfurt: SWV), replied to China’s tough talk with its own scathing statement accusing the Chinese of not only rampant illegal subsidies for its players, but also of allowing them to wreak havoc on the Chinese environment through irresponsible waste disposal practices. (official statement) I said last week that the speed of this conflict’s rapid evolution has surprised me, as China’s generous subsidies have been going on for years. Now I’ll add that the volume of the rhetoric is also surprising me, showing that both sides are taking this case very seriously and could take some equally strong actions if either doesn’t like the final ruling by the US International Trade Commission. The timing of this dispute is clearly very much in favor of the US solar companies, as no US politician, including the Obama administration, will want to look soft on China as the US economy continues to struggle just a year before the 2012 presidential elections. If Beijing is smart, it will quickly tone down its rhetoric and move discussions to back-room channels if it really wants to try to avoid punitive tariffs that now seem almost inevitable. Beijing’s actions in the next few weeks will be critical: a quieter, more conciliatory approach could result in less aggressive action by the US, which in turn would cause China’s solar companies to suffer less. But if China continues its loud rhetoric, this dispute could well turn into a drawn-out war that would seriously harm the long-term prospects of the Chinese players.

Bottom line: The outburst of accusations by China and US solar makers in their dispute over unfair trade could deal a long-term blow to Chinese solar makers unless Beijing moderates its rhetoric.

Related postings 相关文章:

◙ China Solars Brace for Icy 2012 With US Trade Complaint 中国太阳能产业需直面美欧关税壁垒

◙ US Congress Turns Up Heat in China Solar Debate

◙ China Brushes Off Western Protest With New Ming Yang Support 明阳获巨额融资 表明中国不理会西方反对

Huawei: Fight Them With Innovation 华为欲借创新论低调进军美国市场

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Huawei Technologies has given some of its first formal remarks since the latest rejection in its drive to enter the US, saying it will rely on innovation to finally break into this difficult market. The remarks, which came from one of the company’s top US officials late last week, sound neutral enough in theory, but really doesn’t do anything to address the main US concerns over security that have thwarted Huawei in the market so far. (English article; Chinese article) I do have to credit the official, a man named John Roese, with at least modifying Huawei’s previous style that was more direct and even slightly confrontational. A couple of weeks ago, the company was informed by the US telecoms regulator that it wouldn’t be allowed to bid for contracts to build government-operated emergency broadband networks, an outcome that surprised no one, and then made the situation worse by asking for an explanation. (previous post)  At least the company finally is letting someone who appears to be an American citizen be its spokesman, and it’s clear that he’s avoiding the sensitive topic of national security, which is the main reason for Huawei’s lack of progress in the market today. But for the company to ultimately succeed in the US, it will have to tackle this tough issue of security by demonstrating that it’s not an arm of the Chinese government, and that its products won’t be used for spying by Beijing. Roese’s “innovation” argument won’t do anything to address any of these concerns, but at least he’s showing that the company will probably take a more low-key approach to the situation in the future, which is needed in such a highly sensitive matter. I would look for the volume of behind-the-scenes communication between Huawei and US government officials to pick up considerably as part of this effort, though the company is unlikely to make any significant progress until after next year’s presidential elections in November.

Bottom line: Huawei is making a smart move by toning down its high-profile approach to enter the US, but is unlikely to gain access to the market until 2013 at the earliest.

Related postings 相关文章:

◙ Huawei Undermines US Push With Foolish Request 华为讨要说法很不明智唯有阻碍进军美国市场

◙ Huawei, Lenovo Look to Foreign Advisors in Westward Drive

◙ Rongyao’s US Lawsuit Spotlights China’s Lack of PR Savy *荣耀高调起诉辉瑞 彰显公司缺乏公关意识

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

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China Mobile (HKEx: 941; NYSE: CHL) continues to struggle under the uninspired leadership of outgoing Chairman Wang Jianzhou, with third-quarter profit growth slowing to 3.7 percent, or about half the second quarter’s rate of 7 percent. (English article) I’m probably being too tough on Wang, as clearly fierce competition for 3G subscribers with rivals China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA) is the main reason for the profit slowdown. In fact, China Mobile has boosted its 3G subscriber campaign considerably in the last few months, as more phones and other devices that can run on its homegrown technology come to market. But while Wang should be commended for finally using China Mobile’s dominant market position to promote 3G, he continues to provide uninspired leadership that simply sees the new standard as a way to power cooler-looking smartphones, many of them low-cost models made by the likes of ZTE (HKEx: 763; Shenzhen: 000063) and Huawei. Instead of focusing on this lower end of the market, Wang and China Mobile should be chasing higher-end subscribers who use 3G for its powerful data transferring speeds to enable a wide range of mobile Internet applications, which provide much fatter profit margins. Instead, most of my friends here in Shanghai still overwhelmingly use 3G services from Unicom and China Mobile for their wireless web surfing, even though most complain of spotty coverage: a shortcoming that China Mobile could easily exploit to steal some of these more lucrative subscribers. It looked for a while like China Mobile might get some help at the high end with the roll-out of a 3G iPhone from Apple (Nasdaq: AAPL) for its service, but suddenly that initiative seems to have gone quiet. (previous post) As I’ve said before, Wang was an OK leader for his time, helping China Mobile consolidate its position as the country’s dominant mobile carrier during his 5 or 6 years as chairman. But he really needs to step down soon, a development that looks likely, and hand over the company to younger new leadership that really understand where the mobile world is heading.

Bottom line: China Mobile’s uninspired third-quarter results are largely a result of its poor approach to the 3G market.

Related postings 相关文章:

◙ China Mobile: Where’s the 3G iPhone? 中移动4G网络稳步推进 3G版iPhone或遇阻

◙ China Mobile Shuffle: Sea Change Coming? 中移动高层变动或引发重大变化？

◙ TD-LTE Hits First Delay, More to Come? TD-LTE技术首次延期 未来还会更多？

China Regulors Threaten E-Commerce, Group Buying 官方监管威胁到电子商务与团购业务

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After standing aside and letting its online sector develop largely unhindered for the last decade, China is suddenly showing a worrisome trend of trying to regulate everything on its often unruly Internet, a move that, while needed, could also interfere with market forces. In separate developments on the same day, media are reporting Beijing is preparing to regulate both its group buying sites as well as its e-commerce sector to bring more order to these spaces that have become ultra-competitive in the last 1-2 years. (group buying article; e-commerce article) In this case the reason behind each move is unrelated. For group buying, the reason seems simply to be a desire to regulate an industry that has become ultra-competitive, with quality control virtually non-existent and many players teetering on the brink of closing. (previous post) For e-commerce, the issue is directly related to a massive fee hike last week by Alibaba’s Taobao Mall, China’s leading B2C site, that led to an uprising by smaller merchants who complained they were being targeted for elimination from the site. These two new rounds of regulation for major emerging sectors follow other recent reports that China will soon regulate the vibrant micro-blogging space, and months after it issued its first round of electronic payment licenses and as it prepares to issue online mapping licenses. There definitely seems to be a trend emerging here, which looks a bit worrisome in light of Beijing’s past record at heavy-handed interference in emerging tech sectors. In one case a few years back, Beijing’s heavy regulatory hand effectively killed a vibrant SMS industry that was once a major source of revenue for the likes of Sina (Nasdaq: SINA), Sohu (Nasdaq: SOHU) and NetEase (Nasdaq: NTES). It has also attempted to regulate online games from time to time, which may be partly responsible for that industry’s unexciting growth profile of recent years after years of explosive growth. While some form of direction is certainly needed to bring order to the unruly e-commerce and online auction sectors, it’s far from clear to me that this direction needs to come from Beijing, which instead would be better advised to provide some “guidance” and let market forces do the main work.

Bottom line: New campaigns by Beijing to regulate e-commerce and online auctions are misguided efforts that will ultimately severely hamper growth in both sectors.

Related postings 相关文章:

◙ Taobao Mall’s IPO March Collides With Merchant Uprising 淘宝商城IPO或因商户“起义”被推迟

◙ Group Buying Turmoil Grows With 55tuan Layoffs 窝窝团撤站裁员 团购业整合在即

◙ Investors Punish Sina for Slow Weibo Progress

News Digest: October 19, 2011

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The following press releases and media reports about Chinese companies were carried on October 18. To view a full article or story, click on the link next to the headline.

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◙ China Quizzes Audit Giants on Foreign Regulator Contact (English article)

◙ Tencent (HKEx: 700) Acquires Stake in SNS Kaixin001 – Company Source (English article)

◙ New Oriental (NYSE: EDU) Announces Results for Fiscal Qtr Ended August 31 (PRNewswire)

◙ Nomura Set to Buy GE Capital (NYSE: GE) Unit in China: Source (English article)

◙ China Becomes 2nd Largest Apple (Nasdaq: AAPL) Market: Cook (English article)

China Brushes Off Western Protest With New Ming Yang Support 明阳获巨额融资 表明中国不理会西方反对

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If China plans to cut back its subsidies to its alternate power sector in response to complaints from the West, it sure isn’t showing its intentions in a new announcement about a massive new loan support program for leading wind power equipment maker Ming Yang. (company announcement)  According to the announcement, China Development Bank, a major government policy lender, will provide Ming Yang with up to $5 billion in financing to help its customers both at home and abroad purchase its wind generation equipment. This is exactly the kind of state-backed subsidy that is at the center of a debate in both the US and Europe over solar energy, which has seen Western governments finally sit up and take notice of China’s massive support for its alternate energy sector. Punitive tariffs against China’s solar sector look almost inevitable as a result of Beijing’s huge support policies (previous post), and this kind of announcement of yet even more support for Ming Yang, even though its focus is wind and not solar power, will hardly help China’s case if it really wants to avoid such punitive tariffs, which would send a chill through its solar firms already suffering through their worst-ever downturn. If this kind of high-profile announcement is Beijing’s way of saying it has no intent to stop offering strong backing for its alternative energy makers, I would look for new punitive tariffs to come sooner rather than later and for a drawn-out standoff as neither the West nor China yields to pressure to compromise. Of course, there’s also the possibility that Ming Yang’s announcement is just very poorly timed, and China might still be willing  to curb its support for its solar energy firms. Time will tell. Meantime, one of the many struggling solar firms, Canadian Solar (Nasdaq: CSIQ) has just issued updated guidance that is very mixed. (company announcement) It says it will meet its unit sales targets for the third quarter, but that its margins will come in well below previous guidance due to stiff competition that has resulted in sharply falling prices. All this means the crisis could be easing, but it’s not over yet and it could heat up all over again if either the US or Europe issues punitive tariffs.

Bottom line: A new announcement of massive state loan support for a top Chinese wind power firm indicates China will keep strongly supporting its alternate energy sector despite Western protests.

Related postings 相关文章:

◙ More Solar Woes With Plunging Prices

◙ US Congress Turns Up Heat in China Solar Debate

◙ Tech, Environmental Issues Cast New Clouds Over Solar Firms

Shanda’s Private Ploy: For Real or Market Manipulation? 盛大拟退市：是动真格还是虚晃一枪？

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The big news of the day from the tech world is most certainly the announcement by online game operator Shanda Interactive (Nasdaq: SNDA) that its founder and chairman Chen Tianqiao may take the company private, in the latest development for US-listed China shares that have seen their prices plummet in the last few months amid a broader confidence crisis. (company annoiuncement) The real questions, of course, is whether Chen is really serious, and, if he is, will we see other companies follow his lead as they search for investors who better appreciate their shares. My prediction is that Chen’s offer, which would give shareholders $41.35 per ADS, or a 24 percent premium to their last closing price, is largely a stunt that Chen has no intention of actually executing. The offer is explicitly non-binding, and, in a nod to the market’s skepticism, Shanda’s shares rallied 14 percent after the announcement but still finished on Monday at $38.33, or well below the privatization offer price. Some Chinese observers said perhaps Chen wants to bring his shares back to China to list in his home market where the company is better known, perhaps on a new international board for overseas-registered firms expected to launch in the next year or so. (Chinese article) This could be a long-term possibility, although Shanda might have to wait a while, as many other bigger-name firms like China Mobile (HKEx: 941; NYSE: CHL), Lenovo (HKEx: 992) and HSBC (HKEx: 0005; London: HSBA) are already cuing to list on this new high-profile international board and will probably be given priority. In addition, there’s no reason that Shanda can’t list its shares both in the US and China at the same time, which makes a privatization of its US shares even less necessary. At the end of the day, Chen loves the spotlight and any privatization would move his company back into the shadows for a while, which he would no doubt dislike. Instead, this latest move to privatize looks largely like a show, and Shanda and other US-listed China firms will continue to maintain their overseas listings despite current negative sentiment.

Bottom line: A management-led plan to privatize Shanda Interactive is most likely just a stunt that will never happen, and other US-listed China firms are unlikely to follow with similar actions.

Related postings 相关文章:

◙ CDC Kicks Off China Bankruptcy Parade 中华网打开赴美上市公司破产魔盒

◙ US China Stocks: Bloodbath Becomes Correction 在美上市中资股遭抛售 迈入股价修正新阶段

◙ US-Listed China Firms Fight Back — Finally 中国赴美上市公司最终还击