Bottom line: A new Pepsi-branded smartphone set to launch in China next week could get an initial boost from strong publicity, but will quickly fizzle due to lack of special features to distinguish it from others in the crowded market.
Pepsi phone coming to China
An entertaining new twist to China’s overheated smartphone story is coming from the soft drink sector, with word that global beverage giant Pepsi (NYSE: PEP) is preparing to enter a crowded space that hardly needs any new entrants. The headline looked somewhat strange to me, though nothing surprises me these days in a market where names like industrial equipment supplier Sany (Shanghai: 600031) and air conditioner maker Gree (Shenzhen: 000651) have all jumped on the smartphone bandwagon.
Such a bandwagon approach is quite typical for China, where local companies are always quick to join the latest trends even if they have little or no experience in the business. But foreign names are usually a little more savvy, and this particular instance was the first I could recall of a major foreign brand joining this kind of silly herd mentality that often ends in failure and big losses for the associated company. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 21. To view a full article or story, click on the link next to the headline.
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Yum Brands (NYSE: YUM) to Separate China Unit Amid Activist Pressure (English article)
Meituan, Dianping Said Seeking to Raise Up to $3 Bln (English article)
Bottom line: LeTV’s latest hired car services investment and high-profile poaching of top talent from a rival look similar to the recent rapid rise and sputtering of Xiaomi, and the company could follow a similar trajectory by this time next year.
LeTV steals top talent from Youku Tudou
After watching the meteoric rise of online video sensation LeTV (Shenzhen: 300104) over the past year, I’m quickly tiring of this company and its hyperactive diversification strategy. The latest move in that drive is taking LeTV onto the road, with word the company is investing a hefty $700 million for a controlling stake of struggling private car services firm Yidao Yongche.
At the same time, other media are reporting that LeTV has just stolen a top executive from chief rival Youku Tudou (NYSE: YOKU), which announced last week it has received a buyout offer from e-commerce giant Alibaba (NYSE: BABA). Anyone feeling a sense of deja vu from these latest 2 LeTV headlines, and from LeTV’s meteoric rise in general, would be correct. Read Full Post…
Bottom line: Shanda Games’ imminent de-listing could be followed by a behind-the-scenes consolidation by one or more savvy private equity firms to create a major new online game firm capable of challenging NetEase or even Tencent.
Shanda Games heads for de-listing door
Faded online gaming pioneer Shanda Games (Nasdaq: GAME) is finally heading for greener pastures, releasing what’s likely to be its final earnings report as its shareholders get set to vote on a plan to privatize the company. Shanda Games’ road to privatization has been long and tortured, and is only now finally coming to completion after its initial announcement nearly 2 years ago. (previous post) But that said, I do have to commend Shanda’s strong-willed founder and chief Chen Tianqiao for finally getting the job done.
From a broader perspective, Shanda’s departure continues a trend that has seen online game companies de-listing en mass, after their stocks struggled for years due to stiff competition. In an interesting twist to that trend, these gaming laggards have been one of the few groups to actually complete privatizations among the 3 dozen US-traded Chinese companies that announced such buyouts earlier this year. Read Full Post…
Bottom line: Beijing needs to accelerate reform of traditional media in the face of rising challenges from players like Alibaba and Baidu, or risk seeing many of these state-run companies fall into irrelevance.
Alibaba challenges traditional media to speed up reform
A wave of mega-mergers sweeping through China’s Internet over the last 2 years saw its biggest deal to date announced late last week, when e-commerce leader Alibaba (NYSE: BABA) offered $4.6 billion for the more than 80 percent of leading online video site Youku Tudou (NYSE: YOKU) it doesn’t already own. The move marked the latest challenge to China’s traditional media industry, which has been monopolized for years by state-run broadcasters and printed publications.
If this latest mega-deal gets completed, a new Youku Tudou with access to Alibaba’s cash and other vast resources will almost certainly accelerate its challenge to traditional media by aggressively rolling out compelling new on-demand products and premium content. Read Full Post…
Bottom line: Declining Wal-Mart China sales and Suntory’s decision to dissolve a China joint venture reflect difficulties foreign consumer names face in the fast changing market, and also challenges posed by local rivals like Bright Food.
Sales fall 6 pct at Walmart China JV stores
Two new consumer stories are shining a spotlight on the difficulties many big foreign brands are facing in China’s tough retailing market, where they compete with both homegrown giants and also smaller names that can quickly gain scale over the Internet. One story reports on falling sales at US retailing giant Wal-Mart’s (NYSE: WMT) China stores, based on rarely seen data from a local joint venture. The other reports that Japanese brewing giant Suntory (Tokyo: 2587) is putting a lid on its 3-year-old Chinese beer-making joint venture.
Meantime, a third outbound M&A story involving Shanghai-based Bright Food shines a spotlight on one of the rising local giants that is posing a growing challenge to the big western consumer names. That deal has the acquisitive Bright, which has made billion-dollar purchases in Britain and Israel, signing another smaller deal to buy half of a major New Zealand meat processor for $200 million. Bright’s agreement to buy the stake in Silver Fern Farms looks similar to WH Group’s (HKEx: 288) blockbuster deal 2 years ago that saw it purchase leading US pork producer Smithfield for nearly $5 billion. Read Full Post…
Bottom line: Alibaba could make a bid for Weibo in the next 6 months, in a deal that would share many similarities with its newly launched blockbuster offer for Youku Tudou.
Weibo next on Alibaba’s M&A menu?
China’s Internet is buzzing over the industry’s biggest acquisition to date with Alibaba’s (NYSE: BABA) offer for Youku Tudou (NYSE: YOKU), but that deal could presage an even higher-profile one that sees the fading Twitter-like Weibo (Nasdaq: WB) follow a similar fate. Or even more intriguing, Alibaba could make a potential play for Weibo’s parent and founder Sina (Nasdaq: SINA), in a move that would spell the end for China’s leading web portal and one of its oldest Internet firms.
There would be many similarities between such a deal and the Alibaba offer for leading online video site Youku Tudou deal announced late last week. Investors appear to also believe such a deal could possible, based on stock reactions to the blockbuster deal that would see Alibaba pay $4.6 billion for the more than 80 percent of Youku Tudou it doesn’t already own. Weibo shares leaped 13.4 percent after the deal was announced, second only to Youku Tudou’s own 22 percent jump. Read Full Post…
I couldn’t help but feel a bit nostalgic on reading reports this week that one of Shanghai’s Cultural Palaces in Putuo district would be shutting its doors for much-needed renovations. The story was really just a newspaper photo with a caption, underscoring just how irrelevant these Soviet-era buildings with grandiose and idealistic names have become in modern China.
Many of these buildings have long ago fallen off the map for both locals and out-of-town visitors, despite their Disney-esque quality that makes many seem like theme park attractions in today’s Shanghai. As a history lover and also someone who actually visited and used many of these establishments when they were still relevant, I would propose that local officials take advantage of this need for repairs to do something different with these sites as they undergo renovations. Read Full Post…
Bottom line: AMD’s sell-down of its China assets, and a record fine against Qualcomm earlier this year reflect China’s fading attraction for global chip makers due to technical and bureaucratic obstacles.
AMD sells down China operations
A trio of headlines from the chip-making sector is showing just how much China has lost its luster for big multinationals, as logistical and technological issues dog this once-promising industry. Leading the headlines is word that struggling US chip maker AMD (NYSE: AMD) is selling most of its Asia-based foundry business, including sizable China operations, to a Chinese partner.
That was followed by announcement of a new very domestic chip-making joint venture anchored by SMIC (HKEx: 981), China’s largest contract foundry that at one time had hopes of becoming a global giant. Last but not least is a headline showing that US giant Qualcomm (Nasdaq: QCOM) was the main recipient of China’s recent anti-monopoly fervor, paying 90 percent of the penalties meted out by one of the nation’s main anti-trust regulators in 10 cases so far this year. Read Full Post…
Bottom line: LeTV’s fledgling e-commerce business could rise quickly but may also experience growing pains that bring negative publicity, as media start to tire of the company’s constant hype and its fortunes start to stagnate.
LeTV jumps into e-commerce
Online video sensation LeTV(Shenzhen: 300104) has never been one to do anything quietly, and that’s true once more with its sudden jump into the hotly contested e-commerce space. In its usual high-profile fashion, LeTV has sent out emails to reporters detailing its huge success with a recent e-commerce promotion, and also its launch of a US e-commerce site.
But the media weren’t giving to much ink to LeTV’s hype, and instead focused on negative reports of logistical problems connected to its recent promotion on September 19. Such problems don’t come as a huge surprise for an e-commerce newcomer like LeTV, which is far better known for its online video service than Inernet shopping. Read Full Post…
Bottom line: Wal-Mart’s loss of China Resources as one of its major Chinese partners reflects rapid changes in the traditional retailing market, and could prompt Wal-Mart to accelerate an overhaul of its broader China strategy to focus more on e-commerce.
China Resources dumps Wal-Mart JV stake
Just 3 months after sacking the founders of its China e-commerce site, US retailing giant Wal-Mart (NYSE: WMT) has suffered yet another blow in the huge but difficult market with the loss of a major local partner for its traditional brick-and-mortar stores. That move is seeing China Resources, one of the country’s biggest and oldest consumer names, dump shares worth $515 million in a number of Wal-Mart stores that it jointly owns with the US retailing giant.
The move isn’t all that surprising for a number of reasons, but still doesn’t look too good for Wal-Mart in the fast-changing Chinese retailing market. For starters, China Resources is already a major owner of smaller supermarket chain called Vanguard. It also moved into the hypermarket business 2 years ago when it effectively took over the China-based operations of British giant Tesco (London: TSCO) through a joint venture. (previous post) Read Full Post…
