Shanda Cloudary Returns to Market, Worth a Look

Shanda Interactive (Nasdaq: SNDA) Chairman Chen Tianqiao is either very persistent or very stupid, as he returns to market with an IPO for his online literature unit, Shanda Cloudary, just months after he shelved the offering due to poor market sentiment, even as current sentiment remains poor. I’ve heard the guy is quite intelligent, even if most of his business endeavors don’t yield very impressive results, so I’m willing to give this new offering a look. (English article) Based on the numbers, the story actually looks quite interesting. Cloudary’s two biggest income sources, revenue from online users and from its online wireless service, both rose by triple digit percentages in the first half of the year, with the latter up more than 200 percent to a relatively modest 73.7 million yuan, or about $12 million. The company posted a net loss for the first half of the year, but that loss narrowed to about 14 million yuan from 22 million yuan in 2010. With revenue of around $50 million in the first half of this year, Cloudary is clearly not a huge company yet and has lots of room to grow. I’ve previously yawned at this offering, calling it just another attempt by Chen to squeeze more money out of financial markets, but I have to admit the numbers do seem to tell an interesting story. What’s even more interesting for me, however, is the reality on the ground: walking around in Shanghai, it’s nearly impossible to go for more than a few minutes without seeing someone on the subway or waiting in line at a shop reading on their cellphone or tablet computer. Perhaps it’s news, or perhaps it’s literature or perhaps it’s both. But regardless, Cloudary does seem to be in a strong position to take advantage of this trend, which will undoubtedly grow stronger as mobile devices such as e-readers and smartphones become more common. That said, I’m going to tweak my previous prediction and say that despite a dismal debut by video sharing IPO Tudou (Nasdaq: TUDO) earlier this month (previous post), Cloudary could actually do well in its offering and bring back a little buzz to the sputtering China Internet.

Bottom line: Shanda’s Cloudary online literature unit could offer an intriguing play into the growing market for mobile content with its upcoming IPO.

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