Bottom line: Dangdang’s growth is likely to slow rapidly over the next 2 years as it gets marginalized by larger rivals, putting pressure on its owners to sell the company before it sinks back into the red.
Dangdang posts strong profit growth
Investors were breathing a big sigh of relief after reading the latest quarterly results from Dangdang (NYSE: DANG), as an ongoing turnaround at the former e-commerce leader boosted both its top and bottom lines. The news erased concerns that sparked a sell-off just a couple of weeks earlier, after the company unexpectedly announced a last-minute delay in the release of earnings report for unspecified scheduling reasons.
While the Dangdang fears were ultimately unfounded, the same hasn’t been true for former online video high-flyer Youku Tudou (NYSE: YOKU). In that instance, Youku Tudou played a similar scheduling trick for the release of its earnings report around the same time, and ultimately served up gloomy results. It also disclosed it was being probed by the US securities regulator for aggressive accounting that may have been illegal. (previous post) Read Full Post…
Bottom line: Chinese Internet stocks are likely to see a soft landing after a correction period in the first half of the year, with leaders and high-growth second tier players likely to experience a rebound in the second half.
China Internet stocks headed for soft landing
A new scorecard is casting a worrisome spotlight on the bumper crop of Chinese Internet firms that listed last year, pointing out that more than half are now trading below their IPO prices. The sagging prices continue a trend that I pointed out in my IPO scorecard at the end of last year. That trend has seen shares of many New York-listed Internet firms come back to their offering levels or lower as investors pocketed profits from strong post-IPO rises. (previous post) But rather than label this a reason for worry, I would argue instead this broader wave represents a rationalization of the market that will ultimately see the best-performing names rewarded and the money losers languish. Read Full Post…
Bottom line: The exclusion of foreign tech giants from criticism in a prominent annual consumer rights show is unrelated to the broader bias they are facing from Beijing, and they will continue to come under fire for the next 1-2 years.
Foreign techs not targeted on annual consumer rights show
Top China officials at global tech giants like Apple (Nasdaq: AAPL) and Amazon (Nasdaq: AMZN) are probably breathing a sigh of relief today, after their companies weren’t targeted for attacks in an annual consumer rights show that has become a famous for creating public relations nightmares for its victims. Instead, this year’s edition of the investigative Consumer Rights Day program on China Central Television (CCTV), broadcast on March 15 each year, singled out China’s 3 major telcos for criticism in the tech sector.
Multinationals weren’t completely spared from attack, with a number of car makers including Vokswagen (Frankfurt: VOWG), Nissan (Tokyo: 7201) and Daimler (Frankfurt: DAIGn) coming under fire for things like abusive after-sales practices. (English article) But for now at least, China’s central media seem to be backing away from new attacks on foreign tech companies, following recent criticism that Beijing has unfairly targeted such firms for everything from monopolistic practices to posing national security risks over the last year. Read Full Post…
Bottom line: Amazon’s opening of a shop on Alibaba’s popular Tmall looks like a shrewd move to boost its struggling China business, but is unlikely to raise its market share significantly.
Amazon opening store on Alibaba’s Tmall
Word that Amazon (Nasdaq: AMZN) will open a China store on Alibaba’s (NYSE BABA) popular Tmall marketplace has the online world buzzing that the US e-commerce giant is admitting defeat and failure of its China strategy. Some are even saying the move could mark an eventual closure of Amazon’s own China site, which has failed to attract a major audience despite huge investments by the company. But anyone reaching those conclusion should think again, as this particular move looks quite shrewd and could actually help Amazon to boost its struggling China business. Read Full Post…
Bottom line: Alibaba’s 2 latest big investments in Snapchat and Snapdeal look like good bets for strong financial returns, but are unlikely to produce any major strategic benefit.
Alibaba in talks for Snapdeal stake
I was a bit confused on my first reading of the headlines today, after seeing articles saying e-commerce leader Alibaba (NYSE: BABA) was in talks to invest in 2 companies whose “snappy” names sounded quite similar. But a closer reading made it clear that these were 2 very different deals, one involving the popular US social networking service (SNS) Snapchat, and the other involving a popular Indian e-commerce site called Snapdeal.
Despite their big geographic and product differences, these 2 deals seem to represent a growing trend for Alibaba, which is no longer acquiring companies but instead only buying small strategic stakes. The strategy looks mostly advantageous to the investment targets. That’s because it’s helping to push up the valuations of names like Snapchat and Snapdeal to frothy levels, much the way Alibaba used similar investments to pump up its own valuation in the run-up to its IPO last year. Read Full Post…
Bottom line: China should work with its major trading partners to send unified signals on issues like piracy to create a transparent business climate and avoid confusion.
US, China send crossed signals on piracy
In an unusual reversal of roles, Washington officials who regularly criticize China for piracy found themselves defending Alibaba (NYSE: BABA) on the issue last week, just a month after a Beijing regulator blasted the e-commerce leader for allowing rampant fake goods trade on its popular Taobao site. The conflicting messages are at least partly political, since a similar US condemnation would have contradicted Washington’s praise of Alibaba’s piracy-fighting efforts over the last 2 years. Read Full Post…
The following press releases and media reports about Chinese companies were carried on March 7-9. To view a full article or story, click on the link next to the headline.
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Amazon (Nasdaq: AMZN) China Opens Store on Alibaba (NYSE: BABA) Tmall (English article)
Momo (Nasdaq: MOMO) Announces Q4, Full Year Financial Results (Globe Newswire)
JD.com (Nasdaq: JD), iFlytek (Shenzhen: 002230) In Smart Home Products JV (English article)
Bottom line: Apple’s allowance of audits of its products by Chinese inspectors marks its latest compromise to address China’s national security concerns, and could mark the start of a more transparent approach on the issue by Beijing.
Apple allows product audits by Beijing
Global gadget leader Apple (Nasdaq: AAPL) is deepening its uneasy embrace with Beijing security officials, with word that it has agreed to allow security audits for products that it sells in China. This latest development comes less than a year after Apple took the unusual step of moving some of the user information it collects to China-based servers, which was also aimed at placating security-conscious regulators in Beijing.
Apple’s increasingly close cooperation with Beijing contrasts sharply with Google (Nasdaq: GOOG), whose popular Internet products and services are increasingly being locked out of China as it refuses to play by Beijing’s rules. Other global tech giants are also having to deal with the delicate situation, each taking a slightly different approach to try to protect user privacy while complying with Beijing’s insistence that they make their information available to security-conscious government regulators. Read Full Post…
Bottom line: A current round of big fund raising for Chinese tech firms will continue through the first half of the year but then start to fade, leading to a steady drop in valuations for such companies.
51Auto raises $30 mln in new funds
The fund-raising frenzy for Chinese tech companies continues as we head into the end of January, with word of another mega funding worth $100 million for childcare website Beibei.com. At the same time, a used car specialist called 51Auto has landed a nifty $30 million in its own new funding round. But my favorite story from the fund-raising realm comes from a company that has created a PC for dogs, and has found a backer to give it 5 million yuan ($800,000) for the endeavor. Read Full Post…
Bottom line: Alibaba could make a bid to buy Yahoo as part of a broader overhaul of the relationship between these 2 Internet companies, but personal and other issues could ultimately hamper such a deal.
Yahoo to sell remaining Alibaba stake?
Media have been focused these last 2 days on reports of a new mega purchase by Alibaba (NYSE: BABA) in the insurance space, but another report centers on a far more intriguing possible deal involving the e-commerce giant’s long relationship with faded US search giant Yahoo (Nasdaq: YHOO). That particular relationship has undergone huge changes since the pair first formed their partnership a decade ago, and could easily be the subject of a book. In the latest chapter to that story, a new report is speculating that Alibaba could make a bid for Yahoo in the next year as it seeks to go global following its blockbuster IPO in 2014. Read Full Post…
Bottom line: Alibaba’s new online credit product and global shopping mall look like smart new initiatives that could help maintain its strong growth to justify its high valuation.
Alibaba financial unit trials credit product
It’s been quite a while since I’ve written about the actual business of e-commerce giant Alibaba (NYSE: BABA), which has captured global headlines for much of the last 4 months for mostly financial reasons after its record-breaking IPO in September. So on that note, I was quite happy to finally read new headlines on some smart-looking moves the company is making to justify its sky-high valuation, which is built on expectation for continuing super-charged growth.
One of those initiatives has Alibaba’s finance unit rolling out a product that looks like a variation of traditional cards, and is aimed at getting shoppers to spend even more on its popular e-commerce platforms. The other is an update on its new global e-commerce initiative that looks like it’s gaining some strong early momentum, at least according to the company’s own telling of the story. Read Full Post…
