The arrival of spring is bringing a sudden surge in new partnerships for China’s overheated tech space, as companies seek any competitive advantage they can find to stay in business. Online video sites Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) led off the parade with announcement of their $1 billion marriage last month (previous post), followed by a strengthening of ties last week between Apple (Nasdaq: AAPL) and Foxconn International (HKEx: 2038), one of its main iPhone producing partners. Now struggling online retailer Dangdang (NYSE: DANG) and equally embattled real-world electronics retailer Gome (HKEx: 493) have formally cemented a relationship that will see the pair merge their online electronics retailing business. (company announcement) This new tie-up has been rumored for a while now so it isn’t really news (previous post), though it should help both partners better compete with 360Buy, the online retailer that started out as an electronics seller, as well as Suning (Shenzhen: 002024), Gome’s main real-world retailing rival that has also pushed aggressively into the online space. But I suspect what really has investors excited, and myself intrigued as well, is the possibility that this alliance could eventually develop into an outright marriage between these 2 companies, each of which could greatly benefit from the other’s traditional strengths. Investors in New York bid up Dangdang shares as much as 15 percent in Monday trade to levels not seen since last September, with the stock closing up nearly 10 percent. Still, its shares are trading at just a third of their level from a year ago — testimony to a bloody price war with 360Buy and other players backed by the likes of Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) in China’s ultra-competitive e-commerce space. That price war pushed Dangdang itself deeply into the loss column in its latest reporting quarter, with the company posting a $21 million loss for the fourth quarter of 2011. (previous post) While Dangdang’s troubles have mostly appeared over the last year, Gome’s date back a bit longer, starting a few years back after its charismatic founder Huang Guangyu was arrested on insider trading allegations. Since then Gome has been involved in an endless series of internal power struggles, which has undermined its ability to function effectively. This new partnership won’t immediately address Gome’s internal problems, but it could give both companies a nice boost by allowing each to draw on its traditional strengths to help the other if the partnership runs smoothly. Of course there’s no guarantee that will happen, as Huang may still try to interfere with the new partnership from his prison cell and Dangdang’s husband and wife founders, Peggy Yu and Li Guoqing, are also quite opinionated and may not easily want to give up any control of their company. But if both sides realize that a strong partnership is in everyone’s own interest, I could see this relationship deepen and eventually result in a real-world merger in the next 2-3 years.
Bottom line: The new partnership between Gome and Dangdang could evolve into a true merger within the next 2-3 years if the 2 sides can work well together.
Related postings 相关文章:
◙ Dangdang, GOME In New Alliance, More to Come 国美携手当当网 或开启类似合作序幕
◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重
◙ 360Buy Heats Up E-Books, People’s Daily Goes to Market 京东商城高调进军电子书,人民网开启上市进程
I’ll close out the week with a couple of Internet items, starting with a tie-up between home electronics retailer GOME (HKEx: 493) and e-commerce specialist Dangdang (NYSE: DANG), both top firms in their spaces, that has the online world buzzing. The other deal involving a small European acquisition by Internet leader Tencent (HKEx: 700) also looks interesting, mostly because it represents one of the company’s first steps into more developed western markets. Let’s start with the GOME-Dangdang deal, which is still unconfirmed but presumably would see the former move most of its online operations onto the latter’s platform. (
