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China’s Huawei, one of the world’s largest smartphone providers
Latest news about Huawei Technologies Co, Chinese IT and telecommunications company

Wanda’s AMC Buy: The Show Isn’t Over Yet 万达并购美国AMC影院：表演还未结束

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The headlines are buzzing today with word that China’s leading theater chain operator Wanda Group has agreed to buy struggling US chain AMC Entertainment, calling it a landmark cultural exchange for Chinese firms expanding overseas. But to those applauding the deal, I would quickly caution not to celebrate just yet, as I see a greater than 50 percent chance that the sale will never close due to opposition from US politicians in this presidential election year. Let’s look at the deal first, which looks benign enough and was actually first reported 2 weeks ago when talks were in advanced stages. (previous post) Under their agreement, Wanda will buy struggling AMC from its current private equity owners for $2.6 billion, in what foreign media are calling the largest ever buyout of a US company by a Chinese one. (English article) Chinese media are noting the deal comes just a week after Rupert Murdoch’s News Corp (Nasdaq: NWSA) agreed to buy 20 percent of Bona Film (Nasdaq: BONA), a leading Chinese film distributor, implying the doors are opening in both directions to cross-border investment in the sensitive media and entertainment sectors. But anyone who follows Chinese investments in the US will know that US politicians love to get involved in anything even remotely sensitive, and that is even more likely to happen in this election year as candidates look for votes by portraying themselves as tough on China. That kind of grandstanding has led to problems mostly in the telecoms space so far, with China Mobile (HKEx: 941; NYSE: CHL), Huawei and ZTE (HKEx: 763; Shenzhen: 000063) all running into recent obstacles in their attempts to expand in the US. Politicians have also attacked the banking regulator for recently allowing several of China’s top banks to set up branches and make small acquisitions in the US for the first time, again reflecting how candidates are seizing on fears of these kinds of Chinese investments to raise their profiles. (previous post) Considering that movies are such a central part of American culture and that movie theaters are clearly a part of that picture, I could very easily see politicians raising objections to this latest deal, questioning the wisdom of letting such an important company into Chinese hands. Never mind that AMC and the theater industry in general are struggling due to tough competition not only from other theaters, but also from DVDs and newer products that let people watch and download movies over the Internet. The politicians won’t care about any of that, and they probably won’t care if AMC goes bankrupt in the end because no other company wants to buy it. All they will care about is looking tough against China in order to gain votes. All that said, I predict we will hear the first political objections to this deal within 2 weeks and potentially much sooner, and that all the negative publicity will give the deal a greater than 50-50 chance of ultimately collapsing, to the benefit of no one except the politicians.

Bottom line: The planned purchase of struggling US theater chain AMC by a Chinese buyer is likely to collapse due to objections from vote-seeking US politicians.

Related postings 相关文章:

◙ Welcome to the US Dollhouse, China Mobile 中移动和万达进军美国料将失败

◙ News Corp Makes New Play for China 新闻集团入股博纳影业集团

◙ Disney, Tencent Tie-Up to Animate China 迪斯尼、腾讯合作研发动漫

China Approves Google’s Motorola Buy 中国批准谷歌收购摩托罗拉

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I have to admit that perhaps I was wrong in my initial skepticism about Beijing’s motivations in repeatedly delaying approval for Google’s (Nasdaq: GOOG) purchase of Motorola Mobility (NYSE: MMI), speculating that its foot-dragging might have been motivated by political factors. (previous post) But now that the anti-monopoly regulator has finally approved the deal, I feel like I should actually congratulate it for addressing an important concern that was probably the real source of the delays, namely the potential that Google might give Motorola phones preferential treatment for its Android smartphone operating system at the expense of other major handset makers who also rely heavily on the popular OS. The long-awaited approval, which was delaying closure of a $12.5 billion deal first announced last August, finally came after Google agreed to conditions required by the Chinese regulator aimed at making sure that Android remains open and free to everyone, and that Google treats all cellphone makers who chose to use the operating system equally. (English article) I’ll be the first to admit that my first reaction to most actions by China’s anti-monopoly regulator is one of skepticism, since it has a history of allowing political considerations into its decisions that are largely unrelated to its main mission of ensuring that major M&A deals don’t harm market competition. The regulator’s bias was on glaring display in 2009, when it vetoed Coca Cola’s (NYSE: KU) plan to buy leading domestic juice maker Huiyuan (HKEx: 1886), citing monopolistic concerns even though most observers believed that Beijing simply didn’t want to see the promising domestic brand swallowed up by a foreign company. The regulator seemed to be changing its ways last year when it approved the purchase of another promising Chinese brand by a foreign name, in this case allowing Yum Brands (NYSE: YUM), operator of the KFC and Pizza Hut chains, to buy Little Sheep, operator of China’s largest hot pot restaurant chain. (previous post) The delays behind this latest approval of Google’s purchase of Motorola look like a smart move to me, aimed at addressing the very real concern by many of Android’s users that they might lose access to the OS if Google gives preferential treatment to Motorola. The major regulators in the US and Europe were unlikely to focus on this particular concern, since most of the major cellphone makers that use Android are based in Asia, such as Taiwan’s HTC (Taipei: 2498) and Korea’s Samsung (Seoul: 005930). A growing number of Android users are also in China, most notably Huawei and ZTE (HKEx: 763; Shenzhen: 000063), which are 2 of the world’s fastest growing players in the smartphone space. Thus the regulator was clearly addressing very real concerns from these and other domestic smartphone makers about becoming second-class Android citizens after a Google-Motorola merger, hence the regulator’s decision to impose its conditions. At the end of the day I’m quite encouraged by this action, and increasingly confident that we’ll see more decisions from the regulator based on market concerns rather than political considerations.

Bottom line: China’s long-delayed approval of Google’s Motorola purchase was due to real anti-competitive concerns, and reflects growing maturity at the Chinese regulator.

Related postings 相关文章:

◙ Huawei-Motorola Rumors Look Logical 华为收购摩托罗拉手机业务传言看似合情合理

◙ Google Tussles With China on Motorola 延迟批准摩托罗拉移动交易 中国政府对谷歌仍心存芥蒂

◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢

Baidu Smartphones Set to Stumble 百度进军智能手机市场或以失败告终

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I don’t like to sound too negative for 2 days in a row, but one day after predicting failure for PC giant Lenovo’s (HKEx: 992) new smart TV initiative I have to give a similar forecast for the recent rush into smartphones by a growing number of Chinese Internet players, with search leader Baidu (Nasdaq: BIDU) leading the charge. Chinese media have been buzzing for the last few days about Baidu’s new offering, a low-end smartphone that runs on the company’s self-developed operating system and was co-developed with TV maker Changhong (Shanghai: 600839). (Chinese article; English article) Baidu’s move follows the announcement of similar self-developed smartphones from online game specialist Shanda and Internet security firm Qihoo 360 (NYSE: QIHU), and the latest reports that online game specialist NetEase (Nasdaq: NTES) may also be getting into the space. (English article) Let’s have a closer look at the Baidu smartphone initiative, as that one is the most advanced, following the previous roll-out of an original Baidu model that failed to gain much attention under a partnership with Dell (Nasdaq: DELL). This latest tie-up with Changhong differs from the Dell model in that it is significantly cheaper, costing just 899 yuan, or about $140. I’ve looked at pictures of the new phone, and while a photo doesn’t always tell the full story, the handset truly does look clunky and cheap. I’m a bit surprised that Baidu is partnering with such unexperienced companies, first with Dell and now Changhong, in this initiative that is no doubt costing a lot of money. Dell is more known for its computers than cellphones, though the 2 product types do share some similarities. Changhong is known almost exclusively for its TVs, which have almost nothing in common with smartphones. That said, I really don’t expect much if any success for this new Baidu-Changhong model, which will have to compete with much more attractive low-cost smartphones from fast-growing domestic firms ZTE (HKEx: 763; Shenzhen: 000063) and Huawei, which mostly use Google’s (Nasdaq: GOOG) popular and reliable Android operating system. In fact, Baidu’s initiative looks like an attempt to imitate Google with Android, acknowledging the increasing importance of the mobile Internet. I applaud Baidu for putting big resources into this important new area, but honestly believe its smartphone initiative is set for failure. If Baidu wants to increase its chances of success, it could start by partnering with a major smartphone maker rather than Changhong, though I suspect many such players would be reluctant to form such a tie-up. Meantime, I would make similar predictions for the other smartphone initiatives from Shanda, Qihoo and now NetEase. I’m not sure why all these companies are taking such steps, as the smartphone market is already quite crowded with much more experienced and resource-rich players like Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). Perhaps all these companies just have too much money and are looking for a place to spend it.

Bottom line: Baidu’s smartphone initiative is likely to fail due to competition and inexperience, but could stand a better chance of success with better manufacturing partners.

Related postings 相关文章:

◙ Huawei Follows ZTE to Lower Profits 继中兴之后华为利润也降低

◙ ZTE Results: Waiting for Returns 中兴坚持低成本手机策略 亟需尽早盈利

◙ Nokia Bets on China Telecom 诺基亚联手中国电信

Welcome to the US Dollhouse, China Mobile 中移动和万达进军美国料将失败

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There are several interesting developments today on big-name Chinese firms moving into the US, highlighting both the opportunities but also the risks for increasingly assertive Chinese names looking to expand into a market that is at once the world’s largest but also highly suspicious of China. Leading the news is dominant wireless carrier China Mobile (HKEx: 941; NYSE: CHL), whose US expansion aspirations are reportedly running into trouble over familiar security concerns. (English article) That report is followed by another one saying Wanda Group, a real estate developer and owner of China’s largest movie theater chain, is in talks to buy some or all of AMC, operator of the second largest US movie theater chain. (English article) And last but not least, long-frustrated telecoms equipment maker Huawei appears to have found a new backdoor into the US through a new tie-up with local company Synnex (NYSE: SNX) to sell its enterprise products in the world’s biggest market. (English article) Let’s look at the China Mobile and Wanda-AMC developments first, as they’re certainly the newest and each provides an interesting challenge that many will be watching in the months ahead. US media are reporting that US national security officials, concerned about the potential for cyber-spying, may deny China Mobile’s recent request to provide mobile service between the US and China and to build facilities in the US. Their main concern is that China Mobile could use the US presence to gain access to local infrastructure that could then be used for spying and to steal intellectual property. This particular concern has become a popular refrain for Chinese telecoms firms trying to enter the US, with both Huawei and rival ZTE (HKEx: 763; Shenzhen 000063) both being denied access to the market numerous times due to similar concerns over the last year. Whereas Huawei and ZTE have both made significant efforts to improve their US images and ease spying concerns, I suspect that China Mobile has done little or nothing in this regard and for that reason its request is very likely to be vetoed. Meantime, other US media reports say that Wanda is talking with AMC’s private equity owners about buying some or all of the US theater chain, in discussions that began a year ago but have become more serious since then. Anything involving Chinese ownership in the US media space is also likely to be sensitive, despite China’s recent opening of its own media sector by allowing big names like Disney (NYSE: DIS) and DreamWorks Animation (NYSE: DWA) to form new animation joint ventures. Accordingly, I would also give this deal a good chance of failure, higher than 50 percent, both due to such sensitivities and also Wanda’s inexperience at this kind of overseas M&A. Lastly there’s Huawei, which is the most experienced in the US after a number of high-profile failed attempts to enter the market in the last 2 years. I quite like this deal with Synnex, which will see the US company sell Huawei routers and switches to US businesses for use in their internal networks, putting it in direct competition with Cisco (Nasdaq: CSCO). These kinds of smaller sales are much less likely to attract controversy than Huawei’s previous efforts to build bigger mobile networks in the US, and thus could actually succeed and give Huawei its first chance to make a serious inroads to the elusive market.

Bottom line: New efforts by China Mobile to enter the US and a Chinese real estate firm to buy US theater operator AMC are likely to fail due to sensitivities, while a new Huawei initiative could succeed.

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◙ Albaba Hires Big Gun in US Image Drive 阿里巴巴重金聘请美国前高官 启动形象改善工程

◙ Beijing Help Undermines Huawei Image Drive 中国商务部替华为出面或适得其反

◙ Huawei-Motorola Rumors Look Logical 华为收购摩托罗拉手机业务传言看似合情合理

News Digest: May 10, 2012 报摘： 2012年5月10日

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The following press releases and media reports about Chinese companies were carried on May 10. To view a full article or story, click on the link next to the headline.

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◙ Fears of Spying Hinder US License for China Mobile (HKEx: 941) (English article)

◙ Sina (Nasdaq: SINA) Adopts Point System to Regulate Microblogger Behavior (English article)

◙ Huawei Signs US Distribution Deal With Synnex (NYSE: SNX) (English article)

◙ 7 Days (NYSE: SVN) Announces Unaudited 2012 Q1 Financial Results (PRNewswire)

◙ Sinopec (HKEx: 386), PetroChina (HKEx: 857) Facing Processing Losses on Price Cut (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

News Digest: May3, 2012 报摘： 2012年5月3日

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The following press releases and media reports about Chinese companies were carried on May 3. To view a full article or story, click on the link next to the headline.

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◙ Temasek Selling $2.4 Billion in BOC (HKEx: 3988), China Construction Bank (HKEx: 939) (English article)

◙ Hony Capital May Sell Elpida (Tokyo: 6665) DRAM Plant to SMIC (HKEx: 981) – Report (English article)

◙ People’s Daily Website (Shanghai: 603000) Up 90% in First 2 Trading Days (Chinese article)

◙ Wal-Mart (NYSE: WMT) Says Last Two Employees in Pork Scandal Released (English article)

◙ Huawei to Build $1.5 Bln Logistics Center in Hungary (Chinese article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

News Digest: April 24, 2012 报摘： 2012年4月24日

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The following press releases and media reports about Chinese companies were carried on April 25. To view a full article or story, click on the link next to the headline.

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◙ China Auto Rental Said to Struggle to Attract Investors (English article)

◙ Sohu, Tencent, Baidu Video Channels to Jointly Buy Copyrighted Material – Source (Chinese article)

◙ Huawei Profit Halves; Handset Competition Saps Margins (English article)

◙ Lashou Reported Cutting Staff, Halting Ads, Calls Move “Strategic Adjustment” (Chinese article)

◙ Alibaba.com (HKEx: 1688) Reports Net Profit1 of RMB339.2 million in Q1 2012 (Businesswire)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Huawei-Motorola Rumors Look Logical 华为收购摩托罗拉手机业务传言看似合情合理

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I was highly skeptical at first about a rumor that Google (Nasdaq: GOOG) might be in talks to sell its Motorola Mobility (NYSE: MMI) handset business to telecoms equipment and cellphone giant Huawei; but the more I think about it the more it makes sense, leading me to speculate that the rumor may actually be true. The source of all the buzz is actually quite small, namely a small mention at the very end of a Wall Street Journal article in which the author simply says that rumors are swirling that Google has already offered to sell its newly acquired Motorola handset business to Huawei, even though it also cites a person close to Google denying any such talks. But regardless of what people are saying, such a deal would make good sense for both Google and Huawei, and here’s why. For its part, Google is an Internet and media company first and foremost, and has little or no experience in the highly competitive and lower margin cellphone business. Most believe the only reason Google even purchased Motorola’s handset business at all was to get the company’s extensive patent portfolio, which it hoped to use in its legal battle with Apple (Nasdaq: AAPL) involving Google’s Android cellphone operating system. From Huawei’s perspective, such a purchase would also look attractive since Huawei has made a recent major drive into handsets as it tries to diversify away from its traditional networking equipment business. Motorola would greatly help that drive, as the brand, while somewhat tarnished in recent years, is still globally recognized, and also has well-developed international sales and distribution channels that Huawei could instantly tap. (previous post) There’s one other factor as well that is less obvious but involves a complex history between Huawei and Motorola. The 2 companies previously collaborated in the networking equipment business many years ago, and that collaboration led Huawei to sue Motorola when the latter sold its networking equipment business last year to Nokia Siemens Networks. The pair eventually resolved the lawsuit, and, in a development that appeared to be related, China’s anti-monopoly regulator approved the Motorola sale to Nokia Siemens a short time later after a long unexplained delay. (previous post) The current talks, if they’re really happening, would share a number of similarities with the Nokia Siemens case, as both involve Motorola and Huawei. Furthermore, China’s anti-monopoly regulator has also delayed approving Google’s purchase of Motorola for unexplained reasons, holding up the deal that has cleared regulatory approval in all other major markets. (previous post) It’s difficult to know what’s happening behind the scenes, but I wouldn’t be at all surprised if the Chinese regulator’s delays are somehow related to ongoing talks by Google for a sale of the handset business to Huawei. Of course something like that would never happen in the west, where regulators would never get involved in a deal between 2 private companies. But China isn’t the west, and so really anything is possible.

Bottom line: A rumor that Huawei is in talks to buy the Motorola handset business from Google could well be true, as such a deal would make good sense for both companies.

Related postings 相关文章:

◙ Google Tussles With China on Motorola 延迟批准摩托罗拉移动交易 中国政府对谷歌仍心存芥蒂

◙ Huawei Discovers Cellphones 华为手机要向世界前三进军

◙ Troublesome Timing As China Approves NSN-Motorola 中国监管部门批准诺基亚西门子购买摩托罗拉网络业务时机不佳

Beijing Help Undermines Huawei Image Drive 中国商务部替华为出面或适得其反

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At least it wasn’t the Public Security Bureau. That’s what the public relations people at Huawei Technologies are probably saying as they come back to work this morning, after China’s Commerce Ministry spoke out late last week in the company’s defense after Australia’s government forbid Huawei from bidding to help build a new high-speed network due to security concerns. (Chinese article) Huawei has repeatedly run into similar concerns over the past year, hitting another brick wall in the US in 2011 when it tried to bid for contracts to help upgrade that nation’s emergency communications networks. (previous post) The problem in both cases is largely related to image, as many western politicians see Huawei as a spying arm of Beijing and are thus reluctant to let it build sensitive communications networks in their countries. The background of Huawei’s media-shy founder Ren Zhengfei hasn’t helped the situation and is even the source of many of the image problems, since Ren himself was a former engineer in the People’s Liberation Army before founding Huawei more than 2 decades ago. Huawei has made repeated attempts to distance itself from Beijing, with Ren himself pointing out in a recent speech that he was rejected for Communist Party membership many years ago. After the latest Australian setback late last month (previous post), Huawei even volunteered to reveal its source code if it could re-enter the bidding, in a move to ease the security concerns. (Chinese article) But from a public relations perspective, this latest defense of the company by China’s Commerce Ministry was probably the last thing that Huawei wanted or needed to make its case to the Australian government of its independence from Beijing. From a purely perceptional point of view, having a major government agency speak out on your behalf will hardly help to convince people of your independence from government support or control. As I said at the beginning of this post, perhaps Huawei can take some consolation in the fact that the Commerce Ministry spoke out on their behalf and not the Public Security Bureau itself, which is responsible for policing China’s telecommunications networks. But if Huawei really wants to convince the world of its independence from Beijing, its public relations department might want to make a low-key call to the Commerce Ministry and other government departments and politely ask them not to speak out too much on its behalf when its bids for global contracts fail. The Commerce Ministry remarks aside, I actually think Huawei has handled the Australia setback relatively well, remaining quiet despite the rejection, unlike its outspoken reaction when it was rejected for the US contracts last year. It needs to keep up this low-key approach, including good-will measures like revealing its source code to skeptical governments, and continue the effort without Beijing’s assistance if wants to eventually break into these lucrative but difficult markets.

Bottom line: Huawei needs to conduct its campaign to break into western markets by itself without government help if it wants to prove its independence from Beijing.

Related postings 相关文章:

◙ ICBC, Huawei: It’s Cold Out There 工商银行、华为：国外市场冷清

◙ Huawei, ZTE Suffer More Setbacks 华为、中兴料将在西方市场遭遇更多挫折

◙ Huawei on PR, Spending Blitzes to Shore Up Global Prospects 华为砸钱大打公关战 打造国际形象

News Digest: April 7-9, 2012 报摘： 2012年4月7-9日

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The following press releases and media reports about Chinese companies were carried on April 7-9. To view a full article or story, click on the link next to the headline.

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◙ TPG Capital, China’s Hony Said to Plan Bid for Japanese Chipmaker Elpida (English article)

◙ China Lodging Group (Nasdaq: HTHT) Announces Preliminary Q1 Hotel Operating Results (PRNewswire)

◙ Taobao Japan Shopping Channel Shuts Down Due to Low Usage (Chinese article)

◙ Commerce Ministry: Australia’s Ban on Huawei Bid Unfair (Chinese article)

◙ CNPC (HKEx: 857) in Talks With Foreign Firms About Shale Oil Exploration (English article)

News Digest: March 30, 2012 报摘： 2012年3月30日

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The following press releases and media reports about Chinese companies were carried on March 30. To view a full article or story, click on the link next to the headline.

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◙ Apple (Nasdaq: AAPL), Foxconn (HKEx: 2038) Revamp China Work Conditions (English article)

◙ Huawei Internet Business CEO Resigns (English article)

◙ ICBC (HKEx: 1398) Announces Annual Results (HKEx announcement)

◙ Citic Securities (Shanghai: 600030) in Talks to Buy C.Agricole’s (Paris: CAGR) CLSA (English article)

◙ Coca-Cola (NYSE: KU) Continues Strong China Investment with 42nd Bottling Facility (Businesswire)