Bottom line: Cisco’s dismissal of several top China executives reflects its struggles in the market, and the situation will only improve if it takes a more conciliatory approach to address Beijing’s national security concerns.
Cisco lays off China execs
Beijing’s ongoing clampdown on foreign tech companies over national security concerns is taking a toll on Cisco (Nasdaq: CSCO), with word that the US networking equipment giant is laying off several of its top local executives due to falling China sales. This particular development doesn’t come as a huge surprise due to Beijing’s recent obsession with national security and suspicion of foreign tech companies. But Cisco’s struggles do contrast sharply with that of Hewlett-Packard (NYSE: HPQ), which appears to be faring better in China due to its more conciliatory approach to address Beijing’s concerns.
Bottom line: Tsinghua Unigroup’s latest investment in an online lottery ticket seller hints that it may add Internet services to its growing list of high-tech products and services through separate tie-ups with Intel and HP.
Unigroup invests in 500.com
A previously little-known company connected with China’s leading science university has made headlines over the last year through major new tie-ups with global tech titans Intel (Nasdaq: INTC) and Hewlett-Packard (NYSE: HP), which makes its latest investment just slightly puzzling. That investment is seeing Tsinghua Unigroup pour a relatively modest but still significant $124 million into 500.com (NYSE: WBAI), a New York-listed Chinese firm that sells lottery tickets over the Internet.
I’m being just slightly whimsical in tying Unigroup’s latest purchase to its much larger recent tie-ups with Intel and HP, which I’ll recap shortly. But that said, Unigroup has rapidly emerged as a player to watch in a China’s underperforming domestic microchip and IT services sectors, and most of its high-profile investments since it first moved into the spotlight have been centered on efforts to assemble a homegrown Chinese giant in those spaces. Read Full Post…
Bottom line: An ongoing wave of buyout offers for US-listed Chinese firms is being funded by speculative money that will quickly evaporate when China’s stock market rally fizzles, causing some deals to collapse when that happens.
Gamblers fund privatization wave
It’s a new day, which means it’s time to take a look at the latest US-listed Chinese companies receiving privatization offers from opportunistic investors looking for bargains. Today it’s data center operator 21Vianet (Nasdaq: VNET) and beleaguered social networking site (SNS) operator Renren (NYSE: RENN) that are headed for the exit door.
I’ve been writing about this recent flurry of privatizations for the last few months, which is quickly turning into a flood as investors scramble to assemble deals to buy companies whose shares have languished on Wall Street. The idea is that these companies would be far more appreciated, and therefore get much higher valuations, from investors in their home China market, where an ongoing stock market rally has seen the main Shanghai index more than double over the last year. Read Full Post…
Bottom line: HP’s choice of a Beijing-based group with strong ties to a top science university as its China IT services partner looks like a smart move, which will help ease potential for conflict over national security concerns by Beijing.
HP choses Unigroup as China IT partner
Hewlett-Packard (NYSE: HPQ) has chosen a relatively dynamic, Beijing-based tech company as its future China partner over a stodgier state-run firm in Shanghai, as the US computer giant prepares to split itself into 2. The development is seeing HP get a bit less money than it had hoped for the 51 percent stake of its China-based H3C unit, which makes equipment for use in small telecoms networks. But the choice of Tsinghua Unigroup as the buyer looks quite prudent, and will bring in a new politically connected partner for HP as it prepares to split off its core PC unit from its more dynamic business that sells computing and networking services to enterprises. Read Full Post…
Bottom line: Intel’s latest drive to fund wireless-related Chinese start-ups is part of a growing strategy to promote its struggling telecoms chip business, but it could face big obstacles due to China’s lackluster record at innovation.
Intel launches incubator at Shenzhen event
I have to commend Intel (Nasdaq: INTC) for its perseverance in the telecoms space, with news that the fading microchip giant is adding an incubator initiative to its drive into the sector using China as a backdoor. But that said, this latest project looks pathetically small, with Intel earmarking a meager 120 million yuan, or less than $20 million, to the initiative.
This project is just one of several recent initiatives for Intel in China, and we should point out that many of the companies it’s targeting would probably be happy for just $1 million or less to fund their early development. But that said, this particular initiative looks mostly like a public relations ploy than anything really substantive, and Intel might be advised to get a little more aggressive if it’s serious about promoting a China-based ecosystem for its struggling telecoms chip business. Read Full Post…
I previously wrote that Apple’s (Nasdaq: AAPL) plain-spoken CEO Tim Cook should consider buying a second home in China due to his frequent visits to the country, and the same could be said for Facebook’s (Nasdaq: FB) more brash founder and CEO Mark Zuckerberg. While Cook’s frequent visits are quite official and include many stops at government and company offices, Zuckerberg has been far more low-key in his equally regular visits due to Facebook’s lack of official presence in the country where its website is formally blocked. But Zuckerberg wants desperately to find a way to enter the market, which explains his latest low-key appearance at an event this week in Beijing at Tsinghua University, China’s equivalent of MIT. Read Full Post…
Just weeks after Intel (Nasdaq: INTC) unveild a major new tie-up with a leading Chinese microchip maker, the Chinese partner behind that deal is moving ahead with its own drive to consolidate the nation’s fragmented sector for such chips, formally known as integrated circuits (ICs). The Chinese company, Tsinghua Unigroup, is reportedly leading the establishment of a major new fund that will invest in IC designers and manufacturers. While such a fund might normally focus on providing money to start-ups, based on Unigroup’s recent actions it looks more likely that this new entity could become a vehicle for consolidation that is sorely needed in China’s microchip sector. Read Full Post…
A significant move of consolidation occurred in China’s fragmented microchip design sector last week, when global leader Intel (Nasdaq: INTC) purchased a strategic minority stake in a Chinese company formed through the recent combination of 2 midsized players. The step will bring together domestic smartphone chip designers RDA Microelectronics and Spreadtrum, with Intel’s huge financial resources, R&D muscle and global sales network. Read Full Post…
Microsoft (Nasdaq: MSFT) and Intel (Nasdaq: INTC), the sputtering “Wintel” pair that once dominated the high-tech industry, are both in the China headlines today, as each tries to reverse its downward slide in the important market. In the first case, Microsoft’s new CEO Satya Nadella is visiting China in his first overseas trip since assuming his current title, and is quickly finding himself quite busy putting out fires on a number of fronts. In the latter case, Intel is paying a hefty premium for a Chinese cellphone chipmaker as it attempts to find a place in a critical sector that is rapidly overtaking its core business making chips for traditional PCs. Read Full Post…
Two more US-traded Chinese firms are on the cusp of de-listing, with online game operator Giant Interactive (NYSE: GA) and chipmaker RDA Microelectronics (NYSE: RDA) just announcing they have wrapped up buy-out deals that will pave the way for their imminent privatization. These 2 de-listing stories were announced months ago and are completely expected. But the bigger underlying story is the lack of major new privatization announcements in the last half year. In a similar development, major new IPOs by Chinese firms in New York have slowed considerably since a boom of offerings in April and May, indicating the broader deal-making market may be entering a new, more stable phase. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 3. To view a full article or story, click on the link next to the headline.
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China Investigates Danone, Nestle on Milk-Powder Pricing (English article)
Japanese Car Sales in China Decline for Fourth Quarter (English article)
Trina Solar (NYSE: TSL) To Redeem Outstanding Notes Due 2013 (PRNewswire)
Spreadtrum (Nasdaq: SPRD) Board Selects Advisor On Tsinghua Offer (PRNewswire)
Qihoo (NYSE: QIHU) a Winner in China Mobile Wars, Citigroup Says (English article)
