A brewing spat between security software giant Qihoo 360 (NYSE: QIHU) and struggling smartphone maker Coolpad (HKEx: 2369) has provided some good entertainment for followers of China’s vibrant Internet sector over the last few weeks. The tale has all the elements of a good trashy romance novel, including a love triangle and vengeful scheming by China’s most famous Internet bad-boy.
But more fundamentally, the tale is also filled with valuable lessons for anyone doing business in China’s high-tech sector, or really in any of the country’s emerging industries where private entrepreneurs are driving the growth. The story’s biggest moral is to be careful when choosing your business partners – a lesson that many private investors have learned over the last 3 decades as China transforms from a socialist system to a market-oriented economy. Read Full Post…
The following press releases and media reports about Chinese companies were carried on September 16. To view a full article or story, click on the link next to the headline.
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Carmakers Curb China Output as Sales Growth Stalls (English article)
Tencent (HKEx: 700) to Invest 2 Bln Yuan in Cloud Unit Over Next 12 Months (English article)
Meituan Denies Rumors of Failure for Latest Funding Round (Chinese article)
Bottom line: Alibaba’s latest sell-off is part of an ongoing correction in the company’s value, reflecting a new era of more realistic expectations from investors.
Bloom continues to shrivel from Alibaba’s rose
After years of basking in the hype of adoring investors who briefly valued it even higher than much-older and far more global rival Amazon (Nasdaq: AMZN), Chinese e-commcerce leader Alibaba (NYSE: BABA) has entered a new phase centered on more realistic expectations for the company. That new phase has seen Alibaba’s stock tumble to a more realistic level this year on a steady series of bad news, including the latest reports that one of its key sales metrics wasn’t as strong as previously estimated last quarter.
But that wasn’t the only bad news for Alibaba in the last few days. Earlier reports this week said the company was cutting back in its college recruitment, in what looked like another sign of slowing growth. (previous post) An Alibaba official seemed to refute those initial reports, only to have a second series of reports emerge that seemed to confirm that the recruitment slowdown was indeed happening. (English article) Read Full Post…
The following press releases and media reports about Chinese companies were carried on June 12. To view a full article or story, click on the link next to the headline.
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Homeinns (Nasdaq: HMIN) Announces Receipt of “Going Private” Proposal (PRNewswire)
Integrated Silicon (Nasdaq: ISSI) Agrees To Be Bought By China’s Uphill (English article)
Xiaomi Invested 1.8 Bln Yuan in its Content Business Since November 2014 (English article)
Qualcomm (Nasdaq: QCOM) Greater China President Resigns for Job at Xiaomi (Chinese article)
Alibaba (NYSE: BABA) Chief Jack Ma Says No Plans to Buy Yahoo, eBay (Chinese article)
Bottom line: Uber should consider forming closer alliances with local city governments to boost its chances of survival in China.
By Jeffrey Towson
Uber struggles in China
Hired car services giant Uber is now in the situation you never want to be in in China: a foreign company on the wrong side of both the government and powerful local competitors. Ask Google (Nasdaq: GOOG) and Yahoo (Nasdaq: YHOO) how that worked out. However, Uber can still win in China. They have one last move that could reverse the situation. They can do what homegrown rivals Kuaidi and Didi won’t. They can ignore the advice of Alibaba (NYSE: BABA) Chairman Jack Ma and marry the government.
Ma has famously said “Never, ever do business with government. Love them. Don’t marry them. So, we never do projects for government.” Compare this to statements by Kuaidi’s CEO Joe Lee, who said “One thing we learned is if we want to grow fast, we need to make sure the government supports us. Because in China, they can stop you in one day — they shut down your server and you’re out.” Read Full Post…
Bottom line: Baidu’s crackdown on internal corruption and big jump in a ranking of global media firms are both good publicity, but won’t change the fact that it’s facing sharply slowing growth over the next year.
Baidu probes 3 directors for corruption
Following a bruising battle with some of its leading advertisers in March, leading search engine Baidu (Nasdaq: BIDU) is in the headlines this week on a more positive note with a report it is cracking down on internal corruption. At the same time Baidu is in a separate similarly positive headline that shows it is quickly climbing the ladder on a list of global media companies, surpassing much older rivals like Yahoo (Nasdaq: YHOO) and Microsoft (Nasdaq: MSFT).
The first of these headlines casts a spotlight on the many corrupt practices that frequently occur in China’s young business culture, such as preferential treatment for customers who pay “special” fees and bribe individual employees. Such practices were almost certainly a factor behind the high-profile spat that saw one of China’s largest associations of hospital owners boycott Baidu’s advertising services in March, dealing a significant blow to Baidu. (previous post) Read Full Post…
Bottom line: Baidu’s new go-slow global expansion strategy focused on emerging markets like Brazil and Egypt looks smart, but will provide limited contributions due to the small size of those markets.
Chinese online search leader Baidu (Nasdaq: BIDU) is making some major strategic adjustments in its global expansion, turning to developing markets and away from more lucrative but also extremely competitive western ones. That’s my main conclusion, following reports that Baidu has finally pulled the plug on its struggling Japan search service 8 years after choosing the market for its first foray abroad. At the same time, the company is making initial moves into Egypt with its first Arabic-language website, following earlier moves into Brazil and more recently into Thailand. Read Full Post…
Bottom line: The move by Yahoo’s former China R&D chief to a major local Internet firm reflects growing work opportunities at Chinese companies, and waning attraction of China as an R&D center for big multinationals.
Former Yahoo R&D exec joins JD.com
A new move by a leading R&D executive is spotlighting a pair of major trends in China’s high-tech space, led by rapidly falling expectations for the market by big multinationals. The actual move has seen the former head of Yahoo’s (Nasdaq: YHOO) China R&D center take a new job at JD.com (Nasdaq: JD), China’s second largest e-commerce company, just weeks after Yahoo closed one of its last remaining Chinese operations. That move also highlights the growing attractiveness of big domestic companies for top R&D executives, who used to eschew such homegrown firms. Read Full Post…
Bottom line: A rebellion by a major hospital group against Baidu could reflect growing discontent towards the search engine among Chinese advertisers, which could force it to lower prices and make its business practices more transparent.
Medical group takes on Baidu
Local media are swarming to a story that has seen a major hospital association advise its members to yank their advertisements from Baidu (Nasdaq: BIDU), cutting off a top cash cow for China’s leading search engine. The Putian Healthcare Industry Chamber of Commerce is saying the grievances that led to its action are related to the high prices that Baidu charges for its services. But Baidu has weighed in with its own view, calling the move retaliatory for its own refusal to accept ads containing false and exaggerated claims from many Putian members. Read Full Post…
Bottom line: The latest blockage of Reuters sites in China is probably temporary and related to coverage during the recent National People’s Congress, but still reflects the very real risk of doing business in the tightly controlled media market.
Reuters websites blocked in China
China’s latest crackdown on foreign media has just netted global news giant Reuters (Toronto: RTR), in a potentially worrisome trend that has seen Chinese censors block a growing number of websites operated by big multinationals. Despite longer-term crackdowns on big names like Bloomberg and the New York Times, Reuters had managed to largely steer clear of China’s censors and its websites have remained largely accessible in China for most of the last 2 years.
But I couldn’t access any of Reuters sites in Shanghai starting last Thursday, and later reports confirmed the company’s Chinese- and English-language websites have been blocked throughout the country since then. (English article) Before I go any further, I should disclose that I previously worked at Reuters for a decade, and maintain contact with many of my former colleagues 4 years after leaving the company. Reuters Chinese site also is a regular user of my work, though apparently none of that has been viewable in China for the last few days. Read Full Post…
Bottom line: Qihoo’s new smartphones, including its self-developed mobile OS, could perform well due to its strong software development record, potentially bringing some excitement back to its stock later this year.
Qihoo prepares mobile OS
I don’t usually have lots of positive things to say about Qihoo 360 (NYSE: QIHU), but I’ll admit I’m quite intrigued by the latest word that the security software specialist is preparing to roll out its own mobile operating system (OS). The new system, to be called 360 OS, will be based on Google’s (Nasdaq: GOOG) popular Android OS, so in that regard it will vie with many other Android variations in the market. But regardless of that, I would expect this new OS could quickly become a major player in the fiercely competitive space, drawing on Qihoo’s record as one of China’s savviest and oldest software and Internet product developers. Read Full Post…
