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ZTE China. Latest Business and financial news of ZTE corporation news overview of an expert of Chinese Companies Doug Young

News Digest: June 12, 2012 报摘： 2012年6月12日

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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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◙ Huawei, ZTE (HKEx: 763) Execs Sentenced to 10 Years for Corruption in Algeria (English article)

◙ 7 Days (NYSE: SVN) Announces Strategy Update and Share Repurchase Program (PRNewswire)

◙ Lenovo (HKEx: 992) Launches No-Contract Mobile Broadband Service (English article)

◙ NetEase (Nasdaq: NTES) Invests Over RMB 10 Mln in Mobile Literature Content (English article)

◙ Shanda Games (Nasdaq: GAME) Reports Q1 Unaudited Results (PRNewswire)

Huawei Layoff Reports: Growth Days Over? 华为裁员消息：增长时代终结？

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Domestic media have been buzzing for several days now about reports of massive layoffs at telecoms equipment giant Huawei, prompting the company to finally come out and deny the rumors. But where there’s smoke there’s usually fire, and I suspect that Huawei is playing with words to try and downplay the fact that indeed it is having to make some big adjustments to its workforce as its breakneck growth of recent years slows considerably due to a wide range of issues. Let’s look at the reports first, which quote a Huawei spokesman saying the company has made no large-scale layoffs recently, though he didn’t rule out future cuts. (English article) It’s hard to guess what’s really happening at Huawei, since rumors of layoffs usually come from affected employees who may know the situation in their own departments but aren’t really informed about the bigger picture. At the same time, companies themselves — especially in China — are usually reluctant to ever admit to large-scale layoffs, even though job cuts are relatively common, especially in former state-run enterprises trying to become more market-oriented. In this particular case, I would guess that Huawei has already drafted a plan to cut perhaps up to 10 percent of its workforce, and is starting to execute that plan without making an official announcement. Since the company has been keen to show the world its more transparent side, as part of an effort to distance itself from suspicions that it’s controlled by Beijing, I would expect it might actually make a formal announcement on its workforce “adjustment” plan perhaps as soon as September or October. No one should be all that surprised by such an announcement. To the contrary, some might even find such it refreshing that a Chinese company of that size is being more open about the recent challenges it has faced in most of its major global markets. Those challenges for both Huawei and crosstown rival ZTE (HKEx: 763; Shenzhen 000063) have been numerous over the last year. Huawei itself has seen several major initiatives blocked in the US and Australia in recent months, and is now reportedly being investigated in the European Union for receiving unfair subsidies from Beijing. (previous post) One of its other major markets, India, is also caught up in a domestic corruption scandal that has slowed purchasing of new telecoms equipment to a crawl. Meantime, spending in Huawei’s home market is also slowing after a boom over the last 3 years as China’s 3 telcos built up their 3G networks. Huawei has tried to offset the slowdown in its traditional networking equipment business by building up its cellphone unit, but even that will take time. In the meantime, the company may be suffering with growing numbers of underemployed workers and idle production lines, necessitating this upcoming “adjustment” to its workforce.

Bottom line: Huawei has very likely created a plan to cut up to 10 percent of its workforce, as it tries to adjust following setbacks in many of its major markets.

Related postings 相关文章:

◙ West Launches New Attack on Huawei, ZTE 西方对华为和中兴通讯发起新攻击

◙ Nokia Siemens Accuses Huawei 诺基亚西门子指责华为抄袭其宣传材料

◙ Huawei Goes on the Offensive 华为发起攻势

Commerce Ministry Weighs in on Price Wars 商务部或对电商领域价格战有所行动

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You know things are bad when even your national regulator isn’t optimistic, which appears to be the situation based on comments by a top Commerce Ministry official discussing rampant competition plaguing China’s e-commerce sector. Of course, it doesn’t take a genius to know that China’s vibrant e-commerce industry is in the midst of a series of cutthroat price wars, with new promotions being announced almost daily by the likes of Jingdong Mall, also known as 360Buy, Dangdang (NYSE: DANG), Yihaodian and Suning (Shenzhen: 002024). What’s more interesting here is the fact that the regulator is commenting on the situation, which hints that perhaps it may soon make an attempt to ease the situation — a step that would be consistent with China’s past behavior but also one I would strongly advise against. According to media reports, a top Commerce Ministry official for e-commerce, speaking at an event in Beijing this week, noted that the online retailing space has huge growth potential, with total sales set to pass 3 trillion yuan in the country’s current 5 year plan. But he also noted that companies are using the future to subsidize the present, which has led most major players to sink deeply into the red. (Chinese article) That trend has been all too obvious on company financial statements lately, with Dangdang, the biggest publicly traded player, and newly listed discount retailer Vipshop (NYSE: VIPS) both recently reporting big quarterly losses. (previous post) None of this is really news, as these price wars have been going on for nearly a year now. But what’s potentially cause for concern is that the Commerce Ministry is speaking so publicly about its own concern for the sector, since regulators are traditionally supposed to remain low-key and impartial to market developments as long as conditions remain orderly. These comments indicate the ministry may be considering taking steps to cool the competition, perhaps by bringing the major parties together to try and tone down their price wars. Indeed, the very same Commerce Ministry made a similar move last year, when it tried to mediate a patent dispute between telecoms equipment leaders Huawei and ZTE (HKEx: 763; Shenzhen: 000063). (previous post) That attempt looked clumsy and inappropriate and I doubt it yielded any results, and a similar attempt to end the rampant competition in e-commerce would most likely product a similar outcome. It’s somewhat understandable that Beijing regulators might want to prevent this kind of destructive situation from getting out of control, which is clearly the case with e-commerce. But experience in the West has shown that government intervention in these situations usually just makes the situation worse, and instead natural market forces are the best antidotes for these kinds of problems.

Bottom line: The Commerce Ministry needs to remain impartial in ongoing e-commerce price wars and let market forces resolve the situation.

Related postings 相关文章:

◙ Beijing Plays ‘Father Knows Best’ In Huawei-ZTE Spat 中国政府插手华为与中兴之争

◙ Dangdang and Gome: Marriage Ahead? 当当和国美：联姻前夕？

◙ Youku and Dangdang: Stuck in the Red 优酷和当当：生存在亏损

News Digest: May 31, 2012 报摘： 2012年5月31日

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The following press releases and media reports about Chinese companies were carried on May 31. To view a full article or story, click on the link next to the headline.

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◙ Huawei, ZTE (HKEx: 763) Say Have Yet to Be Notified of Europe Anti-Dumping Probe (Chinese article)

◙ Commerce Ministry Urges B2C Sites to End Price Wars, Not Optimistic (Chinese article)

◙ US Sets Preliminary Duties on China Wind Towers (English article)

◙ Yingli Green Energy (NYSE: YGE) Reports Q1 Results (English article)

◙ Youku (NYSE: YOKU) Slowly Taking Over Tudou (Nasdaq: TUDO) Management (Chinese article)

West Launches New Attack on Huawei, ZTE 西方对华为和中兴通讯发起新攻击

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The bad news never seems to end for embattled telecoms equipment makers Huawei and ZTE (HKEx: 763; Shenzhen: 000063), which have become magnets for attacks from global rivals seeking to curb their gains into the lucrative US and European markets. The latest move has seen the European Union launch an anti-dumping probe against the Chinese pair over allegations that they receive unfair subsidies from Beijing, according to foreign media reports. (English article; Chinese article) It’s not surprising that this investigation is coming in Europe, since most of Huawei’s and ZTE’s biggest global rivals are based there, including Ericsson (Stockholm: ERICb), Nokia Siemens Networks and Alcatel Lucent (Paris: ALUA). All those companies have complained for years that Huawei and ZTE can offer lower prices partly due to strong support from Beijing, which indirectly subsidizes them through policies like export rebates. From my perspective, the fact that the EU has launched this investigation is not surprising at all. What is more interesting is the timing of the move, as well as the broader implications of the probe for a recent major push by Huawei and ZTE into the faster-growing and less controversial smartphone sector. In terms of timing, this anti-dumping investigation is the latest in a recent series of government probes in the US and Europe against not only Huawei and ZTE but also a growing number of other Chinese firms in up-and-coming sectors. Both companies have been largely locked out of the US network-building market to date over concerns their equipment could be used for spying by Beijing. ZTE received a major setback on that front early last year when Sprint (NYSE: S), one of the top 4 US wireless carriers, rejected its bid to help build a new 4G telecoms network (previous post); Huawei received a similar setback months later when it was blocked from bidding for US government contracts to upgrade some of the nation’s emergency telecoms networks. (previous post) Even top Chinese mobile carrier China Mobile (HKEx: 941; NYSE: CHL) has gotten caught up in the fray, with US regulators earlier this month citing security concerns as a reason for potentially vetoing the carrier’s application to offer service between China and the US. (previous post) This latest EU move is unrelated to security concerns, but is rather based on accusations of unfair subsidies from Beijing, which has become another popular tool for Western firms to slow down the advance of aggressive Chinese rivals into their markets. Both the EU and US regularly launch anti-dumping investigations against Chinese sectors, though most of those have usually targeted low-end manufacturing areas like construction materials and auto parts. But the unfair trade attacks moved into the high-tech space last year when the US has launched a high-profile investigation against China’s solar panel industry, which could soon result in big punitive tariffs. (previous post) This new series of attacks against such higher tech companies could quickly become a major obstacle for China as it tries to move away from its traditional strength as a low-end manufacturing powerhouse to higher-tech products that command bigger profit margins and rely less heavily on the cheap labor. From the perspective of Huawei and ZTE, equally worrisome is the prospect that the US and Europe could soon turn their attention to the companies’ smartphone units, which they are aggressively building up as a less controversial alternative to their traditional networking equipment businesses. If the EU believes the 2 companies’ networking equipment business is unfairly subsidized, it should logically believe the same is true for their cellphones. At the end of the day, I suspect there is some truth to the anti-dumping and possibly even the security concerns, which Chinese companies will need to address if they really want to become global players. At the same time, however, I do believe that much of this activity also represents foreign rivals’ attempts to stop encroachment into their home markets by Chinese firms — a reality that Huawei, ZTE and other aspiring Chinese high-tech firms will have to learn to deal with more effectively if they really want to become top global players.

Bottom line: An EU anti-dumping probe against Huawei and ZTE is the latest move by their global rivals to try and keep them out of lucrative Western markets.

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 Goes on the Offensive 华为发起攻势

◙ Solar Storm Heats Up in US, China 中美太阳能产品征税之争升温

News Digest: May 29, 2012 报摘： 2012年5月29日

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The following press releases and media reports about Chinese companies were carried on May 29. To view a full article or story, click on the link next to the headline.

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◙ China’s Huawei, ZTE (HKEx: 763) Face EU Action on Telecom Subsidies-FT (English article)

◙ China Poised to Revive Cash-for-Clunkers Program, Official Says (English article)

◙ China Yongda Scraps Hong Kong IPO Amid Weak Demand (English article)

◙ UPS (NYSE: UPS), FedEx (NYSE: FDX) to Receive Domestic Delivery Licenses – Source (Chinese article)

◙ China’s PICC Adds 14 Banks to $6 Billion Dual IPO: IFR (English article)

Huawei Goes on the Offensive 华为发起攻势

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Maybe I’ve become a bit jaded after writing about Chinese companies for so long, but I’ll openly admit that I was quite encouraged by the latest reports that telecoms equipment giant Huawei has lodged a complaint in Europe accusing a company of monopolistic practices. The reason for my excitement is that after years of watching Chinese companies constantly assume a defensive posture on the global stage, it’s refreshing to finally see one go on the offensive to fight what it believes is unfair treatment. Whenever Chinese companies appear in the headlines due to conflicts overseas, the chances are nearly 100 percent that those companies are coming under attack by local interests, sometimes over allegations of unfair subsidies, and other times due to nationalistic concerns. In nearly every case, the accused Chinese company is likely to quickly assume a defensive posture, complaining that it’s being treated unfairly and arguing why the allegations are untrue. So it’s nice for once to finally see a Chinese company take the offensive and fight for its right when it believes it is receiving unfair treatment in the market. In this case Huawei lodging its anti-monopoly complaint after failing to license key 3G technology patents from a company called InterDigital (Nasdaq: IDCC). (English article) Huawei is  accusing InterDigital of extortion, saying the company made “unreasonable and discriminatory demands” for rights to the patents for its 3G wireless technology. Huawei filed its complaint after it was sued in the US last year for patent infringement by InterDigital, which also sued Nokia (Helsinki: NOK1V) and LG Electronics (Seoul: 066570). So from that perspective, Huawei’s latest action is a bit reactionary to InterDigital’s lawsuit, and in fact this kind of suit and countersuit has unfortunately become quite common in the technology industry. But from my perspective, this kind of action by Huawei at least shows it finally realizes the global market is a tough and competitive place, and the only way it will be able to survive and succeed there is to play by the same rules as other major global companies. That means that it, as well as other Chinese companies, will need to use more aggressive tactics, not only when they come under direct attack but also when they are entering markets where local interests might want to use excuses like national security, unfair subsidies and broader xenophobic fears to keep them out of the market. Huawei tried out its legal attack skills at home last year, when it sued crosstown rival ZTE (HKEx: 763; Shenzhen: 000063) for patent infringement. (previous post) Now it appears to be taking its more aggressive strategy to the global stage, which, combined with a well-funded public relations campaign, could finally help it win better access to Western markets in the next couple of years.

Bottom line: Huawei’s new anti-monopoly complaint in Europe reflects a new more offensive posture that more Chinese companies need to take to succeed on the world stage.

Related postings 相关文章:

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

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

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

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

News Digest: April 26, 2012 报摘： 2012年4月26日

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The following press releases and media reports about Chinese companies were carried on April 26. To view a full article or story, click on the link next to the headline.

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◙ Proview Owns iPad Trademark in China -Govt Official (English article)

◙ Digital Domain (NYSE: DDMG) Completes JV, 3D License Deal with China’s Galloping Horse (Businesswire)

◙ Studios’ Dealings in China Said To Be Subject of SEC Questions (English article)

◙ ZTE (HKEx: 763) Reports Q1 Results (HKEx announcement)

◙ Shanghai Fosun Pharmaceutical’s IPO Gets OK (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)