Bottom line: National security concerns are likely to torpedo pending sales of crane maker Terex and the Chicago Stock Exchange to Chinese buyers, while a similar sale of Ingram Micro shouldn’t draw as much scrutiny.
Terex, Chicago Stock Exchange sales draw national security concerns
Just a day after chip maker Fairchild (NYSE: FCS) called off talks to be purchased by a Chinese buyer over concerns that Washington would veto the deal, 2 other similar planned acquisitions of US firms are coming under the microscope. In the more ominous of the new developments, a group of 46 US congressmen have expressed reservations about a deal announced last week that would see a little-known Chinese company buy the Chicago Stock Exchange.
The other development has a single US congressman expressing similar reservations about a deal that would see Chinese construction equipment maker Zoomlion (HKEx: 1157) buy US crane maker Terex (NYSE: TEX). At the same time, yet another major deal that could draw similar national security scrutiny is in the headlines, with word that a company connected to private equity investor HNA Group has offered to pay $6 billion for computer and component distributor Ingram Micro (NYSE: IM). Read Full Post…
Bottom line: Apple Pay’s upcoming China launch and WeChat’s roll-out of fees for its cash-providing service reflect growing competition in the e-payments market, which will result in a long and costly battle among major players for market share.
Apple, WeChat in new e-payments moves
The rapidly heating China market for electronic payments is in a couple of top headlines today, led by highly anticipated news that Apple (Nasdaq: AAPL) will launch its Apple Pay service in China later this week. At the same time, separate media reports say that Internet giant Tencent (HKEx: 700) is taking a major step towards monetizing the e-payments service attached to its wildly popular WeChat instant messaging service.
The pair of headlines underscore just how much potential both domestic and foreign companies see in the China electronic payments market, which is growing rapidly as consumers and companies do more of their buying online. Some new data nicely summarizes the market, with leading e-payments firm UnionPay reporting that transactions processed over its network soared 30 percent to 312 billion yuan ($48 billion) over the week-long Lunar New Year holiday last week. Read Full Post…
Bottom line: Huawei is likely to consolidate its position as China’s top smartphone brand this year, while Lenovo and Samsung could regain some market share as each mounts aggressive turnaround campaigns.
Huawei takes China smartphone crown
A year is almost like an eternity in the fast-moving smartphone world, and nowhere is that reality more on display than in the latest quarterly data on China’s cut-throat market. In the smartphone history books, 2015 will go down as the year that saw Huawei surge to become China’s largest player, with smaller homegrown brands Vivo and Oppo also making impressive gains. On the other side of the aisle, the year is one that former high-flyers Samsung(Seoul: 005930) and especially Lenovo (HKEx: 992) would rather forget, as both plunged out of the nation’s top 5 brands.
Smartphones are an extremely big business due to their high prices, a fact that has drawn numerous companies to the space and created intense competition in China. But constant changes to technology, combined with increasing commoditization due to the dominance of the free Android operating system, means that unknown companies can quickly rise to become major players. Similarly, a winner one year can quickly stumble to become a loser the next. Read Full Post…
Bottom line: A new equity alliance between Qihoo and Norway’s Opera web browser is a smart move that could see initial turbulence due to differing management styles, but should ultimately benefit both sides.
Qihoo in group buying Opera
Security software specialist Qihoo 360 (NYSE: QIHU) is taking an important step towards its ambitions of becoming a global Internet brand, with word that it’s part of a group set to buy Norway-based Opera (Oslo: OPERA), maker of the world’s fourth most popular mobile Internet browser. Qihoo is already the maker of one of China’s most popular homegrown web browsers, and is also posing one of the first serious challenges in years to online search leader Baidu(Nasdaq: BIDU) with its Haosou.com engine. It’s also making a big push to move its highly popular security software products into the global marketplace.
Against that backdrop, this new deal looks quite intriguing and also like a smart step for Qihoo to complement its current strengths. But I would also caution that Qihoo is famous for its business tactics, which many might describe as highly aggressive and even unethical. Those include designing products that make big changes to computer and smartphone configurations without their users’ knowledge, most often to favor Qihoo at the expense of rival products. Read Full Post…
Bottom line: Xiaomi and Meizu are trying to expand their exports by working through third-party distributors, and could make a formal entry into the US later this year after studying the market for patent-related liability.
Meizu eyeing US?
After dancing around the edges of the lucrative but extremely competitive US market for much of the last 2 years, fast-fading Chinese superstar Xiaomi and up-and-coming local rival Meizu may finally be preparing to enter the market through tie-ups with local carriers. A flurry of new media reports say the pair of Chinese brands are already making the move via a tie-up that will see their smartphones offered by US Mobile, a virtual network operator (VNO) that uses T-Mobile’s (Nasdaq: TMUS) network.
But no sooner did the reports emerge that Xiaomi issued its own statement saying it had no plans to sell its phones in the US, and that US Mobile was not one of its authorized distributors. Meizu also said it has no announced plans to enter the US. What seems clear from all this is that both companies are probably talking with one or more distributors about selling their smartphones in the US and possibly other western markets, even though neither is quite ready to make a formal announcement. Read Full Post…
Bottom line: Western Digital’s planned sale of 15 percent of itself to a Chinese buyer stands a 50-50 chance of getting vetoed by Washington on national security grounds, which could throw Western Digital’s planned purchase of SanDisk into doubt.
Western Digital’s China tie-up unraveling?
Many have been writing about China’s mega purchase last year of a big stake in computer hard drive giant Western Digital (Nasdaq: WDC) as if it’s a done deal, even though the $3.8 billion tie-up has yet to formally close. Even the buyer, Tsinghua Unisplendour, appeared to believe its purchase of 15 percent of Western Digital was unlikely to attract controversy, and was already using the US company as part of plans to build up China’s first global memory chip giant.
But the tie-up could fall victim to US national security concerns, following Western Digital’s new disclosure that it’s extending a timeline for the deal to close due to scrutiny from Washington. It’s probably too early to say this particular deal will collapse, even though Western Digital was apparently caught off guard by the scrutiny it’s now receiving from the Committee on Foreign Investment in the US (CFIUS), which reviews major cross-border high-tech deals for national security risks. Read Full Post…
Bottom line: Apple’s China sales are likely to enter a new period of slower growth as the Chinese domestic smartphone market stalls and a growing number of higher-end buyers flock to the surging Huawei.
Apple faces long-term China slowdown
Everyone is buzzing about Apple’s (Nasdaq: AAPL) latest quarterly results, which show that sales of its iconic iPhones may have finally peaked and be set for a longer period of slow growth or even contraction. A key piece of that equation is the China market, where the company’s growth slowed sharply in the quarter due to fierce competition from a growing field of rising domestic competitors led by the surging Huawei.
As someone living in China, I can say with relative confidence that Huawei smartphones are indeed becoming increasingly common here on the streets of Shanghai. The brand is still seen as distinctly Chinese, in contrast to the trendier but fast-fading Xiaomi that rose to prominence partly on its ability to escape the “made in China” image. Read Full Post…
Bottom line: A subdued mood at Chinese high-tech firms’ New Years parties reflects a growing realism that the days of breakneck growth may be over for many, due to stiff competition and a slowing domestic economy.
Subdued mood at Year of the Monkey parties
The Year of the Monkey is still more than a week away, but already online gaming giant NetEase (NYSE: NTES) is taking the prize for most unusual New Year’s party for including sex toys among its cache of prizes during the lottery at its annual bash. Meantime, stumbling smartphone sensation Xiaomi ushered in the New Year with an unusual dose of new realism from chief Lei Jun, who also added a bit of historical revisionism in a bid to cheer up staff at his annual party.
Theses yearly parties are a good indicator of how companies feel about their performance in the previous year, and also offer some insight into their mood going into the year ahead. A media report sums up highlights from some of this year’s biggest parties, which typically bring together hundreds and sometimes thousands of employees at a single event to celebrate the New Year as a corporate “family”. Read Full Post…
Bottom line: Coolpad’s shares are likely to come under pressure for the rest of 2016 due to stiff competition in China’s smartphone market, and it could be forced to raise more money last this year following its newly-announced rights issue plan.
Coolpad taps stakeholders for more funds
It seems like $700 million and 2 major new alliances weren’t enough to prop up financially challenged smartphone maker Coolpad (HKEx: 2369), which has just announced a new share rights offer to raise up to HK$736 million ($95 million). The deal marks the latest distress signal coming from China’s overheated smartphone sector, which has seen Coolpad and a vibrant field of other domestic brands engage in a fierce game of price wars over the last 2 years.
What’s somewhat revealing about this new capital raising plan is its relatively paltry size, and also the large discount that Coolpad had to offer to sell the new shares. Even worse, one of the main buyers of the new shares is Chinese online video giant LeTV (Shenzhen: 300104), which should have been willing to pay closer to market levels for the new shares after becoming one of Coolpad’s largest stakeholders last year. Read Full Post…
Bottom line: Beijing should note the latest trouble signal from ZTE in the smartphone sector, and take steps to prevent future similar boom-bust cycles by encouraging more responsible investing incentives by local governments.
ZTE cautious on China smartphone market
The latest trouble signal from China’s overheated smartphone sector came last week from telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063), which said it would remain cautious in the world’s largest market even as it announced ambitious new sales targets for the rest of the world this year. The company’s relative caution in its own home market comes amid a looming shakeout that is just the latest in a series of boom-bust cycles that have become all too common in China’s business landscape in the last 3 decades.
While market forces play a large role in these bubbles, regional governments looking to spur economic growth may also share some responsibility by offering incentives that encourage local firms to enter unfamiliar areas where the chance of failure is high. Such failures often result in big financial losses and mass layoffs, negating any economic benefit they were supposed to create. Read Full Post…
Bottom line: Apple’s accelerated China store openings and February roll-out of its Apple Pay service represent efforts to boost its local profile, as the broader China smartphone market shows signs of saturation and is likely to contract this year.
Apple Pay coming to China in February
Global smartphone leader Apple (Nasdaq: AAPL) is kicking off the New Year by accelerating its efforts in China on two fronts, opening more of its trademark Apple Stores as it also prepares a February launch for a local version of its Apple Pay electronic payments service. Both campaigns have been in the headlines in recent days, extending a broader campaign by CEO Tim Cook to pay more attention to a market that could soon surpass the US to become Apple’s biggest.
At the same time, these latest campaigns come amid a growing chorus of predictions that sales of Apple’s iPhones could soon start to slow sharply. A primary factor behind that slowdown could be China, where the smartphone market has become saturated and is expected to contract in 2016 after 3 years of explosive growth. Read Full Post…
