Bottom line: Micron’s decision to discourage a buyout offer from China’s Unigroup is a bargaining tactic due to high regulatory risk, and Unigroup is likely to come back with a sharply raised offer in the next 2 weeks.
Micron discourages China bid
A week after splashing into the headlines, a potential bid by China’s Tsinghua Unigroup for Micron Technology (Nasdaq: MU) is being cast into doubt, with word that the leading US memory chip maker is worried such a deal would get vetoed by Washington on national security grounds. The development comes as a slight surprise to me, as I previously predicted that such a deal would ignite some controversy but would ultimately get approved by the Committee on Foreign Investment in the United States (CFIUS), which conducts reviews for national security risks.
It’s quite possible that Micron really doesn’t want to proceed with talks because it believes there’s a big enough chance that such a deal could get vetoed in Washington. But that said, it’s also quite possible that Micron could quickly resume the talks if Unigroup offers a higher price than the previous $21 per share being discussed, and that all of this is just a bargaining tactic. Read Full Post…
Bottom line: ZTE’s new campaign in its home China smartphone market looks relatively well timed if a wave of consolidation starts by year-end, but it could miss its annual sales target if the competition doesn’t start to subside soon.
ZTE targets high-end with Axon
After quietly falling out of the top 5 in its home smartphone market over the past 2 years, telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063) is gearing up for a new push with an aim to become one of China’s top 3 players in the next 3 years. That’s the message coming from Adam Zeng, who has been working hard to breathe new life into ZTE’s smartphone business since taking over the company’s mobile device unit about a year ago.
Zeng detailed his plans for me in an interview last week, including his attempts to go upmarket with a new line of smartphones and also a broader blitz of new models slated for release in China later this year. In my view, ZTE was quite wise to scale back its smartphone campaign in China over the last 2 years, as the market became incredibly competitive with a wide range of established and new names all competing for space. Read Full Post…
Bottom line: Xiaomi’s and Wanda’s moves into financial services look logical but a bit late, and could struggle to compete with earlier initiatives from the likes of Alibaba, Tencent and Baidu.
Xiaomi joins partners in new bank plan
With just about all the major Internet players moving into financial services, it’s been somewhat surprising that smartphone sensation Xiaomi hasn’t joined the trend yet. The same can be said for Wanda Group, which is moving beyond its traditional strength in real estate with plans for a major e-commerce venture and plays in the entertainment space.
That looks set to change soon, however, with separate reports saying both Xiaomi and Wanda are planning moves into China’s financial sector that is being opened to private money after years of domination by big state-owned companies. Xiaomi’s move comes in an announcement from an obscure company called Hebang Corp (Shanghai: 603077), which says the pair are part of a group that plans to open a privately funded bank. Meantime, Wanda’s plan comes in a report citing company chief Wang Jianlin saying he is planning to make some major purchases in the financial services arena. Read Full Post…
Bottom line: The iPhone’s appearance at the top of a Chinese investigative list of “data hogs” reflects the company’s obsession with control, but is unlikely to have a long-term negative effect on its local image.
iPhones gobble up data
Chinese media are once again feasting on leading smartphone maker Apple (Nasdaq: AAPL), which has has come out squarely on top of a “list of shame” that details how some of the best selling brands quietly steal data minutes from their unaware users. I’m not an iPhone user so I can’t attest to how the iPhones steal their data and how easy it is for users to stop the process. But my Google (Nasdaq: GOOG) Nexus phone is guilty of similar data hogging, and I had to pay a couple of large phone bills after I first bought it before I finally learned how to stop such automatic data consumption. Read Full Post…
Bottom line: Xiaomi’s rapidly falling sales growth is the result of many factors that reflect its youth and inexperience, and the company should pause and return to its early strategy or risk seeing its slowdown accelerate.
Xiaomi sales growth slows further
Media are swarming to the latest sales figures from sputtering smartphone sensation Xiaomi, which has just announced first-half data that looks mediocre to downright bad, depending on how you look at it. The company is trying to put a positive spin on the data, saying its first-half sales rose 33 percent from a year earlier. But one media report points out the latest 6-month sales were actually down from the second half of 2014, marking the first-ever sequential decline for this rapidly sputtering smartphone superstar.
This latest data shouldn’t come as a huge surprise, but instead marks a continuation of a steady stream of signals that point to a rapid reversal of fortune for Xioami. I’ve previously said the company and its charismatic CEO Lei Jun are at least partly to blame for the negative publicity they are now receiving, since they built up huge expectations over the last 2 years through a non-stop series of lofty announcements and other high-profile publicity stunts. Read Full Post…
Bottom line: Xunlei’s growing ties with Xiaomi could presage a buyout bid for the former by the latter, as Xiaomi seeks partners and acquisitions to help it realize its goal of building an ecosystem of Internet services and related devices.
Xiaomi, Xunlei launch Xingyu
A year-old alliance between smartphone sensation Xiaomi and online video operator Xunlei (Nasdaq: XNET) has entered a new phase, with news that the pair have formed a content distribution service. That plan, which will see the pair launch a new brand called Xingyu, is part of Xiaomi’s efforts to create an ecosystem of Internet-based services like online video for its smartphones and other devices like smart TVs and set-top boxes.
This latest move isn’t a big surprise, and comes after Xiaomi purchased 30 percent of Xunlei almost exactly a year ago at the time of Xunlei’s New York IPO that met with a cool reception. Xunlei’s shares have been quite volatile since then, losing almost half their value before rebounding over the last few months to return to their IPO level. But a recent wave of buy-out offers for many US-listed Chinese companies, combined with this growing alliance, is raising the interesting possibility that Xiaomi might soon lead a bid to privatize Xunlei or perhaps buy the company outright. Read Full Post…
Bottom line: Xiaomi’s hiring of a new CFO and entry to Brazil are its latest steps in a gradual transformation to a more western-style global company, in preparation for an IPO that is at least 2 years away.
Xiaomi to launch next week in Brazil
Stumbling smartphone sensation Xiaomi is back to doing what it knows best, namely making headlines with the latest moves in its global expansion and by hiring executives from other high-profile companies. In this case the smartphone high-flyer has just announced its formal plan to enter Brazil, putting it squarely in 3 of the 5 BRICS countries after India and China. The other move looks a bit scripted, and will see a top China executive from Russian high-tech investor Digital Sky Technologies (DST) join Xiaomi as CFO.
The latter piece of news looks slightly strange because DST is one of Xiaomi’s investors, and it would be unusual to do something hostile like stealing a top executive from one of your big backers. Instead, this looks more like a planned move that is relatively common in this kind of situation, which sees big investors supply executives to the companies they back in preparation for eventual IPOs. Read Full Post…
Bottom line: Alibaba’s boosting of its stake in a leading Indian e-payments firm is part of a broader strategy that aims to replicate its China success in India through a series of acquisitions, and looks relatively well conceived.
Alibaba eyes new India investment
Just a week after abruptly pulling out of a major US investment, e-commerce giant Alibaba (NYSE: BABA) is increasingly focusing on India as the first major stop on its global expansion, with word that it’s in talks for a major new investment in a local e-payments firm. The new investment in Paytm, which would be worth about $600 million, is just the latest in a growing string of similar Indian acquisitions for Alibaba as it tries to replicate its success in China in overseas markets.
From a strategic perspective, India looks like a smart bet for Alibaba. The Indian market shares many characteristics with China, including the lack of a mature western-style retail industry from the pre-Internet era. As a result, a far bigger percentage of people in these markets are more likely to shop online. What’s more, the Indian retail market is relatively less competitive than western markets, and is experiencing rapid growth. Read Full Post…
Bottom line: The current fund-raising frenzy reflected in a recent round of buyouts for US-listed Chinese companies and large IPOs like the one for Legend Holdings is likely to quickly fizzle if China’s stock market sell-off continues.
KongZhong gets buyout offer
The China fund-raising machine has continued to rumble ahead despite the recent stock market sell-off in Shanghai, with yet another privatization offer coming for a New York-listed firm and a lethargic but respectable debut for newly listed Legend Holdings (HKEx: 3396). The former item saw shares of game operator KongZhong (Nasdaq: KZ) jump after receiving a buyout offer, even as most New York-listed Chinese shares slumped in line with the big sell-off in Shanghai. The latter item saw Legend shares finish down slightly in their Hong Kong trading debut, which doesn’t sound too exciting but was still far better than the 3.3 percent decline of the Shanghai benchmark index. Read Full Post…
Bottom line: LeTV’s purchase of a major stake in Coolpad is likely to upset Coolpad’s existing alliance with Qihoo, and could lead to a turbulent period that could ultimately see one of the alliances terminated.
LeTV buys into Coolpad
The battle for supremacy in China’s crowded smartphone space has just taken a strange twist, with word that online video superstar LeTV (Shenzhen: 300104) has purchased a major stake in domestic manufacturer Coolpad (HKEx: 2369). This particular move was quite unexpected, as I had written just last week that software security specialist Qihoo 360 (NYSE: QIHU) was the most likely candidate to purchase a stake in Coolpad being sold by the company’s largest shareholder, Data Dreamland.
Coolpad was once one of China’s hottest homegrown smartphone makers, but intense competition drove it to form a joint venture late last year with Qihoo, which contributed $420 million in much-needed cash for its stake in the venture. That led me to believe that Qihoo could make a bid to invest directly in Coolpad and perhaps eventually buy the company outright after Data Dreamland last week announced its intent to sell some or all of its 38.3 percent stake in Coolpad. (previous post) Read Full Post…
Bottom line: A probable correction in China’s stock markets could cause Tongcheng to abandon its decision to list at home, and lead to a weak debut for Legend Holdings’ Hong Kong IPO.
Toncheng eyes China IPO
When the history books are written, the latest batch of IPO news could well mark the end of a brief but unusually buoyant period that has seen many Chinese companies eschew overseas stock markets for listings at home. Leading off the news was a sizzling performance by securities brokerage Guotai Junan (Shanghai: 601211) on its trading debut in Shanghai, as it become China’s biggest domestic IPO since 2010.
Another piece of IPO news also cast a spotlight on the hot Chinese stock markets, as online travel site Tongcheng said it was eying a listing at home in the next year, in a snub to New York where most of its peers are traded. Last but not least, the lukewarm reception for Chinese listings abroad was reinforced by Legend Holdings, parent of PC giant Lenovo (HKEx: 992), which failed to attract any major international investors as it priced its Hong Kong IPO. Read Full Post…
