Bottom line: JD.com’s new share repurchase program looks like a good use of cash due to likelihood of a rebound for its stock, while its tie-up with a top Korean peer also looks like a good way to target Chinese consumers who like imported goods.
JD launches share buy-back
After amassing huge quantities of cash through a series of IPOs and other fund-raising activities, Chinese Internet companies are rapidly discovering a new use for those idle funds by buying back their own stock. The latest such move has JD.com (Nasdaq: JD), the nation’s second largest e-commerce company, announcing a new plan to buy back up to $1 billion worth of its shares, on the belief they have become undervalued in a recent sell-off.
JD was also in the headlines for another new tie-up with a major Korean retailer, announcing the opening of a flagship store to offer imported goods from South Korean e-commerce giant Lotte.com. This particular move is part of an ongoing drive by Chinese e-commerce firms to offer more imported goods to local consumers who are often wary of domestic products that are fakes and suffer from poor quality. Rival Alibaba (NYSE: BABA) has embarked on a similar drive, announcing its own new tie-up with Germany’s Metro Group the same day as the JD announcement. (company announcement) Read Full Post…
Bottom line: Qihoo’s latest move forcing Coolpad to buy-out their joint venture could be a bargaining tactic to pressure Coolpad into ditching a separate tie-up with LeTV, and could spark a bidding war for Coolpad by Qihoo and LeTV.
Bidding war brewing for Coolpad?
Smartphone maker Coolpad (HKEx: 2369) has become a bit of a hot potato lately, though it’s not clear if the company is hot property or a pariah these days. The company was one of China’s earliest smartphone makers, and quickly built up share as a leading name in its fledgling home market. But rampant competition as others piled into the market hurt its prospects, prompting it to form a major equity tie-up with security software maker Qihoo (NYSE: QIHU) last December, and then with online video firm LeTV (Shenzhen: 300104) last month.
The LeTV tie-up surprised many, and led Qihoo feeling betrayed. Now Qihoo, whose equity tie-up came in the form of a joint venture, appears to be seeking revenge for that betrayal. In its latest move to express its outrage, Qihoo has just announced it will exercise a non-compete option in their agreement that will force Coolpad to buy out their joint venture at double the current market value. Read Full Post…
Update: Since originally writing this post, Alibaba has put out a statement denying it is reducing graduate hiring, and says it has sent more than 1,400 job offer letters to graduating students for 2016 (Chinese article)
Bottom line: Alibaba’s reduction in its university recruiting program is an extension of a hiring freeze announced earlier this year, and is part of a much-needed effort to make its large headcount more efficient.
Alibaba trims campus recruitment
In what some may interpret as a sign of trouble, media are reporting that e-commerce leader Alibaba (NYSE: BABA) is sharply scaling back its recruitment of new college graduates. The interpretation of trouble is relatively obvious, since Alibaba has wooed investors with its breakneck growth story since its record IPO last year. Thus a sharp slowdown in hiring of young talent could signify a parallel slowdown in overall growth.
But the news shouldn’t come as a huge surprise, since Alibaba announced just 4 months ago that it would freeze its global headcount for the rest of the year. (previous post) That move was aimed at giving the company time to rationalize its huge workforce of 30,000, many of whom have joined as a result of Alibaba’s lightning growth that has included numerous acquisitions over the last 2 years. Read Full Post…
Bottom line: A new 1 billion yuan co-production tie-up for iQiyi marks the latest bid by Baidu to build up its new businesses through big spending, but could pressure Baidu’s shares due to shorter-term profit erosion.
iQiyi, Shanghai New Culture in production tie-up
I have to credit Internet giant Baidu (Nasdaq: BIDU) for sticking to its guns with its recent strategy of aggressive spending on acquisitions and tie-ups as the centerpiece of a drive to diversify beyond its core search business. That strategy put a big damper on Baidu’s profit growth in its latest quarterly results, sparking a sell-off that has seen its stock lose more than a third of their value this year.
And yet despite those concerns, Baidu continues to aggressively pour money into its emerging new businesses, many of them companies that are growing fast but are also losing big money. That’s certainly the case with Baidu’s latest investment, which will see it pour 1 billion yuan ($160 milllion) into a new co-production deal between its iQiyi online video unit and a Shenzhen-listed film production house called Shanghai New Culture (Shenzhen: 300336). Read Full Post…
Bottom line: Xiaomi’s latest scandal involving false promotional claims will deal another blow to its rapid rise, increasing the likelihood that it will miss its already-reduced target for smartphone sales this year.
Xiaomi caught in bait-and-switch scandal
Smartphone maker Xiaomi started this year on a high note, after scoring a major new fund-raising late last December that gave it an impressive $45 billion valuation just 4 years after its founding. But it seems there was only one direction to go from there, as the company has been dogged by a steady series of minor scandals, product delays and disappointing sales figures ever since.
The latest headlines of a Xiaomi scandal reflect just how much momentum the company has lost this year. The reports center on allegations of false promotions for the company’s Hongmi Note 2, after consumers noticed the new low-end smartphone came with a cheaper screen than originally promised. Read Full Post…
Bottom line: A plan by Alibaba’s chairman and vice chairman to borrow $2 billion using their company stock as collateral is a simple diversification move, and doesn’t represent any change in the company’s fundamentals or outlook.
Alibaba chairman, vice chairman eye $2 bln loan
Shares of e-commerce leader Alibaba (NYSE: BABA) have been buzzing these last few days since media reported that Chairman Jack Ma and one of the company’s other co-founders are preparing to diversify their company holdings that are worth billions of dollars. Neither Ma nor Vice Chairman Joe Tsai is planning an actual share sale, which would almost certainly undermine the company’s shaky stock. Instead, the pair are in talks to take out a $2 billion loan using their huge stash of Alibaba shares as collateral.
Alibaba’s shareholders didn’t seem to like the plan too much, and made their voices heard by trimming nearly 4 percent from the company’s share price after reports of the move surfaced late last week. The latest close means Alibaba stock now trades at a record low of $63.91, or about 6 percent below the $68 price for its record-breaking $25 billion IPO that will celebrate its one-year anniversary later this month. Read Full Post…
Bottom line: Alibaba’s new tie-up with a leading US wine maker is mostly symbolic and represents a boom in the e-commerce market for imported goods, while NetEase’s new share buyback plan is unlikely to provide much support for its sagging stock.
Robert Mondavi launches on Tmall
Leading Chinese Internet companies Alibaba (NYSE: BABA) and NetEase (Nasdaq: NTES) are trying different approaches to boost their sagging stocks, amid a broader sell-off for US-listed Chinese companies in tandem with China’s own tanking markets. The first case has e-commerce leader Alibaba launching a new online wine shop with US giant Robert Mondavi, as part of a broader move to let Chinese consumers buy imported goods online. The move by online game giant NetEase looks a bit more conventional, with its announcement of a plan to buy back up to $500 million of its stock.
Alibaba and NetEase certainly aren’t alone in watching their shares tumble, amid a broader sell-off for US-listed Chinese stocks over the last 2 months. Alibaba shares have lost nearly half of their value from their all-time high reached last November, and now trade about 5 percent below their IPO price from a year ago. NetEase shares have lost a quarter of their value since early August, in a plunge coinciding with China’s own tumbling stock markets. Read Full Post…
Bottom line: Phoenix New Media’s retrenchment could produce some short-term improvement for its profits, but won’t halt a longer term decline due to its inability to adapt in a rapidly changing new media environment.
Phoenix New Media in big job cuts
After stumbling badly in its latest quarterly report, a sputtering Phoenix New Media (NYSE: FENG) is making major job cuts and rolling out a broader retrenchment, as it tries to avoid getting sidelined in China’s rapidly evolving media market. This particular story has an interesting parallel in a mostly forgotten company called Tom Group (HKEx: 2383), which was backed by Hong Kong billionaire Li Ka-shing who hoped to build it into a regional media giant when he launched the company during the Internet boom of the late 1990s and early 2000s. But more on that shortly.
Phoenix also began its life as a traditional media company, and the lesson from all this is that such media are having a hard time adapting to the rapid pace of change in the Internet age. That said, I’m not at all optimistic that Phoenix will be able to chart an effective new course, and it could just be a matter of time before the company becomes a non-player on the Chinese Internet or disappears completely. Read Full Post…
Bottom line: New O2O take-out dining investments involving companies backed by Tencent and Alibaba reflects intensifying competition in the space, and is likely to result in a costly price war for market share.
Alibaba, Tencent in new take-out dining investments
The take-out dining space continues to heat up, with word of a major new funding for Ele.me, the service backed by social networking giant Tencent (HKEx: 700), and a big new investment for Koubei, the service owned by e-commerce leader Alibaba (NYSE: BABA). Both investments reflect a recent rush into online-to-offline (O2O) services by all 3 of China’s top Internet companies, as each tries to forge a hybridized mix of services that are likely to make up the retailing landscape of the future.
The larger of the 2 deals has Ele.me raising as much as $630 million in new funding, in a deal that brings in existing investors Tencent, along with its main e-commerce partner JD.com (Nasdaq: JD) and several other major private equity firms. The second has Koubei, Alibaba’s recently resurrected take-out dining site, investing a more modest 300 million yuan ($50 million) in a rival that operates the service called SHBJ.com. Read Full Post…
Following last week’s wild ride for Chinese stocks, now seems like a good opportunity to revisit the flurry of privatization bids for US-listed China Internet companies and how they’re faring. The list of headlines is led by reports that the biggest of the buyout bids for software security maker Qihoo 360 (NYSE: QIHU) is showing signs of unraveling, as investors balk at the widening gap between their original buyout offer and the company’s latest share price following last week’s sharp declines.
Meantime, another much smaller deal first announced at the height of the buyout wave in June has been quietly completed, resulting in the delisting of shares for China Mobile Games. Completion of this second deal just a couple of months after it was originally announced shows that such buyouts can still be done despite the big sell-offs in both China and New York that are making it hard to value such deals. Read Full Post…
Bottom line: Qihoo and Meizu are likely to struggle with their new smartphone campaigns in India, where intensifying competition will also undermine domestic rivals like Xiaomi and Huawei that have recently entered the market.
Qihoo unveils new Qiku smartphones
Qihoo (NYSE: QIHU) and Meizu have announced they are taking their smartphones to India, becoming the latest Chinese brands to export to the fast-growing but increasingly competitive market. India is actually the second stop on Qihoo’s smartphone roadmap, which will begin in its home China market with the launch of the first 2 models of its new Qiku smartphone brand. Meizu has become a major second-tier player in its home China market over the last few years, and formally announced its own move into India this week as it looks to move overseas.
The pair will join several of China’s top smartphone makers in the increasingly crowded India market, which shares many qualities with China. Xiaomi launched in India last year and the market quickly became its second largest globally, while Huawei’s Honor brand has also scored rapid progress in the market. But Qihoo’s biggest competitor in India could be Coolpad (HKEx: 2369), which is already a big player in the market but will also produce Qihoo’s new smartphones through a joint venture formed by the pair last year. Read Full Post…
