Bottom line: A special meeting between 8 Chinese government agencies is a positive sign for Uber and its rivals, indicating Beijing wants to forge a unified national policy to foster the development of hired car service operators.
Beijing meeting sends positive signal for Uber
The brash Uber and its rivals are seeing some encouraging signs in China, with reports that Beijing has convened a special meeting of 8 ministries to clearly define a national policy on these up-and-coming providers of hired car services. At the same time, Uber has broadened its stable of China partners by forming an alliance with homegrown smartphone sensation Xiaomi to promote their products and services in Southeast Asia. Lastly, Uber is also in a slightly troubling headline that spotlights some of risks it will face, as media in southern Guangdong province report that one of the company’s drivers may have been murdered by a customer. Read Full Post…
Bottom line: Internet-based financial services should continue to boom over the next few years, while a rapid decline in microblogging could start to ease now that Weibo has consolidated its position as market leader.
Weibo consolidates microblogging market
China’s Internet data tracker has just released a slew of figures for the first half of the year, painting a rosy picture for companies like Alibaba (NYSE: BABA) and others that are moving aggressively into online financial services. At the other end of the spectrum, microblogging continued its rapid decline, as marginal players retreated and industry leader Weibo (Nasdaq: WB) consolidated its position.
On a broader level, I was surprised to see the growth rate in overall Internet users slow sharply in the first half of this year, even as the number of people accessing the web over their mobile phones continued to post strong growth. I also took the time to tally up the subscriber totals for China’s big 3 telcos in the first half of the year, which shows that the dominant China Mobile (HKEx: 941; NYSE: CHL) gained share on its 2 smaller rivals as it aggressively promoted its year-old 4G service. Read Full Post…
Bottom line: WeChat’s recent blockage of Uber reflects challenges the US company will face from rival car service operators and their backers in China, providing yet another obstacle as it tries to build up its local business.
Uber locked out of WeChat
A colorful war of words has broken out in China over the last week between high-flying car services provider Uber and the popular instant messaging service WeChat, providing not only some good entertainment but also valuable lessons for foreign companies doing business on the Chinese Internet. In this instance, WeChat has been blocking keyword searches on Uber, meaning users of the popular mobile messaging service can no longer access Uber’s public account or any articles with the Uber name. WeChat has given its own explanation for the blockage, blaming it on technical issues. Of course it’s probably no coincidence that WeChat’s parent Tencent (HKEx: 700) is also a major backer of rival domestic car services provider Didi Kuaidi. Read Full Post…
Bottom line: Mecox Lane’s privatization plan should succeed, but the company is likely to continue its decline even if it re-lists in China under its current lackluster management.
Mecox Lane gets buyout offer
The current privatization wave is giving me a chance to revisit some companies that I haven’t written about in quite a while such as former e-commerce superstar Mecox Lane (Nasdaq: MCOX), which has just become the latest name to receive a buyout offer. In a slightly surprising twist, Mecox Lane’s shares tanked after it made the announcement, losing more than 8 percent to close around 20 percent below the buyout offer price.
Mecox’s announcement is one of the smallest so far in terms of deal value, since the company only has a market value of about $40 million. That’s even less than the $63 million education specialist New Oriental (NYSE: EDU) will need to pay an unusual special dividend announced just a day earlier, in a move I interpreted as a signal that the company had no plans to join the exodus of Chinese companies from New York. (previous post) Read Full Post…
Bottom line: New Oriental’s special dividend sends a signal that it has no plans to de-list from New York, even as short-sighted companies like Qihoo continue buyout plans in pursuit of higher valuations in China.
New Oriental awards special dividend
Nearly 2 weeks after the last US-listed Chinese companies announced plans to privatize, education specialist New Oriental (NYSE: EDU) is sending a different signal that indicates it has no plans to abandon its New York listing anytime soon. That signal comes in a footnote to New Oriental’s newly announced quarterly earnings, in which it declares a rare special dividend — something you wouldn’t expect a company to do if it was planning to soon de-list.
At the same time, software security specialist Qihoo (NYSE: QIHU) is reaffirming its previous plans to push ahead with its privatization scheme, even as investors remain skeptical that this particular deal could fall apart. Qihoo is easily the largest of China’s companies looking to privatize so far, and clearly investors are worried that the company won’t be able to complete its buyout worth nearly $10 billion due to the recent market volatility in China. Read Full Post…
Bottom line: Qihoo’s new Dazen smartphones stand a low chance of success, even if they provide better quality to comparably priced rivals, due to their late entry to the overheated ultra low-end of China’s smartphone market.
Qihoo unveils Dazen smartphone
About a half year after announcing its intent to enter China’s crowded smartphone space, software security specialist Qihoo (NYSE: QIHU) has unveiled its new product under a brand name that sounds clever and catchy but is decidedly downscale. Qihoo has just announced that its new smartphones will carry the brand name of Dazen, and will sell for a bargain basement price of 899 yuan, or about $150.
The move appears to be an extension of Qihoo’s longtime strategy of selling products cheaply or even giving them away for free, and then using those products as a marketing tool for its other paid products and services. But in this case the strategy of going after the ultra low end looks a bit questionable, since that part of the market is already quite crowded and many brands are believed to be losing money. Read Full Post…
Bottom line: Tongcheng’s new fund raising and Ctrip’s launch of an offshore hotel investment fund reflect the huge amount of investor dollars flowing into China’s online travel market, which will keep competition intense for the next 1-2 years.
Tongcheng in major new funding
Two of China’s leading online travel sites are in the headlines with major new initiatives, led by a massive fund-raising and even larger promotional spending plan by aggressive up-and-comer Tongcheng. The other major headline has industry leader Ctrip (Nasdaq: CTRP) setting up a fund to invest abroad, as it looks for new growth outside its overheated home market.
The pair of stories point to the huge potential for China’s domestic travel market, but also the fierce state of competition. Such conditions spotlight the need for consolidation, which seems to show signs of coming from time to time, only to collapse due to the fiercely independent nature of the company founders who are also usually their chief executives. Read Full Post…
Bottom line: A US trade group’s statement criticizing Alibaba’s anti-piracy efforts reflects widely diverging views between the company and its critics, and could see Alibaba’s name return to the annual US list of “notorious” piracy sites.
US trade group blasts Alibaba
I’ve written several times about the difficult task that leading e-commerce site Alibaba (NYSE: BABA) will face in maintaining its status as a friend of Washington in the battle against piracy, following a major scandal earlier this year involving the rampant sale of fake goods on one of its main websites. Most news has involved steps Alibaba is taking to boost its chances of staying off an annual list of “notorious” websites for piracy, which is published annually by the Office of the US Trade Representatives. But now we’re getting a taste of the opposition Alibaba will face in that battle, with a major US trade association blasting the company for shortcomings in its anti-counterfeiting policies. Read Full Post…
Bottom line: Meituan is feeling increasing isolation as its 2 chief rivals strengthen partnerships with Baidu and Tencent, and is likely to be forced into a similar tie-up by the end of next year to maintain its industry-leading position.
Meituan feels growing isolation
Leading group buying site Meituan is finally responding to a flurry of reports involving its own finances and a new challenge coming from top search engine Baidu (Nasdaq: BIDU), releasing data that reflect its own strong growth and market dominance. At the same time, CEO Wang Xing is also shooting down rumors that his company is in the process raising $1 billion in new funds, and is repeating his previous position that his company isn’t in any hurry to make an IPO.
The sudden release of information by this low-profile company raises the bigger question of what’s the motivation behind this flurry of activity for the normally low-profile Meituan. I personally believe the company isn’t gearing up for an IPO, especially in the wake of all the market turbulence in China right now and the flood of US-listed Chinese companies that have announced plans to privatize and return home to re-list. Read Full Post…
Bottom line: Earlier announcers of privatization plans like Jiayuan are likely to succeed due to their more reliable funding sources, but many of the deals announced by Chinese firms in the second half of June could ultimately collapse.
De-listing bells keep ringing for Jiayuan
China’s sudden stock market rally isn’t reassuring US investors who believe that many of the most recent buy-out offers for New York-listed Chinese firms may collapse due to questionable funding. That has prompted at least 1 firm, online dating site Jiayuan (Nasdaq: DATE), to come out and openly say it is still committed to the privatization process that could ultimately end with its departure from New York and re-listing of its shares in its home China market.
The rationale for this kind of a move hasn’t changed throughout China’s massive stock market gyrations, which saw the main Shanghai index more than double over the past year at its early June peak, before crashing in a major sell-off. The crash has subsided in the last few days thanks to major intervention by Beijing, though it’s far from clear whether the selling binge is over. Read Full Post…
Bottom line: Walmart’s dismissal of Yihaodian’s 2 top executives marks a major shake-up due to the unit’s disappointing performance, and could be followed by closer integration with Walmart’s own China operations.
Yihaodian in management shake-up
A major shake-up has just occurred at Walmart’s (NYSE: WMT) China e-commerce unit, reflecting its disappointing progress 3 years after the US retailing giant took control of local upstart Yihaodian. The shake-up has seen the sudden resignation of Yihaodian’s 2 founders, Yu Gang and Liu Junjun, who were also the chairman and CEO, respectively. Yihaodian confirmed the departures, and said they were announced after a high-level Walmart official came to visit the company. (Chinese article)
The reports say Walmart issued a nicely worded statement on the matter, saying “A company’s founders will naturally leave after a certain stage of development, and we wish them well”. But the fact of the matter is that Yihaodian has been quite a disappointment for Walmart, which took control of the company in 2012 and has made it the central focus of its e-commerce strategy in China. Read Full Post…
