Bottom line: Suning’s Japanese expansion and receipt of a new license to build and operate a private broadband network are both positive developments, but also reflect a lack of quick progress in transforming its core China-based retail business.
Suning in Japanese expansion
A couple of new reports involving Suning (Shenzhen: 002024) made me realize it’s been quite a while since I’ve written about this company that is trying to transform from a traditional retailer to a major e-commerce player. Both reports are interesting and noteworthy, though neither is related to its e-commerce drive, which doesn’t appear to be going anywhere quickly.
One of the deals involves Suning’s purchase of a money-losing Japanese electronics seller 5 years ago, and will see it now plow several billion yuan into a major expansion of the Laox chain of home appliance stores. The second deal has Suning named as one of 4 companies to receive licenses to build broadband networks to offer services under a newly announced pilot program to open the sector to private money. Read Full Post…
Bottom line: Cisco’s dismissal of several top China executives reflects its struggles in the market, and the situation will only improve if it takes a more conciliatory approach to address Beijing’s national security concerns.
Cisco lays off China execs
Beijing’s ongoing clampdown on foreign tech companies over national security concerns is taking a toll on Cisco (Nasdaq: CSCO), with word that the US networking equipment giant is laying off several of its top local executives due to falling China sales. This particular development doesn’t come as a huge surprise due to Beijing’s recent obsession with national security and suspicion of foreign tech companies. But Cisco’s struggles do contrast sharply with that of Hewlett-Packard (NYSE: HPQ), which appears to be faring better in China due to its more conciliatory approach to address Beijing’s concerns.
Bottom line: HP’s choice of a Beijing-based group with strong ties to a top science university as its China IT services partner looks like a smart move, which will help ease potential for conflict over national security concerns by Beijing.
HP choses Unigroup as China IT partner
Hewlett-Packard (NYSE: HPQ) has chosen a relatively dynamic, Beijing-based tech company as its future China partner over a stodgier state-run firm in Shanghai, as the US computer giant prepares to split itself into 2. The development is seeing HP get a bit less money than it had hoped for the 51 percent stake of its China-based H3C unit, which makes equipment for use in small telecoms networks. But the choice of Tsinghua Unigroup as the buyer looks quite prudent, and will bring in a new politically connected partner for HP as it prepares to split off its core PC unit from its more dynamic business that sells computing and networking services to enterprises. Read Full Post…
Bottom line: China’s largest corporations need to face stiffer regulatory penalties to ensure their compliance with Beijing rules, as part of a campaign to clean up the country’s business climate.
More strictness needed in Alibaba, telco cases
Some of China’s leading high-tech firms were in the headlines last week for foot-dragging in response to government calls to change their business practices, in separate cases that show why Beijing needs to get more aggressive about enforcing its rules among big domestic corporations.
The first case saw e-commerce giant Alibaba (NYSE: BABA) sued by one of the world’s top makers of luxury goods for allegedly refusing to clean up its popular sites of trafficking in pirated goods. The second saw critics accuse China’s 3 major mobile carriers of taking largely empty steps to improve their mobile data pricing and speeds, after Beijing called on them to take such action. Read Full Post…
Bottom line: Beijing should be commended for its recent program to open up telecoms services to private investment, and should consider accelerating the program and allowing in foreign participation.
Beijing injects competition into telecoms services
A campaign to bring private money into China’s telecoms sector was in the headlines twice over the last 2 weeks, reflecting a broader Beijing campaign to inject new life into traditional sectors like banking and energy that are now dominated by large and often slow-moving state-run firms.
One headline came late last week, when media reported that 20 million new phone numbers would be injected into a year-old program allowing private companies to sell mobile service. That followed even bigger news a week earlier, when media said the telecoms regulator hoped to allow private investors to build domestic telecoms network infrastructure for the first time. Read Full Post…
Bottom line: Tsinghua Unigroup is likely to win the bidding for a controlling stake in HP’s China-based networking equipment unit, and could help HP consolidate its place as one of China’s leading IT service providers.
Bidding war breaks out for HP asset sale
Hewlett-Packard (NYSE: HPQ) is finding itself in a rare position of power in China, with word that an unusual bidding war has broken out as it looks for a partner to buy a controlling stake in its locally-based networking equipment unit. The development could bring not only a windfall in terms of money HP will get for its H3C Technologies unit, but will also allow it to choose between 2 potent partners to help consolidate its place as one of China’s leading IT services providers.
HP is in the process of splitting itself into 2 as part of a broader restructuring announced last fall. In this case the China-based H3C networking equipment venture would almost certainly go into its new HP Enterprise unit, focused on products and services for corporate customers. The other main unit under the break-up will include HP’s older PC and printer businesses, which will go by the name HP Inc. Read Full Post…
Bottom line: The new Nokia-Alcatel merger, combined with a continued low-key lobbying campaign by Huawei could ultimately convince Washington to ease its ban on Chinese telecoms equipment within the next year.
US to rethink Huawei ban?
A couple of new reports are casting a spotlight on the troubled relationship between Washington and leading Chinese telecoms equipment maker Huawei, and raising the intriguing potential for a much-needed compromise that might end the impasse between the pair. The impasse is really quite one-sided, with Washington banning the sale of all Chinese telecoms equipment in the US due to concerns about the potential for spying. But this kind of policy seems a bit broad, especially amid an accelerating sector consolidation that is leaving wireless carriers with fewer and fewer networking equipment suppliers to choose from. Read Full Post…
Bottom line: ZTE’s patent infringement allegations against Huawei are mostly noise that won’t result in any major legal action, and instead reflect the stiff competition that is plaguing China overheated smartphone market.
ZTE accuses Huawei of IP theft
After several months without any major developments, China’s overheated smartphone market is showing new signs of stress with word that domestic heavyweight ZTE (HKEx: 763; Shenzhen: 000063) is accusing its larger rival Huawei of intellectual property theft. The complaint reflects the intense competition that has plagued China’s smartphone market for the last 2 years, and is likely to claim its first victim or two within the next 12 months.
This particular action also shows that Huawei and ZTE are becoming quite adept at playing the western game of filing lawsuits to protect their intellectual property and attack rivals. Both companies have been sued by their western peers in the past, and their domestic rival Xiaomi suffered a setback last year when it had to stop selling some of its models in India after Ericsson (Stockholm: ERICb) filed a patent complaint. Read Full Post…
Bottom line: A recent stabilization of China Mobile’s profits and revenue per user could be short-lived, and declines could resume and accelerate later this year as its rivals ramp up their 4G promotions.
China Mobile earnings report excites investors
Telecoms juggernaut China Mobile (HKEx: 941; NYSE: CHL) passed an important milestone in its latest quarterly results, posting its first increase in years for average subscriber revenue on strong gains for its new 4G service. But that milestone was partly offset by weakness in data services, its biggest future growth engine, hinting that the turning point for average revenue per user (ARPU) may be short-lived.
Of course we’ll have to wait for later quarterly results to see if China Mobile can continue to improve its revenue per subscriber, which will be critical to the company’s future as the Chinese mobile market rapidly approaches saturation. I wouldn’t be surprised if the figure start to erode again by the end of the year, due to stiff competition from rivals China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU), which are just starting to aggressively promote their own new 4G services. Read Full Post…
Bottom line: Intel’s latest drive to fund wireless-related Chinese start-ups is part of a growing strategy to promote its struggling telecoms chip business, but it could face big obstacles due to China’s lackluster record at innovation.
Intel launches incubator at Shenzhen event
I have to commend Intel (Nasdaq: INTC) for its perseverance in the telecoms space, with news that the fading microchip giant is adding an incubator initiative to its drive into the sector using China as a backdoor. But that said, this latest project looks pathetically small, with Intel earmarking a meager 120 million yuan, or less than $20 million, to the initiative.
This project is just one of several recent initiatives for Intel in China, and we should point out that many of the companies it’s targeting would probably be happy for just $1 million or less to fund their early development. But that said, this particular initiative looks mostly like a public relations ploy than anything really substantive, and Intel might be advised to get a little more aggressive if it’s serious about promoting a China-based ecosystem for its struggling telecoms chip business. Read Full Post…
Bottom line: Beijing’s delay of new rules for foreign tech firms selling to Chinese banks could mark a turning point in a looming trade war centered on cybersecurity, and Washington should move to take reciprocal action.
Beijing slows down on new cybersecurity rules
After months of heating tensions, we’re seeing a sudden pause in the growing friction between China and the west that looked set to erupt into a new trade war centered on the sensitive issue of cybersecurity. That’s my assessment on reading that China is delaying implementation of draconian new requirements that would have forced all foreign tech firms to hand over sensitive and highly confidential product information when selling to Chinese banks.
I’m certainly not being naive in believing that China’s delay in this instance is the result of its realization that there’s no security risk posed by products supplied by foreign tech giants like IBM (NYSE: IBM), Cisco (Nasdaq: CSCO) and Oracle (Nasdaq: ORCL). Instead, this delay is almost certainly the result of repeated protests from the companies themselves and also from Washington and Europe, which all argue the new requirements are overly and unnecessarily intrusive. Read Full Post…
