New Year Brings New Starts for China Lodging, Grace-Hua Hong Merger 汉庭换将,华虹NEC和宏力半导体合并
It’s the new year, and that means a time of new beginnings for 2 big names, one in the hotel space where China Lodging Group (Nasdaq: HTHT) is starting 2012 with a new CEO, and the other in semiconductors where the long-awaited merger of Hua Hong NEC and Grace Semiconductor may finally happen. Let’s start with the China Lodging, whose CEO will leave after just 2 years on the job and be replaced by executive Chairman Ji Qi. (company announcement) Based on the announcement, Ji will take on the additional CEO role as China Lodging, owner of the Huating brand, embarks on an interesting multi-brand strategy targeting travelers with different quality levels of hotel, similar to what most of the major western brands already do. This strategy may work well for the western brands, but I’m a doubtful that young Chinese operators like China Lodging, 7 Days (NYSE: SVN) and Home Inns (Nasdaq: HMIN), which have all been quite successful with budget hotels, have the necessary expertise to operate at the higher-end of the market, where they will have to compete with the big international chains like Marriott (NYSE: MAR). In the chip space, Hua Hong NEC and Grace Semiconductor, which have talked about a merger for years, have announced that they have finally reached such a merger agreement. (English article) Reports say the new company will have about $600 million in annual revenue, not small but still a fraction of leading Chinese chipmaker SMIC (HKEx: 981; NYSE: SMI), whose annual figure stands at about $1.6 billion. The report says the merged company is quite profitable, with $100 million in annual profit, which I find difficult to believe considering the industry’s current downcycle. I suspect that if the figure is really true, the 2 companies are using accounting tricks to hide their real situation. I see problems ahead for the company as it struggles to integrate after the merger, and if and when it ever goes public, which is probably the ultimate goal, I wouldn’t be surprised to learn that Hua Hong NEC-Grace isn’t quite as profitable as it wants people to believe.
Bottom line: China Lodging Group will have trouble executing its new multi-brand strategy, while Hua Hong NEC and Grace Semi will also face a rough time in their new merger.
Related postings 相关文章:
◙ China Lodging: Rebound Ahead 中国经济型酒店业绩回升在望
◙ Hotels: Expo Hangover Set to Linger into 2012
◙ Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合
