Outlook Cloudy For Shanda 盛大前景暗淡
Things are looking cloudy for Shanda Interactive, the formerly listed entertainment company whose core online game unit appears to be going through some turmoil even as its more promising online literature unit faces its own separate headwinds. Shanda was once a superstar in its space, making headlines when it became the country’s first new media entertainment firm to make a New York IPO in 2004. But it has struggled in the last 3 years, as its core online game unit Shanda Games (Nasdaq: GAME) saw its growth shrivel and many of its other initiatives bombed.
Now it appears that Shanda founder and Chairman Chen Tianqiao is trying to shake things up at Shanda Games with word that the company’s CEO Tan Qunzhao has resigned for unspecified reasons. (company announcement) It’s probably no coincidence that Tan’s resignation came on the same day that Shanda Games announced dismal financial results that showed its revenue fell 14 percent in the second quarter, while its net profit fell by 9 percent (company announcement)
Chen Tianqiao appears to have finally realized the seriousness of the situation at Shanda Games, which is rapidly losing share to established aggressive rivals like Tencent (HKEx: 700) and NetEase (Nasdaq: NTES), as well as up-and-comers like the online game unit of social networking site Renren (NYSE: RENN). In announcing Tan’s departure as CEO, Shanda Games also said that Tan will retain a seat on the company’s board but step down as chairman, with Chen himself taking over the chairman’s spot.
None of that seemed to excite investors very much, at least based on the company’s lack of big movement in its share price, and I have to assume that people are getting tired of this company’s lackluster performance. Perhaps we’ll see Chen eventually try to privatize Shanda Games, which is what he did for Shanda Interactive earlier this year. (previous post) But frankly speaking, I wouldn’t put the chances of a privatization very high, as there probably aren’t too many private investors that would want to finance such a move for this kind of lackluster company.
Meantime, there’s been a slightly ominous development for Shanda’s online literature unit, Shanda Cloudary, with word that sales of e-readers in China actually fell 6 percent in the second quarter of this year. (English article) That looks like bad news for Bambook, Shanda’s e-reader division which holds 28 percent of the market; but it also looks bad for Cloudary, since e-readers are obviously one of the main platforms for consumers to purchase and read the company’s online literature products.
Readers will recall that Cloudary originally filed a year ago to make a New York IPO, but then had to abandon that plan after market sentiment plummeted. It relaunched the plan earlier this year and has been waiting patiently for good timing to make the offering, though such a window has yet to come amid lingering weak sentiment towards China stocks. This latest e-reader data certainly won’t improve investor sentiment towards the company, though I would still expect Cloudary to get a decent response from investors if and when it finally makes its offer.
Bottom line: Shanda Games’ lackluster performance is unlikely to improve quickly after a management shakeup, while a drop in e-reader sales is a bad sign for Shanda’s online literature unit.
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