Parade of China Money-Losers Report to Wall Street 多家中国企业亏损凸显市场竞争激烈

By newsdoug on November 17, 2011

Losses mount at Youku, Dangdang, Xueda Online video leader Youku (NYSE: YOKU), online retailer Dangdang (NYSE: DANG) and education services firm Xueda (NYSE: XUE) have all reported net losses in their latest results, underscoring the fact that Western investors don’t seem to care all that much about profits when it comes to Chinese firms, especially Internet companies. Each of these firms has a different story to tell, although frankly speaking all 3 look disappointing to me and show movement in the wrong direction. Let’s start with Youku, which reported a third-quarter loss of 47 million yuan, narrowing 11 percent from a year ago but ballooning from the second quarter’s 28 million yuan loss. (company announcement) The company also forecast a slowdown in fourth-quarter revenue growth to 90-100 percent from 130 percent in the third quarter. None of these trends looks particularly positive, especially after chief rival and much smaller Tudou (Nasdaq: TUDO) surprised the market earlier this week by becoming profitable in the third quarter. (previous post) As to Dangdang, the situation looks even more discouraging, as the company faces what seems like daily price wars with the likes of 360Buy and Wal-Mart’s (NYSE: WMT) Yihaodian in the super-competitive e-commerce space. Dangdang reported its third-quarter net loss ballooned to 73 million yuan, or more than double the 33 million yuan loss from a year earlier, as it tries to expand beyond its original model as a book seller to the ultra-competitive general merchandise business. (company announcement; Chinese article) Lastly there’s Xueda, which seems unable to get out of the loss column despite being in the high-growth education services area. It reported a $6.3 million loss for the third quarter, more than double the year-ago loss of $2.4 million, again reflecting tough competition in the market but also in sharp contrast to steady profits reported by industry leader New Oriental Education. (previous post) This parade of losses certainly is still more the exception than the rule among US-listed Chinese companies. But it also reflects a worrisome trend that competition for many has become way too intense, and consolidation in many areas is sorely needed.

Bottom line: Money-losing results from Youku, Dangdang and Xueda reflect stiff competition in their respective spaces, with no immediate relief in sight.

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