E-commerce leader Alibaba has been on a quiet PR offensive for much of the last year, seeking to convince the US that its Taobao marketplaces aren’t havens for pirates whose sales of knock-off products cost legitimate brands billions of dollars in lost sales each year. That drive has reached a crescendo with the company’s highly trumpeted announcement of a new deal with Hollywood to fight the sale of pirated movies online. The deal will see Taobao and the Motion Picture Association of America (MPAA) work together to identify merchants that sell pirated movies over Taobao’s various e-commerce platforms and remove the pirated merchandise. (English article)
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Dangdang Defiant as Losses Balloon 当当网亏损扩大 但拒不认输
It’s only appropriate that I end this week with one more story on the bloody price wars in China’s e-commerce space that have dominated headlines these past few days, this time taking a look at the just-released quarterly results of Dangdang (NYSE: DANG), the only major publicly traded online merchant. Dangdang saw its loss more than quadruple in the quarter, as its marketing costs soared and margins crumbled due to all the price wars. (results announcement) But in an ominous sign that the company is prepared for a long battle, it also trumpeted the fact that it has big cash reserves that should enable it to weather the price wars for many quarters to come. Meantime, local media are also reporting that Jingdong Mall, one of Dangdang’s biggest and most outspoken rivals, is taking longer to pay its suppliers, in what could be the latest sign of distress among e-commerce companies. (English article)
Alternate Fossil Fuels: China’s Newest White Elephant 过度追求替代性化石燃料或给中国留下大量沉重“鸡肋”
Propose almost any project that includes the words “alternate energy” these days, and China will throw millions of dollars your way in the form of low interest loans, tax breaks and other government incentives to promote the latest green initiative. But one can’t help wonder if most of the huge flood of alternate and green energy projects coming out of China these days are bound to end up as white elephants, leaving the country with scores of factories, technology and other assets that died before they ever really got off the starting block. First there was the solar panel and wind power craze that began around 5 years ago, and then there was electric and hybrid vehicles, neither of which has produced companies that can turn profits without strong government support despite billions of dollars in investment. Now the latest fad has China’s energy majors snapping up assets with names like oil shale and oil sands, in what seems like a return to the 1970s when such uneconomical energy sources were also popular after another even bigger jump in oil prices than the one we’ve seen in recent years. China’s energy majors and even some smaller players have been on a drive to tap these energy sources in the last year, no doubt encouraged by Beijing which is letting them spend big dollars to pursue projects that are far more costly than traditional oil exploration. In the latest of these moves, the Ministry of Land and Resources said last week it will auction off blocks of land this month for development of shale gas exploration, with another possible auction to come later this year. That development comes just a week after another China-funded alternate fossil fuel developer, Sunshine Oilsands (HKEx: 2012) listed in Hong Kong. (previous post). And just last month, PetroChina (HKEx: 857; Shanghai: 601857; NYSE: PTR), the nation’s top oil producer, announced it was strengthening its ties with Royal Dutch Shell by buying a 20 percent stake in a Canadian oil shale gas project being developed by the European giant. I know that China is clearly worried about securing future energy supplies to feed its hungry economy, and these alternate fossil fuel projects complement other more traditional energy sources also being pursued by PetroChina and its peers. Furthermore, technology has improved significantly since the 1970s, when these kinds of alternate fossil fuel projects were widely discussed but most were ultimately abandoned after oil prices came down. Still, this latest drive into alternate fossil fuels looks like just the latest display of Beijing’s recent tendency to throw billions of dollars at any kind of new energy project, partly to find sustainable energy alternatives but also in its hopes of creating new technology leaders in some of these emerging areas. The country has made similar drives in solar energy, now producing more than half of the world’s solar panels, and is making another drive in electric and hybrid vehicles. But if history is any indicator, simply throwing money at a new area like alternate energy won’t work without other key elements like supporting infrastructure, long-term economics that don’t require government support, and market demand. Many of these elements are lacking in this growing crop of Chinese alternate energy initiatives, with no signs that the country has the power to change those fundamental issues. If those situations don’t rapidly change in the next couple of years, traditional energy companies like PetroChina, along with solar panel makers and firms that have invested heavily in green vehicles, could easily find themselves holding interesting but worthless technologies several years from now, leaving investors to pay for this promising but ultimately unsuccessful herd of Chinese white elephants.
Bottom line: China’s push into alternate fossil fuels reflects its overheated desire to be a leader in alternate energy, which could easily end up producing a herd of white elephants instead.
Related postings 相关文章:
◙ Pricey M&A, Cheaper Gas Undermine Sinopec 溢价收购和成品油降价 中石化面对双重利空
◙ Yingli Results: Rescue En Route From China? 英利财报：来自中国政府的营救？
China Flexes Anti-Monopoly Muscle in Hard Disks
New comments from China’s anti-monopoly regulator show it is preparing to play an increasingly active role on the global M&A stage, reflecting the nation’s growing importance as not only a major global manufacturer but increasingly also a consumer of many products. The comments from a top Commerce Ministry official, in this case regarding the pending acquisition of Hitachi’s (Tokyo: 6501) memory storage business by Western Digital (NYSE: WDC), look quite intelligent to me, showing that China is taking its new role quite seriously and that it could soon become a major gatekeeper for big global M&A deals, a job now mostly performed by the US and European Union. (English article; Chinese article) In this particular case, the head of the ministry’s anti-monopoly bureau, Shang Ming, made suitably cautious comments at a year end event in Beijing by saying his department is concerned the deal could harm competition in the global market for hard disc drives “to a certain extent”. With this kind of comment, Shang is indicating his department is likely to approve the deal, but only after Western Digital and Hitachi take steps to ensure the global market for disc drives remains competitive, most likely by selling off some assets to another rival. Such conditions are relatively common in global M&A, and are frequently imposed by the US and European regulators before they approve many major global deals. In fact, China has previously imposed such conditions on other major global M&A in its brief history of regulating such deals, though in the few such cases to date conditions have been relatively mild. These latest comments indicate that could change in the future as China looks to play a bigger role in global markets. All this looks good if the Commerce Ministry continues to develop itself as a fair judge dedicated to free trade. It showed movement in that direction last month, when it approved the purchase of leading hot pot chain Little Sheep by Yum Brands (NYSE: YUM), operator of the KFC chain, casting aside concerns by some that the deal might be vetoed for more nationalistic reasons. Global companies will undoubtedly be watching carefully for the final decision in this Western Digital deal; but final conditions that are reasonable and fair will give more credibility to China as it seeks to establish itself as a serious player in regulating the flow of major global M&A.
Bottom line: China’s careful approach to Western Digital’s pending purchase of Hitachi’s hard disc drive business reflects its growing maturity as an arbiter of major global M&A.
Related postings 相关文章:
◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢
◙ China OKs Nestle Buy, Opens Door for Big Brand M&A
◙ Troublesome Timing As China Approves NSN-Motorola 中国监管部门批准诺基亚西门子购买摩托罗拉网络业务时机不佳
CITIC Securities, Koreans Challenge Western Giants 中信证券和韩国电视台挑战西方企业
Two separate news bits out today show that Asian firms, in this case leading brokerage CITIC Securities (HKEx: 6030; Shanghai: 600030) and 3 Korean TV program makers, may pose an interesting challenge to Western names in lucrative developing new business areas in now taking shape in China. In the first of those bits, CITIC Securities announced it has just received regulatory approval to become a renminbi qualified foreign institutional investor (RQFII), a new program that allows financial services firms to raise Chinese yuan outside the country for re-investment in China stocks and other financial products. (company announcement) RQFII specifically targets a growing number of foreigners who want to invest in the yuan offshore as China moves to internationalize its currency, also known as the renminbi. To date, this offshore yuan business, mostly centered in Hong Kong, has been dominated by big foreign names like HSBC (HKEx: 5; London: HSBA), so it’s interesting to see a big Chinese name like CITIC Securities getting involved so quickly in the new RQFII scheme. Of course CITIC Securities will now have to convince foreign investors that it can get them better returns for their yuan than big foreign names that are also applying for RQFII status. But given its market-leading position in China and strong knowledge of Chinese markets, I would expect to see CITIC Securities become a top-tier player in this new and potentially lucrative area in the next 1-2 years. In the second news bit, PPLive, an IPO candidate and one of China’s top video sharing websites, has signed an exclusive deal to license all TV dramas from 3 Korean TV networks for the next 3 years. (English article) No financial details were given and I’ll admit I don’t know anything about the 3 Korean networks in this deal; but the amount of programming does look massive, involving 12,000 episodes of various TV series with 13,500 hours of programming. This deal is interesting in the light of a recent series of high-profile licensing deals between other video sharing sites like Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) with major Hollywood studios, and shows that other Asian program makers, whose shows are popular among many Chinese, will also be competing to cash in on demand from these content-hungry Chinese video sites. Look for more such blockbuster deals from other Asian markets like Japan, Taiwan and Hong Kong in the months ahead.
Bottom line: New deals involving CITIC Securities in the offshore yuan business and Koreans in video licensing show Asian firms will win growing business in areas traditionally dominated by Westerners.
Related postings 相关文章:
◙ Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代
◙ ICBC Discovers China’s Latest Low-Cost Export: Currency 工行将从非洲人民币结算业务中获益
◙ Foreign Banks in China: A Love Affair Ends 外资银行撤资与中国同行说再见
New Rule Hits Sina, Instant Messaging to Benefit? 微博实名重创新浪 即时信息服务有望受益
The Internet world has been buzzing over the weekend about a new rule announced by the Beijing municipal government late last week requiring all microbloggers to use their real names. First off, I should applaud regulators for at least flagging this issue before making the actual move, as a high-ranking official said back in October that such a rule was being considered. (previous post) But that said, the new rule itself has left lots of people scratching their heads over what it all means. Clearly the big loser is Sina’s (Nasdaq: SINA) Weibo service, which stands to lose many of its more than 200 million users when the new rule is fully implemented. At least a few of my friends say they won’t keep using Weibo if they have to register with their real names, and I wouldn’t be surprised to see the service lose up to half of its active users by the time things settled down. Sina, which is already struggling after taking massive write-downs for its real estate and e-commerce investments (previous post), said it is still studying the new rules to figure out their impact. (company announcement) The news marks a major setback for Weibo, often called the Chinese equivalent of Twitter, which Sina was in the process of trying to monetize though progress was slow. This new rule may make Sina think twice about putting too much emphasis on Weibo, potentially killing plans for a separate IPO for this formerly promising business. In the meantime, one of my sources tells me the move by the Beijing city government is likely to be followed by other cities, meaning rival services from companies like NetEase (Nasdaq: NTES) will also be affected, though the impact should be limited since most of those have far fewer users than Weibo. What’s far less clear is how, if at all, instant messaging services, which have many microblogging-type characteristics, will be affected. I wrote about one of those in the mobile space last week, the Weixin service being developed by Tencent (HKEx: 700) (previous post), and many other companies are developing similar services, especially for use on mobile phones. I suspect these instant messaging services will escape regulation for now under this new rule, and could even potentially benefit when droves of microbloggers start to defect from Weibo and other services in the months ahead.
Bottom line: Sina’s Weibo is the clear loser in Beijing’s new campaign to clamp down on microblogging, while instant messaging firms like Tencent could emerge as possible beneficiaries.
Related postings 相关文章:
◙ Watch Out Weibo, Weixin Is Growing 新浪微博要小心腾讯微信要崛起
◙ Govt’s Microblog Shift Looks Good for Weibo 政府口风转变或有利於新浪微博
Search Wars Heat Up With Latest Anti-Baidu Moves 中国网络搜索战升温
The latest mass movement against online search leader Baidu (Nasdaq: BIDU) looks set to sow new chaos in China’s online community, once again underscoring that Beijing needs to step in and bring some order to the marketplace or risk major disruptions. Chinese media are reporting that 3 major web firms, Tencent (HKEx: 700), Qihoo 360 (NYSE: QIHU) and Youku (NYSE: YOKU), have all announced new search engine initiatives to rival Baidu, which dominates the market with nearly 80 percent share. (Chinese article) Tencent’s search engine, Soso, is actually already 5 years old, so that part of the story isn’t really news. (previous post) But what’s alarming is that the report says Youku, China’s leading online video sharing site, is launching its initiative after noticing that the number of Baidu search results directing users to its site has dropped sharply since Baidu launched its own video sharing service, called Qiyi. In fact, this is just the latest example of a frequent Baidu practice, namely tampering with its search results to make its advertisers and its own products appear at or near the top of its search results even when other web pages would rank higher under more objective conditions. This latest conflict pitting Baidu against 3 other major web firms comes just weeks after another similar mass protest saw major online retailers including Dangdang (NYSE: DANG) and 360Buy block their web pages from searches by Alibaba’s Etao search engine. (previous post) These kind of turf wars between major online players have the potential to create real chaos on the Chinese Internet by undermining the credibility of search engines that are often the first place web surfers go to find what they want on the vast worldwide web. I’m usually opposed to any attempts by Beijing to step in and regulate the online world, but this really seems like one exception where the government should step in and act as impartial arbitrator to set up some basic ground rules that everyone can agree upon to end these turf wars. Otherwise, China’s online world could be looking at 1-2 years of major disruptions until the building brouhaha gets resolved by market forces.
Bottom line: A new uprising by 3 major web firms against Baidu marks the latest unrest in China’s online search market, which needs Beijing to step in and act as impartial arbitrator.
Related postings 相关文章:
Alibaba’s Etao Faces New Merchant Revolt
E-commerce leader Alibaba Group looks set to soon get its long-awaited wish for separation from major stakeholder Yahoo (Nasdaq: YHOO), but it won’t have much time to celebrate as new fires seem to be popping up everywhere for nearly all of its major businesses. The latest crisis for the increasingly embattled company has cropped up at its Etao search site, which Alibaba is trying to build up as a specialist in e-commerce searches that can eventually rival online search titan Baidu (Nasdaq: BIDU). Chinese media are reporting that Etao has confirmed that it is no longer indexing search information from sites for a number of major online retailers, including general merchandiser Dangdang (NYSE: DANG) and electronics giant Suning (Shenzhen: 002024) (Chinese article). The confirmation comes just a week after another leading e-commerce site, 360Buy, hinted it may block its pages from Etao searches (previous post), and indeed 360Buy was among the new list of confirmed companies whose pages will no longer be indexed by Etao. With all these major online retailers blocking their material from Etao searches, and the list likely to grow, Alibaba must certainly be worried about the future viability of Etao as a true e-commerce search engine. This latest crisis follows an uprising earlier this month by independent merchants on Alibaba’s B2C platform, Taobao Mall, after the site sharply hiked its fees. That same group of merchants, which has been wreaking havoc on the Taobao Mall site, later moved its rabble-rousing campaign to Alibaba’s electronic payments site, Alipay, as well. (previous post) While all of these crises rage, Alibaba got a rare piece of good news as domestic media reported that Yahoo is looking to sell its 40 percent stake in Alibaba, as the US web giant tries to dispell broader talk that the entire company itself is for sale. Alibaba has long clamored for Yahoo to sell the stake amid friction between the two companies, so clearly it should be happy about this news. But with all the crises now happening in its own businesses, Alibaba won’t have much time to celebrate and indeed might wish it had an ally to help it in this time of trouble.
Bottom line: Alibaba may soon get its official independence from major stakeholder Yahoo, but it won’t have time to celebrate as it faces an escalating crisis at its Etao search site.
Related postings 相关文章:
◙ Albaba Faces New Assaults From Merchants, 360Buy 阿里巴巴受到中小商户和京东商城的双重夹攻
◙ Taobao Mall’s IPO March Collides With Merchant Uprising 淘宝商城IPO或因商户“起义”被推迟
◙ Alibaba Sharpens Focus in Yahoo Buy-Out, Taobao Mall 阿里巴巴回购雅虎所持股权有望
Albaba Faces New Assaults From Merchants, 360Buy 阿里巴巴受到中小商户和京东商城的双重夹攻
Embattled Chinese e-commerce leader Alibaba is looking more and more like a fortress under attack these days, facing assaults on two fronts in the latest chapter of its ongoing spats with the rest of the online world. The first and more serious of those spats has seen smaller online merchants, upset over huge fee hikes at Taobao Mall, Alibaba’s main B2C site, launch an assault on Alibaba’s Alipay electronic payments site, according to domestic media reports. (English article; Chinese article) The reports are quite colorful, with enraged small- and medium-sized merchants, who have complained the fee hikes are designed to weed them out, withdrawing massive amounts of money from Alipay one day late last week, and then blocking access to the service completely. This mass movement comes after the same group of merchants wreaked havoc on Taobao Mall itself a couple of weeks ago by making mass bogus purchases from large merchants on the site, only to cancel their transactions hours later. (previous post) Beijing has reportedly stepped in to try to mediate the dispute and Alibaba itself has made some conciliatory gestures, but obviously the merchants aren’t happy with progress so far and the damage to Taobao Mall looks set to drag on for at least a couple of months, if not longer. In the second development, media are reporting that 360Buy, one of China’s largest e-commerce sites, is hinting it may soon block its pages from searches on Etao, Alibaba’s site that specializes in e-commerce related searches. (Chinese article) Such a break would be a major blow to Etao, and would follow 360Buy’s cut off of ties with Alipay back in August, reflecting a broader feud. (previous post) Many in the online world already blame Alibaba founder Jack Ma for the negative overseas sentiment towards China Internet stocks due to his high profile dispute with Yahoo (Nasdaq: YHOO) earlier this year over ownership of Alipay. These latest disputes will hardly help his company’s damaged reputation, and could mark the latest chapter in a longer decline for the company.
Bottom line: Alibaba’s latest disputes with smaller merchants on its Taobao platform and e-commerce giant 360Buy mark the latest chapter in what could become a long-term decline for the firm.
Related postings 相关文章:
◙ Taobao Mall’s IPO March Collides With Merchant Uprising 淘宝商城IPO或因商户“起义”被推迟
◙ Alibaba Sharpens Focus in Yahoo Buy-Out, Taobao Mall 阿里巴巴回购雅虎所持股权有望
◙ Alibaba.com Blows Smoke With HiChina Spin-Off Plan 阿里巴巴网络分拆万网放烟幕弹
Taobao Mall’s IPO March Collides With Merchant Uprising 淘宝商城IPO或因商户“起义”被推迟
China e-commerce visionary Jack Ma loves to talk about the power of the Internet, and now he’s experiencing that power directly, though not in the way he envisioned, as a group of unhappy merchants on his popular Taobao Mall platform rise up in rebellion over a recent massive fee hike. The uprising that has created chaos at the Taobao Mall, the B2C platform of Ma’s Alibaba Group, is just the latest in a string of crises that have plagued Ma and his company this year, each due to a big miscalculation. This time a large group of small- to medium-sized merchants have created chaos on the platform, flooding larger merchants with bogus orders and posting fake negative user comments on their sites, after Taobao hiked annual fees for merchants by up to 10 times, and implemented other policies that smaller merchants said were aimed at pushing them off the site. (English article; Chinese article) These smaller merchants are right, of course, at least in their argument that Taobao wants to get rid of them to create a site for mostly premier merchants that have better records for quality control and customer satisfaction as it prepares for an IPO as early as next year. I said earlier this week that the strategy is a smart one for Taobao Mall (previous post), as it seeks to avoid scandals like the one plaguing sister company Alibaba.com (HKEx: 1688), which has suffered since it revealed earlier this year that its B2B e-commerce site had become a major ground for fraud by some smaller, unscrupulous merchants. The only problem in Taobao Mall’s latest move is that it failed to understand the power of smaller merchants on its site to create havoc on its system. All this chaos will inevitably result in more negative publicity for Ma and Alibaba, and it could be months or even longer before business returns to normal, potentially scaring away some of the larger merchants that Taobao wants to keep. At the end of the day, this storm will probably pass, but not before dealing a blow to Ma and Alibaba’s image, and creating a delay that could push Taobao Mall’s widely expected IPO into 2013.
Bottom line: A new merchant uprising at Taobao Mall over fee hikes will deal a blow to the company’s business, pushing back a widely expected IPO into 2013 or later.
Related postings 相关文章:
◙ Alibaba Sharpens Focus in Yahoo Buy-Out, Taobao Mall 阿里巴巴回购雅虎所持股权有望
◙ Alibaba.com Blows Smoke With HiChina Spin-Off Plan 阿里巴巴网络分拆万网放烟幕弹
Investors Pocket Spreadtrum, Giant Dividends and Run
It’s going to take more than dividends and buy-backs to win investors back to China stocks, or at least that’s the message that markets are sending to online game operator Giant Interactive (NYSE: GA) and cellphone chipmaker Spreadtrum (Nasdaq: SPRD). Let’s look at Giant Interactive first, which raised investor wrath last month when it disclosed it had made investments in the insurance sector completely unrelated to its core online games business, and then forced out its CFO and offered a massive dividend worth more than 30 percent of its share price to try and make amends. (previous post) Its share moved up marginally when it announced the dividend, and then plummeted after it made the award on September 11, falling from $7.80 the day before it distributed the $3 per share award to a close of $4.61 afterwards. Since then, its shares have tumbled even further to its latest close of $3.48 per share, about a third of their 52 week high. Now the company has just announced a share buy-back, again with little affect on its price. (company announcement) Clearly investors are still not convinced that this company is anything more than the personal play toy of its chairman Shi Yuzhu, reflecting the broader credibility crisis facing US-listed China stocks. Spreadtrum’s case looks similar, though not quite as extreme. After successfully fending off a short-seller attack in June (previous post), the chipmaker has now announced it will award a modest quarterly dividend of 5 cents per American Depositary Share, equaling an annual yield of just 1 percent if it really keeps paying the dividend on a quarterly basis. (company announcement). Not surprisingly, shareholders greeted the news with indifference and perhaps even a little disdain, bidding Spreadtrum shares down marginally in Monday trade, even as the Dow and Nasdaq both rallied more than 2 percent. In Spreadtrum’s case the issue is clearly size, as the dividend is nearly meaningless even though the company itself looks strong. In Giant’s case much more fundamental issues are at stake, namely its lackluster position in the China’s tough online gaming space and its credibility in general. In both cases, investors are saying it will take stronger performance, and not just quick dividends, to win back their interest.
Bottom line: The dividend strategy from several US-listed Chinese companies is falling flat, with investors looking for stronger bottom lines before returning to these firms.
Related postings 相关文章:
◙ Giant Fires CFO, Offers Dividend to Placate Investors 巨人网络CFO辞职 高额分红以安抚投资者
◙ Spreadtrum On Cusp of Putting Out Short-Seller Fire 展讯力抗卖空方
◙ Sofun’s New Strategy: Dividend Wave Ahead? 搜房网新策略：中国概念股派息潮即将来临?
