Chinese companies are feeling the summertime heat of a slowing home economy, with new reports emerging from an array of sectors reflecting turbulence at troubled car maker BYD (HKEx: 1211; Shenzhen: 002594), and also at a year-old struggling luxury goods channel operated by leading web portal Sina (Nasdaq: SINA). Neither of these reports is too surprising for reasons I’ll soon explain; but perhaps a bit most worrisome are other reports saying up-and-coming online travel services site operator Qunar has also laid off some employees, in a sign that China’s economic slowdown is starting to affect even healthier companies.
Search Results for: baidu e-commerce
Xiaomi’s Mega-Funding: Investor Exit Near
The news keeps coming thick and fast for Xiaomi, arguably China’s hottest company right now in the overheated tech space, which has just raised a tidy $216 millon in funding as its low-cost, high-performance smartphones become the latest must-have item in China’s mobile market. That kind of new funding for young high-tech companies hasn’t been seen in China for nearly a year now due to concerns about an Internet bubble, making this capital injection all the more impressive for a company like Xiaomi which only launched its first product last fall. The big size of the funding leads me to suspect that Xiaomi’s investors are aiming to boost not only the company’s manufacturing capacity and profile, but also its valuation in the run-up to either an IPO or perhaps a sale of the company as early as by the end of this year.
China iPhones: Apple Ties Up With Youku 中国型iPhone：苹果与优酷合作
Smartphone powerhouse Apple (Nasdaq: AAPL) is finally waking up to the importance of the China market, forging a new tie-up with leading online video site Youku (NYSE: YOUK) in bid to incorporate more China-friendly features into its wildly popular iPhones. This latest deal follows the even bigger unconfirmed news last week that Apple was in talks to integrate software from leading Chinese search engine Baidu (Nasdaq: BIDU) into its next generation iPhone, in another major nod to the importance of a market that now accounts for a fifth of Apple’s global sales, second behind only the US. (previous post) What we see here is a growing trend for Apple to integrate leading Chinese Internet software into its next-generation iPhones, which should result in some smart new models when Apple rolls out its latest smartphone later this year. Executives speaking at a developer conference in the US have already touted the fact that the next generation iPhone will have better Chinese input and Mandarin voice recognition capabilities, and I wouldn’t be surprised if we see some more news leaks and announcements in the days ahead for tie-ups with other Chinese Internet leaders like e-commerce giants Alibaba or Jingdong Mall, and microblogging sensation Sina (Nasdaq: SINA) Weibo. Let’s look at this latest announcement, which has Youku saying its video site software will be integrated into the newest versions of Apple’s desktop and mobile operating systems, set for release later this year. (company announcement) The integration should provide a nice boost for Youku, which will solidify its place as the country’s leading online video site with its pending merger with the second largest player, Tudou (Nasdaq: TUDO). Youku-Tudou will control a combined 40 percent of China’s online video market, and the addition of their platforms on the next-generation iPhones and Apple notebook computers could help them to further consolidate their dominance and perhaps even push them to their elusive goal of sustained profitability by year end. iPhones have become a must-have product for gadget lovers in big Chinese cities, with the smartphones now offered in plans by 2 of China’s top telcos, China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU). This new drive to create a China-friendly iPhone also hints that Apple could be near one of its biggest objectives for the market, namely the signing of an iPhone deal with China Mobile (HKEx: 941; NYSE: CHL), China’s biggest wireless carrier with two-thirds of the market. Such a deal has been repeatedly delayed due to technological reasons, but this rapid and sudden push to develop a China-friendly iPhone leads me to believe we could also see a China Mobile iPhone deal by the time the newest China iPhone comes out later this year.
Bottom line: Apple’s new tie-up with top online video site Youku is the latest step in its plans to make a China friendly iPhone, which could soon also include a long-awaited deal with China Mobile.
Related postings 相关文章:
◙ Baidu, Sina in Smart Cellphone Tie-Ups 百度、新浪在智能手机领域的合作
◙ China Telecom iPhone Debut Looks Strong 中国电信iPhone初次发售，势头强劲
◙ Apple CEO Cook Stirs Up Guessing Firestorm 苹果CEO库克低调访华意欲何为？
News Digest: June 1, 2012 报摘： 2012年6月1日
The following press releases and media reports about Chinese companies were carried on June 1. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
◙ China Mobile (HKEx: 941) Submits Application to Run Fixed-Line Network – Source (Chinese article)
◙ 360Buy to IPO in September 2012 – Analyst (English article)
◙ Baidu (Nasdaq: BIDU) Unlikely to Invest in E-Commerce – Executive (English article)
◙ RealD (NYSE: RLD), HNA Group Unit to Install RealD 3D on 500 China Cinema Screens (Businesswire)
◙ PetroChina (HKEx: 857) Needs Time on Shale Gas, Looks Abroad: Energy (English article)
Tencent: Preparing for Breakup? 腾讯或为分拆铺路
Tencent (HKEx: 700) is in the headlines today after releasing quarterly earnings that showed its profit continues to slow, but what caught my eye was another unrelated report saying that China’s leading Internet company is planning a major reorganization. I’ll discuss details of the reports in a moment, but from a bigger picture perspective I have to suspect that this reorganization — if it’s really happening — may be the prelude to a much bigger story that could see Tenent split up into several different companies in the next couple of years, either through its own initiatives or possibly under government pressure depending on the outcome of an ongoing anti-monopoly case. If such a split-up were to happen, investors in the current Tencent could reap big rewards by finding themselves holding stock in a number of promising smaller independent companies, including ones built around its highly successful online games and social networking businesses. Let’s look at the reorganization news first, as clearly that’s the most interesting. According to Chinese media reports, which cite unnamed industry sources, the reorganization now underway would see Tencent divide itself into 6 major groups, including one focused on social networking and another on interactive entertainment. (English article). Long-time followers of Tencent will recall the company started out as an instant messaging specialist that went on to leverage its dominant QQ service to enter a wide array of other Internet spaces, from online games, to search, video and e-commerce. The company is now China’s largest Internet firm, with a market capitalization of nearly $52 billion. The only other Internet firms that even come close to that are online search leader Baidu (Nasdaq: BIDU), with a market cap of about $43 billion, and privately held e-commerce leader Alibaba, which is thought to be worth about $30 billion. Unlike Baidu and Alibaba, which are both focused around a single core area, Tencent’s businesses are quite diverse, which is why a break-up would make more sense to let each separate business are improve its focus and sink or swim by itself. Impetus for such a move may not only be coming from within Tencent, but could also soon come from the government, depending on the outcome of an important anti-monopoly case now being heard in Guangdong province. That case, which opened last month, saw another Internet firm accuse Tencent of using its monopoly status in instant messaging to unfairly dominate other areas as well. (previous post) If Tencent loses that case, which could easily happen, it will suddenly come under big pressure to remedy its monopoly status, which could make a break-up more likely. Meantime, I should also take a quick look at Tencent’s latest quarterly results, which showed that its first quarter net profit grew an anemic 2.8 percent, even as revenue grew a much bigger 52 percent. (results announcement) The weak profit growth despite the big rise in revenues probably reflects Tencent’s highly diversified nature, which includes big new revenues but also big new spending on new businesses. That’s all the more reason the company should break itself up and make each of its different units stand alone as separate entities. Such a move would benefit not only the company itself, but also would satisfy critics of its anti-competitive behavior.
Bottom line: Tencent’s reported reorganization could be a prelude to a break-up, which would benefit investors and appease critics of its anti-competitive behavior.
Related postings 相关文章:
◙ Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？
Ctrip Profit Slows Amid Online Travel Rush 在线旅游热潮中携程利润放缓
A number of interesting news bits are coming from the online travel space, led by the latest quarterly results from industry leader Ctrip (Nasdaq: CTRP) that show competition is rapidly heating up in this space, where another up-and-comer named Tujia.com has just received new venture funding. After dominating China’s online travel space for years, Ctrip and eLong (Nasdaq: LONG) are getting a recent wave of new competition from others finally waking up to the potential of the online travel sector, fueled by demand from more and more Chinese who have extra money and time to spend on travel. That demand has helped to propel a new field of rivals, including online travel site Qunar, which itself received a major investment from online search leader Baidu (Nasdaq: BIDU) late last year. (previous post) Others moving aggressively into the space include e-commerce giant 360Buy, which also calls itself Jingdong Mall, and now Tujia.com, which specializes in vacation packages. (previous post) Let’s take a quick look at Ctrip’s results, which show the company’s revenue grew a respectable 19 percent in the first quarter, even as profit tumbled 28 percent. (results announcement) A look at the numbers shows that reduced commissions are partly behind the profit decline, as hotels and airlines come under pressure to boost their own profits and also have more platforms to sell their products from. But the big reason for Ctrip’s profit decline appears to be sales and marketing expenses, which jumped nearly 50 percent and now account for more than one-fifth of total revenue. Clearly Ctrip is having to spend a lot more to maintain its growth than it did in the past, reflecting the growing competition in the market that is only likely to get worse, putting further pressure on profits. For the moment at least, investors seem to like what they see in these latest results, initially bidding up Ctrip shares as much as 5 percent after the report came out, though now they are up only 2 percent in after-hours trade. From my perspective, this kind of increased sales and marketing spending will be critical for Ctrip to maintain its market-leading position, and for that reason I wouldn’t be too concerned just yet by this profit erosion. But at some point the company will have to return to profit growth, or risk being abandoned by investors. Meantime, Tujia has just landed a new round of venture funding, with Ctrip itself as one of the investors, along with US travel site operator HomeAway (Nasdaq: AWAY) and US investment firms Lightspeed Venture Partners and CDH Investments. (announcement) No terms were given in the announcement, but I would expect this round is probably in the $10-$20 million range, and the presence of so many high-profile investors means that Tujia should be well positioned to grow in its niche area of providing vacation packages, and could make a New York IPO in the next couple of years. With all these fast-rising players in the market, look for everyone to feel the heat in terms of falling margins, and perhaps even a merger or 2 involving one or more of the big names in the next couple of years.
Bottom line: Ctrip’s latest results reflect intensifying competition in the online travel space, with some consolidation likely in the next 2 years.
Related postings 相关文章:
◙ Baidu’s Qunar: Going Places 百度投资的去哪儿网：前途无量
◙ Jin Jiang Looks for Room at the Global Lodge 锦江集团寻求跻身国际高端酒店之列
Albaba Hires Big Gun in US Image Drive 阿里巴巴重金聘请美国前高官 启动形象改善工程
If you’re going to seek a New York listing, it seems only appropriate you might want to get your name removed from a major business blacklist before doing so, or at least that’s what e-commerce leader Alibaba seems intent on doing with its latest big-name hire. Foreign media are reporting the company has put up big bucks in the US to hire James Mendenhall, a Washingtonian with strong government ties, with a mandate to improve the company’s image in intellectual property protection. (English article) Of course that looks like a thinly disguised way of saying the company is giving Mendenhall the big paycheck to get Alibaba removed from the annual US list of notorious companies that fail to protect intellectual property by engaging in or facilitating piracy. China’s leading online search site Baidu (Nasdaq: BIDU) trumpeted its removal from the notorious list last year, after being included on it for years, and now uses that removal as a major plank in its public relations campaign to show the world it’s serious about playing in the same leagues as its big western rivals. (previous post) Alibaba’s Taobao sites, which engage in consumer-to-consumer (C2C) e-commerce and business-to-consumer (B2C) until recently, weren’t so lucky, and were once again included on last year’s notorious list. A quick look at Mendenhall’s resume shows he clearly has the connections to help Alibaba tackle the issue. A Harvard law school graduate who now works in a private law firm, Mendenhall has extensive past experience in the US Trade Representative’s Office, and also served as an adviser to the 2008 presidential campaign of Republican John McCain. That will give him good access to many of the key players he will need to convince that Alibaba should be removed from the notorious list, which is compiled by the Trade Representative’s Office. Of course, hiring big name executives doesn’t always work, at least not immediately, as telecoms equipment giant Huawei Technologies has discovered. Despite hiring a string of well-connected political insiders in the US, Britain and Australia over the last 2 years, Huawei has been repeatedly thwarted in all those markets, most recently being denied permission to bid on contracts to build a state-of-the-art new high-speed network in Australia. This latest move by Alibaba is clearly designed to clean up its image in the west, and seems like part of a longer-term plan for an eventual listing of the entire company in New York, which could come in the next few years. In the shorter term, all eyes will be on the next notorious list due to come out at the end of this year, with Mendenhall and his team coming under pressure to show some results for their big paychecks.
Bottom line: Alibaba’s latest hiring of a well-connected Washington insider to lobby for removal from a piracy list is part of its drive to clean up its image in the run-up to an eventual New York IPO.
Related postings 相关文章:
◙ 2011: A Breakthrough Year in Copyright Protection 2011年：中国版权保护取得突破的一年
Lenovo Sister Firm Looks to Japan, Taobao Quits “围城”日本：弘毅想冲进去 淘宝想撤出来
Japan’s foreign minister was in China yesterday on an official visit, so I thought I’d start the week with 2 items on Chinese companies in the notoriously difficult Japanese market, including an interesting move into the chip sector by a sister company of PC giant Lenovo (HKEx: 992) and a hasty retreat by e-commerce giant Alibaba. Let’s start with the more intriguing of the items, which is seeing Hony Capital, the high-profile technology investment arm of Lenovo parent Legend Group, pairing with US private equity giant TPG Capital to make a planned bid for bankrupt memory chipmaker Elpida (Tokyo: 6665), according to a Japanese media report. (English article) If they made a bid, the pair would join 2 other suitors, Korea’s Hynix Semiconductor (Seoul: 000660) and US-based Micron (NYSE: MU) in pursuing the Japanese company that controls 12 percent of the global DRAM market. Frankly speaking, Hynix and Micron look like much better suitors for Elpida, as both are competitors that could consolidate the Japanese company into their own operations for an industry that has been in desperate need of consolidation for the last 5 or 6 years. But the Hony-TPG pairing does include one interesting element, namely the Lenovo connection. Lenovo itself has been trying to break into Japan for years now, following its 2005 purchase of IBM’s PC assets that included sales and distribution networks in Japan. More recently Lenovo has taken over the PC assets of NEC (Tokyo: 6701), and has discussed setting up a manufacturing base in Japan. (previous post) A successful bid for Elpida could theoretically provide Lenovo with a strong DRAM supply for its Japan-based business. Still, I would be wary of such a purchase since Lenovo has little or no experience in running a DRAM operation, and it’s unclear what kind of savings it could achieve by combining its Japanese PC business with Elpida’s money-losing memory business. Moving on, the other Japanese news bit has seen Alibaba’s Taobao service officially shutter its Japanese shopping channel that was operating on a platform run by Yahoo Japan (Tokyo: 4689). (Chinese article) Alibaba made a relatively low-key move into Japan several years ago, seeking to take advantage of ties to one of its earliest investors, Japan’s Softbank (Japan: 9984), which is also the main investor in Yahoo Japan along with Yahoo (Nasdaq: YHOO) itself. Clearly the market hasn’t proven as easy to penetrate as Alibaba had hoped, and the media report even says that sales on the Taobao Japan channel were below the company’s targets. This withdrawal doesn’t surprise me at all, as Chinese firms of all types have had a difficult time in the Japanese market, which has become famous for its impenetrability by foreign firms. The other big Chinese web firm trying to crack the market is search leader Baidu (Nasdaq: BIDU), which has spent millions of dollars over the last 3 years on a Japanese search portal with little results to show for that investment. This Taobao withdrawal from the market was completely predictable, and I wouldn’t be surprised at all to see a similar retreat by Baidu within the next 12 months.
Bottom line: A bid by a Lenovo sister company for bankrupt Japanese chipmaker Elpida is likely to fail, while Baidu is likely to follow a recent Alibaba retreat from Japan in the next 12 months.
Related postings 相关文章:
◙ Lenovo Considers Japan Production 联想向日本转移制造业务为明智公关手段
◙ NEC China Cellphones: New Lenovo Tie-Up? NEC计划重回中国手机市场 或与联想联姻
Alibaba Tests Waters for Group Listing 阿里巴巴试水集团整体上市
Even as it continues the slow and tortured process of a massive buyback of shares from its biggest stakeholder, leading Chinese e-commerce firm Alibaba continues to test the waters for a potential mega-listing of itself, this time by releasing data on group-wide profits that highlight its fast-growth story. Chinese media are quoting a document recently filed with the US securities regulator saying Alibaba Group, 40 percent owned by struggling global search firm Yahoo (Nasdaq: YHOO), posted a profit of $339 million in the 12 months through October 2011, marking an impressive seven-fold increase from the previous 12-month period (Chinese article) The data show that the huge profit jump was clearly the result of Alibaba’s achieving economies of scale, since revenue grew by a much slower but still impressive 80 percent to $2.3 billion. Clearly the big jump in profits didn’t come from its Alibaba.com (HKEx: 1688) B2B marketplace, one of the group’s oldest assets and its only publicly traded one which has seen growth slow sharply in the last year as its business matures and it deals with a fraud scandal. Alibaba is in the process of privatizing Alibaba.com in its effort to downplay that slower growing part of its business and draw more attention to its higher growth units like its Tianmao online mall, formerly known as Taobao Mall, and its AliPay e-payments unit, both of which were probably major contributors to the big jump in profits. Of course people who follow this story will know that Alibaba is trying to buy out the 40 percent stake in the company held by Yahoo, in talks that have dragged on for months now. I’m quite certain that Alibaba is trying to buy back the stake for a price that will give it the highest valuation possible, as it probably plans to turn around and re-sell some or all of that stake at a premium to other investors. The latest disclosure of the group’s fast profit growth, combined with comments from an executive a few weeks ago (previous post), make it look increasingly like Alibaba is seriously considering a listing for the entire group company once it cuts its ties with Yahoo. I’ve previously said such an offering looks like a smart move, as Alibaba is a relatively rare case where its parts are probably worth more together as a package than as individual pieces, as they are all focused on the core e-commerce business and have many synergies. The company is reportedly trying to strike a Yahoo deal that would value it at $32 billion or more, and with these kinds of financials and general market hype created by founder Jack Ma it’s looking like he might actually get that valuation or even higher. He and his team have always hinted they think they should be valued in the same neighborhood as Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700), China’s 2 most valuable Internet companies, now both worth about $48 billion. A group listing would certainly come close to helping him reach that target.
Bottom line: The release of group-level data on Alibaba’s rapid growth is the latest indication the company is weighing a potential listing of the entire group either this year or next.
Related postings 相关文章:
◙ Alibaba.com Privatization: Parent IPO Coming? 阿里巴巴网私有化：母公司或将上市？
Fashion E-tailer Cuts Point to Ad Slowdown 玛萨玛索削减广告投入
There’s an interesting report in the domestic media saying popular online men’s fashion retailer Masa Maso is planning to slash its advertising budget by half this year, a move that will probably be repeated throughout the industry as many e-commerce firms, most of them losing money, go into cash conservation mode in their struggle to survive. Of course that also bodes poorly for companies that depend heavily on such ad spending for their revenue, from search leader Baidu (Nasdaq: BIDU), which gets nearly all its revenue from advertisers, to web portals like Sina (Nasdaq: SINA) and Sohu (Nasdaq: SOHU) and video and social networking sites likes Youku (NYSE: Youku) and Renren (NYSE: RENN). Let’s look at the report itself, as it does contain some details that show how the situation could play out. It cites a Masa Maso executive saying the company began slashing its ad spending in the second half of last year as part of a strategy to focus more on customer retention, in what looks like a roundabout way of saying it finally realized it had to cut costs and become profitable or risk going bankrupt. (English article) Most significantly, the executive says Masa Maso will focus its limited spending on search advertising, reflecting a broader trend that will see e-commerce firms and other advertisers probably cut back on ad platforms with more marginal returns in favor of ones with better track records. That should play to the advantage of search, which obviously means that Baidu could suffer less than others when the looming spending downturn becomes a major tide. Meantime, I would expect portal operators like Sina to also do relatively well in the coming downturn, as they tend to attract more mainstream audiences that would appeal more to advertisers. Companies most likely to take the biggest hit are specialty players, especially ones that cater to younger demographics who have less money to spend and thus are less attractive to advertisers. That category includes many money-losing companies such as video sharing sites like Youku and social networking ones like Renren, which means that these companies might have to wait longer still to achieve their quest for sustainable profits. I expect this report from Masa Maso reflects a sharp slashing of ad budgets for 2012 in general, meaning we should start to see some of the damage show up when companies that depend on ads for their revenue start reporting their first-quarter results in April and May. When that happens, look for investor dollars to flow to the big names like Baidu and Sina, while shares of less popular advertising platforms like Youku and Renren could take a hit.
Bottom line: A slash in advertising by a major fashion retailer reflects broader cuts by e-commerce firms this year, which will soon show up in ad-dependent firms’ bottom lines.
Related postings 相关文章:
◙ Baidu’s Strong Growth Underwhelms 百度业绩持续强劲增长将投资者期望抬升过高
Confidence Crisis Easing For US China Stocks 中国概念股信任危机缓和
While it’s never too smart to call a major market turnaround, growing signs are emerging that last year’s confidence crisis for US-listed China stocks may have finally turned a corner, with a strong rebound on the horizon if the broader market remains healthy. The first 2 months of the year have seen several positive developments for Chinese stocks in New York, following a disastrous 2011 that most would rather forget as their shares were pummeled by a series of accounting scandals that undermined the entire sector. Sensing that the worst of the crisis is over, 3 Chinese companies have filed for new US listings in the last few weeks, betting that investors will once again be interested in the China growth story. At the same time, short sellers and lawyers who seized on the crisis to make quick bucks have found far less success in some of their most recent attacks, indicating investors are once again giving Chinese companies the benefit of the doubt now that many more questionable firms have been de-listed. The nascent return of confidence is most evident in the share prices for many US-listed Chinese firms, some of which fell by 50 percent or more last year at the height of the crisis that began with attacks on 2 names, financial services company Longtop Financial and timber firm Sino-Forest. Both companies saw their shares tumble after short sellers questioned different aspects of their accounting, and Longtop was ultimately de-listed. Since bottoming out in mid December, shares of many industry stalwarts that were dragged down in the crisis have posted a strong recovery, with Internet search leader Baidu (Nasdaq: BIDU) and top web portal Sina (Nasdaq: SINA) both up about 20 percent since mid-December. Even smaller names have joined in the rally, with social networking site Renren (NYSE: RENN) and online video site Youku (NYSE: YOKU) both up by 30 or more. Equally significant has been the failure of a number of short seller attacks, which netted big bucks for companies last year. Muddy Waters, whose name became synonymous with the attacks after its successful assault on Sino-Forest last year, has found much less success with a more recent attack on Focus Media (Nasdaq: FMCN). Focus shares initially fell sharply after Muddy Waters questioned some of its data late last year, but have rallied sharply since then and are now close to their pre-attack levels. A similar attack late last year on security software firm Qihoo 360 (NYSE: QIHU) has also failed to convince investors, with the company’s stock now trading near pre-attack levels after initially falling more than 10 percent. At the same time, a series of recent investor lawsuits designed to seize on a drop in the share price of IT outsourcing firm Camelot Information Systems (NYSE: CIS) has also failed to dent the company’s stock price, again indicating investors may feel the worst is past and these Chinese companies are now more trustworthy. As the confidence creeps back, a small trickle of Chinese companies have decided to test their luck with the New York IPO market. Car rental firm China Auto was first out of the gate when it filed for an offering in January, ending several months with no major new Chinese listings. It was followed this month by e-commerce firm Vipshop and Shanda Cloudary, which initially filed for an IPO last year but had to pull the offering due to poor investor sentiment at the height of the crisis. The real test of whether the worst is really past will lie in the weeks ahead, as these 3 offerings go to market and meet with either investor interest or more skepticism. I personally think China Auto could do well, though the 2 Internet offerings could meet with more tepid interest as both are still losing money. Still, if these 3 can post even modest success, which looks like a strong possibility, it could signal the crisis has truly turned the corner, meaning a solid rally may be in store for these stocks for the rest of the year.
Bottom line: Growing signs are emerging that the confidence crisis for US-listed China stocks may be over, with 3 upcoming IPOs providing a strong test of a turning point for the battered sector.
Related postings 相关文章:
◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划
◙ Citron Keeps Up Qihoo Assault 香橼继续攻击奇虎
◙ Sharks Continue to Circle China Stocks 在美上市中国企业将持续面临做空和法律诉讼压力
