Search Results for: baidu e-commerce

Baidu, Sina in Smart Cellphone Tie-Ups 百度、新浪在智能手机领域的合作

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After witnessing a steady stream of puzzling moves into the smartphone space by Internet companies in recent months, I’m happy to say I’m finally seeing 2 new moves that I like by sector leaders Baidu (Nasdaq: BIDU) and Sina (Nasdaq: SINA). The rush into smartphones has seen many major Internet firms launch their own new products in the last 12 months, from Internet giant Tencent (HKEx: 700) to e-commerce giant Alibaba, security software specialist Qihoo 360 (NYSE: QIHU) and game operator Shanda. Clearly these companies are trying to grab a share of the fast-growing mobile Internet market, which could easily overtake traditional desktop web surfing in just a few years with the explosion of 3G services and smartphones. But rather than partner with strong players using existing mobile platforms, many of these new initiatives are pairing with less experienced cellphone makers like home electronics giants Haier and Changhong, meaning their chances of success are very limited. That’s why I like these 2 new deals with Baidu and Sina, which will see each company partner with a strong smartphone player in a very targeted way rather than trying to develop completely new models. In Baidu’s case, China’s leading search engine is reportedly close to a deal that will see its mobile search engines pre-installed on Apple’s (Nasdaq: AAPL) wildly popular iPhones sold in China. (English article) Meantime, Sina has signed a deal that will see its popular Weibo microblogging service featured prominently on the home screen of a second-generation smartphone model developed for China by Taiwan’s HTC (Taipei: 2498), another strong handset maker. (Chinese article) Let’s look quickly at the Apple-Baidu deal first, as that’s the bigger of the 2 and looks like a smart move for both companies. Apple’s iPhones are quite popular in China, but their high price tag means the models now command a much smaller portion of the market than cheaper smartphones using Google’s (Nasdaq: GOOG) free Android operating system. So this move should help Apple to gain some share by providing easier access to China’s most popular search engine. From Baidu’s perspective, inclusion  of its search engine on iPhones should help it gain more dominance in the mobile Internet, an area it doesn’t dominate nearly as much as it does for traditional desktop web searching. The Sina-HTC tie-up should also benefit both of its partners, giving Sina greater exposure for Weibo as it tries to monetize the popular microblogging service in the run-up to an eventual IPO. The tie-up could also provide a sales lift for HTC, whose fortunes have sputtered recently, as Weibo enthusiasts might be more likely to buy this new smartphone model. I hope we see more tie-ups like this in the months ahead, as they look like smart ways to gain share in the emerging mobile Internet. In the meantime, look for these other  initiatives involving self-developed smartphones from Alibaba, Shanda and others to be quietly retired in the months ahead after they find few or no buyers after their roll-outs.

Bottom line: New tie-ups by Sina and Baidu look like good highly focused moves to gain share in the crowded mobile Internet market by pairing with established smartphone makers.

Related postings 相关文章:

◙ Russia’s DST Builds More Valuation Froth 俄罗斯DST助长中国互联网企业估值虚高

◙ Baidu Smartphones Set to Stumble 百度进军智能手机市场或以失败告终

◙ TCL Cellphones: History Repeats Itself TCL手机业务历史重演

Microsoft E-Commerce: Late to the Game Again 微软进军中国电商市场最终或以失败收场

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I suppose I should congratulate Microsoft (Nasdaq: MSFT) for finally realizing the huge potential of e-commerce in China, even though it’s quite late coming to this incredibly competitive space. Then again, no one will ever accuse Microsoft of being a leader in anything these days, as this company is clearly a follower that takes advantage of its dominant PC presence with Windows to force its way into other product and service areas developed by nimbler, more innovative companies. Chinese media are reporting that Microsoft, through its MSN platform, is planning to enter the crowded e-commerce space in China following the recent end of beta testing for its Chinese-language Bing search engine. (English article) The company didn’t provide any details, but it sounds like the new e-commerce platform will be somehow integrated with Bing, as well as Microsoft’s Windows platform that is also the dominant PC operating system in China, similar to the rest of the world. First off, I have to say that I’m amazed that Bing in China is just finishing up its beta testing, as Microsoft launched the site 3 years ago. Clearly it wasn’t fast-tracking Bing in China, which is obvious from the fact that the search engine is still a non-player in the market, similar to its status in the rest of the world despite Microsoft’s putting large resources into this key Internet area dominated by Google (Nasdaq: GOOG) globally and local search leader Baidu (Nasdaq: BIDU) in China. But let’s take a rest from my sarcasm about Bing, and turn my attention instead to this ludicrous new e-commerce initiative. I use the word “ludicrous” not because e-commerce isn’t an area filled with huge potential, but rather because Microsoft will stand little or no chance of success because the space is already so crowded with other much bigger names with far longer histories in the area. In terms of actual numbers, China’s e-commerce market was worth 500 billion yuan in sales in 2010, or nearly $100 billion, and is likely to hit the 1 trillion yuan mark by 2015 if current growth trends continue. But much of that growth has been fueled by a crowded field of both home-grown and international players who will be formidable rivals even for Microsoft. Just to name a few, the former category includes industry leader Alibaba, along with challengers Jingdong Mall, Suning and Dangdang (NYSE: DANG). In the latter category, retail giants Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) are both making aggressive pushes in the space, the former with a major expansion of its China website and the latter through its investment in another domestic player called Yihaodian. I’m not saying that entry at this late stage is impossible, as Microsoft does have some advantages that its rivals don’t have. But the lateness of this arrival, combined with the presence of so many well-funded, highly experienced rivals, make me fairly confident in saying that this new e-commerce initiative will ultimately end up a failure.

Bottom line: Microsoft’s new China e-commerce initiative is likely to fail due to its late arrival to the sector where it will face stiff competition from well-funded domestic and international rivals.

Related postings 相关文章:

◙ E-Commerce: Dangdang CFO Goes, Suning’s New Trip 当当网首席财务官请辞 苏宁进军在线旅游业

◙ China: Room for How Many Amazons? 中国电商市场到底有多大？

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

Tencent E-Commerce: Another Money Loser IPO 腾讯电商：将又一个失败的

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I was amused to read this morning that Internet titan Tencent (HKEx: 700) may choose its money-losing e-commerce platform for its first IPO, following its recent reorganization into 6 business units to allow each of those areas to sink or swim by themselves. The reports are a bit unclear about the timing of a potential IPO, and indeed say that such an offering is just one possibility for the newly formed unit as it seeks to raise more money to eventually create a broader e-commerce platform, presumably similar to Alibaba’s highly successful TMall. (English article) If that’s the case, I hope that executives are reading the newspapers these days, as investor appetite for money-losing Chinese Internet IPOs is extremely low these days and showing no signs of improving anytime soon. The only company to make an overseas Internet IPO this year so far has been Vipshop (NYSE: VIPS), a money-losing discount retailer, and that was a complete disaster. Other potential offerings from Shanda’s online literature unit, called Cloudary, and leading group buying site LaShou have all been delayed or disappeared completely, although Shanda appears to be moving ahead with its offer after its surprise disclosure that Cloudary recently turned profitable. (previous post) In terms of Tencent’s e-commerce business, it seems to me like the unit’s biggest asset is the Tencent name itself, since Tencent is clearly China’s biggest Internet firm and its leading player in online games and instant messaging. On the other hand, Tencent has had much less success in areas like e-commerce, which rely on an older, more cash-rich demographic of users unlike games and its instant messaging that tend to draw people in the 15-25 year old age range. Tencent’s newly formed e-commerce unit contains its older Paipai online auctions business, also known as C2C, along with a more recently established B2B platform that I’ve never heard of. The unit’s new head says that one of its strengths is its strong social networking element, which presumably helps to create a community among online buyers. Social networking is certainly one of Tencent’s strengths, but I doubt whether its core base of young users, with their low consuming power, would be very attractive to most e-commerce sellers. All that said, I wouldn’t expect to see Tencent make an IPO for this new e-commerce unit anytime soon due to the current frosty market. If I were advising Tencent founder Pony Ma on how to proceed, I would tell him to make an IPO first for one of the company’s more successful units, such as its social networking or online games business, which would certainly create a bit more excitement among investors. But if e-commerce does go first in the march to market for these new little Tencents, look for weak investor interest and a stock that probably won’t go anywhere but down after its trading debut.

Bottom line: Tencent’s spin off and potential IPO for its money-losing e-commerce unit looks like a poor choice for its first IPO following its recent reorganization.

Related postings 相关文章:

◙ Tencent: Preparing for Breakup? 腾讯或为分拆铺路

◙ Shanda Cloudary Wows Investors With Profit 盛大文学利润令投资者惊叹

◙ Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？

Apple Feasts on China, Baidu Burps 苹果在华享受盛宴，百度盛宴停顿

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I’ll start off today with 2 earnings stories from companies moving in opposite directions: one from Apple (Nasdaq: AAPL), whose China sales have exploded on the back of its hugely popular iPhones, and the other from online search leader Baidu (Nasdaq: BIDU), whose rapid growth is showing signs of having peaked. Let’s look at Apple first as that’s the story that has the world buzzing the most, with the company reporting quarterly earnings that beat Wall Street forecasts and dispelled doubts that its popular iPhones and iPad tablet PCs were losing their appeal. (English article; Chinese article) China was the story within the story this time, with the Greater China region accounting for a whopping $7.9 billion of Apple’s sales for the quarter, or a fifth of its $39.2 billion in revenue. That huge figure came largely on the back of a 4-fold surge in iPhone sales. While the latest China numbers were huge, there’s every indication that they will continue to grow in the current quarter thanks to a new partnership with China Telecom (HKEx: 728; NYSE: CHA), the most aggressive of China’s 3 telcos, which began selling the iPhone in early March, or right at the end of the first quarter. (previous post) Apple had previously only sold iPhones in China through Unicom (HKEx: 762; NYSE: CHU), China’s second largest mobile carrier. Additional upside could come from settlement of an ongoing trademark dispute over the iPad name, which recently prompted Apple to delay selling the newest iPad model in China. (previous post) I would expect that dispute to be settled as soon as the end of the current quarter, paving the way for sale of the latest iPad in China as early as July or August. Meantime, Baidu has also just announced results that have failed to impress investors, who have bid down the company’s stock by around 10 percent in after-hours trading. Some are blaming the share sell-off on Baidu’s second-quarter outlook that was below market forecasts, but from my perspective the entire report looks relatively uninspired. (company announcement) The company said its profit and revenue both grew about 75 percent in the quarter from the previous year — figures that would look great for any other company besides Baidu. The profit growth is roughly comparable to a 77 percent profit jump in the previous quarter, although revenue growth slowed from the previous quarter’s 82.5 percent gain. Also slightly worrisome was one of the first negative growth figures I’ve seen from this company in its core advertising business, with Baidu reporting that revenue per online marketing customer fell 7.6 percent in the first quarter of this year versus fourth quarter levels. All of this indicates that an advertising slowdown that I’ve been predicting for the last 8 or 9 months is finally arriving, and that Baidu’s growth has peaked and will soon start to slow considerably.

Bottom line: Apple’s explosive China growth could accelerate on the back of a recent new iPhone deal and resolution of a trademark dispute, while Baidu’s growth appears to have peaked.

Related postings 相关文章:

◙ Apple Pressures Beijing With iPad Snub 苹果在华不售新iPad向中国政府施压

◙ Baidu Diversification Sputters With E-Commerce Flop 乐酷天将关停 百度电商战略再折戟

◙ Apple Bytes: Labor, a State Visit and Baidu 库克中国行猜想：他在下一盘很大的棋

Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？

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An important trial has just begun in southern Guangdong province, testing China’s young anti-monopoly law and its legal system in a case that could spell big headaches for leading Internet firm Tencent (HKEx: 700). Analysts also point out the case could have a domino effect for other areas where a single company dominates the Web, with online search leader Baidu (Nasdaq: BIDU) perhaps the most vulnerable to a similar lawsuit. But let’s look at the Tencent case first, as that’s the main point here. Perhaps appropriately, the case is being bought by Internet software company Qihoo 360 (NYSE: QIHU), a seasoned veteran with litigation in China, having been sued numerous times by others, including Tencent, and also filing numerous lawsuits of its own against rivals. This latest case has Qihoo suing Tencent for monopolistic practices in the instant messaging space, claiming Tencent’s wildly popular QQ service has a virtual lock on the market. (Chinese article) The case, which began on Wednesday morning，has Qihoo seeking 150 million yuan, or about $24 million, in damages. Chinese courts rarely award that much money due to legal restrictions, but even if they did such an award would be trivial to a company like Tencent that has a market cap of $56 billion and a huge cash pile. Of course the much bigger threat is that the court will determine that Tencent does indeed have an instant messaging monopoly, which it has used to quickly gain dominance in other Internet spaces such as online games. From my perspective, Qihoo’s case does indeed look convincing, as Tencent currently controls more than 70 percent of the instant messaging market. I personally don’t use QQ, but in my experience the only other platform that has any users at all in China is Microsoft’s (Nasdaq: MSFT) MSN, whose service is basically just a copy of its global product and is far less popular among Chinese users. A court ruling against Tencent would be interesting for a number of reasons, all of which would obviously be bad for the company. Qihoo and others are clearly interested in seeing the court order Tencent to de-link QQ from its other initiatives, as that would seriously hamper the company’s ability to take advantage of its massive instant messaging user base to quickly develop into other areas like search, online video and e-commerce. But the court, if it rules against Tencent, should also take steps to break its instant messaging monopoly, which is what the anti-monopoly rule was designed for. Of course, if the court rules against Tencent the next major target would be Baidu, which also controls more than 70 percent of China’s search market, the legal definition for a monopoly. Accordingly, China Internet watchers and investors should be paying close attention to this case, which could have big implications for both Tencent and Baidu stock.

Bottom line: Tencent will suffer a big setback if a court rules it has a monopoly in instant messaging, potentially paving the way for a similar lawsuit against Baidu.

Related postings 相关文章:

◙ Tencent Search: Baidu Beware? 腾讯搜搜成功关键依赖创新

◙ Search Wars Heat Up With Latest Anti-Baidu Moves 中国网络搜索战升温

◙ 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

E-Commerce: Dangdang CFO Goes, Suning’s New Trip 当当网首席财务官请辞 苏宁进军在线旅游业

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There are a couple of interesting news bits from the e-commerce space, one from e-commerce giant Dangdang (NYSE: DANG) whose CFO has just resigned, and the other on an interesting new move by an increasingly aggressive Suning (Shenzhen: 002024) into online travel services. I was originally planning to start with Suning, as that news looks the most interesting in terms of broader strategy. But then I had a look at Dangdang’s stock, and was a bit surprised to see it plunged more than 15 percent after news of the CFO resignation came out, indicating investors are clearly concerned about this development. Dangdang itself wasn’t saying much, except that CFO Conor Yang, who joined the company 2 years ago and saw it through its IPO in late 2010, tendered his resignation for personal reasons. (company announcement; Chinese article) Yang helped Dangdang raise more than $300 million in the successful IPO, with Dangdang shares initially soaring in their trading debut. But since then they have tumbled due to fierce competition in China’s e-commerce space that has led Dangdang and most of its peers deeply into the red, and now they trade at about half of their IPO level. It’s never good to lose a CFO, and it’s especially bad when your CFO leaves when the company is so deeply in the red. Such departures often imply the CFO, who is traditionally more conservative about financial matters, may believe his bosses are pressuring him to understate the nature of bad news like big losses. If that’s the case, look for more turbulence for this already-battered stock as its accounting comes under increasing scrutiny. Meantime, Suning, which has aggressively moved into e-commerce over the past year and is now the country’s fourth-biggest player, announced it is getting into the online travel business by selling airplane tickets and hotel reservation services. (English article) This move looks interesting as the online travel space is already quite crowded, dominated by established players like Ctrip (Nasdaq: CTRP) and eLong (Nasdaq: LONG) and recent entries to the space by e-commerce rival 360Buy and search giant Baidu (Nasdaq: BIDU). (previous post) Suning seems to be quite good at executing its new business strategies, and thus could offer a serious product in the space in a relatively short time. If that happens, along with all these other new initiatives, look for the online travel sector to see a serious jump in competition — and profit erosion — in the next 2 years.

Bottom line: Dangdang’s CFO resignation could point to accounting issues, while Suning’s entry to online travel services will further heat up this increasingly crowded space.

Related postings 相关文章:

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

◙ Dangdang and Gome: Marriage Ahead? 当当和国美：联姻前夕？

◙ Baidu’s Qunar: Going Places 百度投资的去哪儿网：前途无量

Talks Swirls on Baidu’s Lekutian 百度乐酷天拟走“日系风格”

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Baidu (Nasdaq: BIDU) has been phenomenally successful in its core online search business, but it’s had a much harder time diversifying into other areas like social networking and e-commerce. The company called it quits in microblogging last year after a late arrival and half-hearted effort in the space (previous post), and now its latest e-commerce initiative, called Lekutian, appears to also be suffering from its own identity crisis. Lekutian is Baidu’s second major attempt at getting into the lucrative but highly competitive e-commerce space, following its failed effort with another site, called You’a, last year. With Lekutian, Baidu was hoping to avoid the same fate by setting up the business as a joint venture with Rakuten (Tokyo: 4755), one of Japan’s a leading e-commerce companies. Signs that the venture wasn’t progressing as quickly as planned first emerged late last year when domestic media reported that Baidu was halting its new investment in the business — reports that Lekutian denied. Now a new flurry of reports have again emerged on Lekutian, with some saying the venture is making a major directional shift while others are saying the site is implementing major layoffs. (English article; Chinese article) Not surprisingly, Lekutian is denying the layoff reports, though it is also talking openly about the directional shift. One report cites a company spokeswoman saying the site wants to take advantage of its Japan connections to transform itself into an e-commerce platform with a distinctly Japanese flavor, including Japanese brand products and a more Japanese look and feel. The site will also emphasize a more mall-like business model, similar to Alibaba’s Tianmao, which operates a platform on which other retailers can open online stores rather than selling merchandise directly itself. Frankly speaking, this move by Lekutian smells a bit of desperation to me, and hints that the site isn’t doing very well and could easily end up with a similar fate  to the failed You’a. At the same time, I should commend Baidu this time for realizing that it is a latecomer to the e-commerce game, and will have to develop a more niche product as it clearly can’t compete with much bigger and more established giants like Tianmaol, 360Buy and Dangdang (NYSE: DANG), as well as sites operated and invested by big foreign names like Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT). I do question whether the “Japanese experience” niche that Lekutian is pursuing will find a big audience in China, and suspect the site will ultimately end up as a small player that will later get quietly shut down. Not all of Baidu’s non-core investments have done so badly, with a big bet last year on an online travel site called Qunar looking like it could have good potential. (previous post) If Baidu is smart, it might be advised to invest in more existing companies like Qunar that already have a strong operating record, rather than trying to start its own new businesses, where its record is decidedly not so good.

Bottom line: A major directional shift by Baidu-invested e-commerce site Lekutian hints at troubles at the joint venture, which could end up as a niche player at best.

Related postings 相关文章:

◙ Baidu’s Qunar: Going Places 百度投资的去哪儿网：前途无量

◙ Baidu’s Takes a $300 Mln Spin on Travel Market 百度斥资3亿美元进军旅游市场

◙ Baidu’s Latest Botch: Microblogging 百度“微博”的倒掉

Baidu’s Silence: Shortfall Ahead? 百度低调发财报：或开始下坡路？

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I certainly don’t think of myself as a believer in conspiracy theories, but I have to say I was a bit surprised to read several reports over the weekend saying that leading search site Baidu (Nasdaq: BIDU) was going to report its fourth quarter results on Monday US time and can’t help but wonder if there’s a bigger story here. (English article; Chinese article) Let’s backtrack a bit and review what exactly happened, or in this case what didn’t happen. Most importantly, Baidu has made no public announcement of its plan to release its latest earnings, even though numerous websites have clearly learned of its intent based on all the reports. The company usually puts out an announcement via PRNewswire around 3 weeks ahead of its earnings date, which is notably absent this time on both the PRNewswire site and Baidu’s own investor relations site. What’s more, the date isn’t even marked on Baidu’s own investor relations calendar, even though quarterly reports are clearly one of the most important events for publicly listed companies, especially ones like Baidu whose revenue and profits  keep growing by very attractive rates even as companies in other sectors stumble. This time is no different, with analysts looking for Baidu’s top and bottom lines to grow by more than 80 percent. The timing of this announcement also looks a little odd, as it comes on the first day of the new work week after most of China took off the previous week for the Lunar New Year holiday. The last time someone tried to do something like that was last fall, when B2B e-commerce leader Alibaba.com (HKEx: 1688), which is listed in Hong Kong, quietly announced its less-than-stellar results on the US Thanksgiving Day holiday when many people had just started a 4-day vacation. (previous post) Of course I should also point out that Baidu released its fourth-quarter results at just about the same time last year, and the odd timing could just owe to the fact that the Lunar New Year fell quite early this year. It’s also possible that Baidu simply just forgot to send out a notice about its latest reporting date, and also forgot to include it on its investor relations calendar. In fact, one research house said it talked recently to Baidu management, which was confident of meeting expectations for its results. Still, I can’t help but wonder if we’ll perhaps see the beginning of the slowdown for this company that I predicted around the middle of last year (previous post) and seems all but inevitable, if not now then later this year.

Bottom line: Baidu’s low-profile approach to its latest earnings due out on Monday US time could signal a downside surprise, as its booming ad sales finally start to slow.

Related postings 相关文章:

◙ Advertising Squeeze Continues, Slowdown Looms 广告支出初显放缓迹象

◙ Baidu, ZTE Earnings: More of the Same 百度和中兴财报：看上去没变化

◙ Search Wars Heat Up With Latest Anti-Baidu Moves 中国网络搜索战升温

 

Baidu, Sohu Highlight China Shell Games 百度搜狐拆分业务让金融骗局再度受关注

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When was the last time you saw Google (Nasdaq: GOOG) or Amazon (Nasdaq: AMZN) spin off one of its units into a separately listed company or inject assets from its parent company into a listed unit? The answer of course is that they never engage in any of these common practices of big China state-run companies, but that hasn’t stopped the country’s booming private Internet sector from becoming increasing masters at such games. The latest machinations in these games have seen Sohu (Nasdaq: SOHU) sell its online game information site, 17173.com, to its separately listed online game unit, Changyou (Nasdaq: CYOU) for a nifty $162 million (English article; Chinese article), while search leader Baidu (Nasdaq: BIDU) is spinning off its struggling e-commerce site YouA into an independent company complete with its own venture funding. (English article) Of course, the granddaddy of this kind of shell game is Shanda Interactive (Nasdaq: SNDA), which listed on the Nasdaq many years ago, then spun off its core online game business into a separately listed company, Shanda Games (Nasdaq: GAME), and is now in the process of trying to spin off its  online literature unit into yet another public company, Cloudary, even as Shanda Interactive itself attempts to de-list as its share price languishes. (previous post) Leading web portal Sina (Nasdaq: SINA) has also engaged in this kind of financial shell game. This situation has evolved in part because many of China’s Internet companies often stray from their core business into completely unrelated areas — a practice seldom seen at major Western firms. But from an investor perspective, this kind of game results in a lack of transparency, as parent companies can often manipulate situations to make results of these spun-off companies appear on their own balance sheets if the results are positive, and then magically disappear if the business is performing poorly. Shares of Chinese web firms are currently mostly the playthings of speculative short-term investors; but if these companies ever want to be taken seriously by longer-term institutional buyers, this kind of game playing is one of the first things that needs to stop.

Bottom line: The latest spin-offs by Baidu and Sohu cast a spotlight on China web firms’ fondness for financial shell games, which will continue to scare off long-term institutional investors.

Related postings 相关文章:

◙ Shanda Moves Ahead With Privatization 投资者对盛大私有化仍持保留态度

◙ Shanda Plays Games With Big Dividend 盛大游戏寄望高额分红计划提振股价

◙ Sina’s Weibo: Growth Engine or Growing Burden? 新浪微博：动力or负担？

New Regulatory, Competitive Waves Hit E-Commerce 监管和竞争冲击电子商务领域

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Turbulence continues to pelt China’s e-commerce sector, with new reports showing how rampant competition is pushing up costs as an industry regulator gets looks into anti-monopoly claims against top online mall operator Taobao Mall. A new foreign media report cites the top executive at luxury e-commerce site Xiu.com saying that rents for the massive warehouses required by most online merchants have soared in the last year, as players like 360Buy and Wal-Mart-invested (NYSE: WMT) Yihaodian all vie for facilities near major cities where they can store and then ship their goods. (English article) Global e-commerce leader Amazon (Nasdaq: AMZN) has joined the fray, announcing last week that its China operation was opening a 120,000 square meter facility in the city of Kunshan, not far from Shanghai, quadrupling its warehouse space in the affluent Yangtze River Delta region. (previous post) The soaring warehouse rents are just the latest headache for the overheated e-commerce sector, where most major players are already hemorrhaging money as the industry heads for a much needed consolidation that is likely to come by the middle of next year. Meantime, domestic media report the Commerce Ministry is entering the e-commerce fray by launching an anti-monopoly investigation into Taobao Mall, Alibaba’s B2C operation, in response to merchant complaints that the online mall operator used its dominant position to unilaterally force a massive fee hike on its merchants, leading many small- and mid-sized sellers to rebel. (English article) I personally think this latest Commerce Ministry investigation is a bit misguided, as there’s plenty of competition in the e-commerce space though less so in the online mall sector. If the ministry really wants to chase someone for anti-monopoly violations, it should focus on online search leader Baidu (Nasdaq: BIDU), which controls nearly 80 percent of the market.

Bottom line: Soaring warehouse rents are the latest sign of overheating in China’s e-commerce space, which is also facing the threat of increasingly heavy-handed regulation by Beijing.

Related postings 相关文章:

◙ Amazon Name Shift Signals China Ramp-Up 亚马逊改名背后折射中国野心

◙ 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

◙ China Regulors Threaten E-Commerce, Group Buying 官方监管威胁到电子商务与团购业务

Baidu, ZTE Earnings: More of the Same 百度和中兴财报：看上去没变化

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Chinese firms are flooding the market with third-quarter results, with industry bellwethers Baidu (Nasdaq: BIDU) and ZTE (HKEx: 763; Shenzhen: 000063) both reporting figures that show continuation of recent trends. First Baidu, which reported a healthy rise of around 80 percent in both revenue and profit, as it banked on strong demand for ads on its search site, China’s dominant player with more than two-thirds of the market. (company announcement) Baidu further predicted that revenue will continue to grow at similar rates in the fourth quarter, as healthy demand continues. I previously predicted a sharp slowdown in ad spending could be looming as a much-needed correction looms for China’s overinflated Internet bubble, but clearly Baidu is seeing no signs of that yet. I still think such a correction is coming, and will hit Baidu’s top and bottom lines when it does; but despite signs of trouble from the group buying sector and some e-commerce firms, we won’t see the first real signs of a downturn until the first or most likely the second quarter of next year. As to ZTE, the company also reported third-quarter revenue grew at a healthy 37 percent, accelerating from the first half of the year as it focused on building up its cellphone business, which was up more than 50 percent in the first 9 months of 2011. (Chinese article) But while revenue rose, its third quarter profit fell by nearly 40 percent, also accelerating from the first half of the year, as it continued its risky strategy of grabbing global market share for its handset business by selling its low-end smartphones at prices near or perhaps even below its costs. This strategy could work in the end if ZTE can raise its prices after it gains market share. But it could also backfire if consumers come to associate the company with cheap products and aren’t willing to pay a premium for its cellphones. The company’s heavy reliance on Google’s (Nasdaq: GOOG) Android smartphone operating system also puts it at risk of potential lawsuits from Apple (Nasdaq: AAPL), which has already files similar suits against some other major cellphone makers.

Bottom line: The latest Baidu and ZTE results show continuation of recent trends, though the former remains at risk due to a possible Internet bubble, and the latter from a risky expansion strategy.

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