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News Digest: May 15, 2012 报摘： 2012年5月15日

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The following press releases and media reports about Chinese companies were carried on May 15. To view a full article or story, click on the link next to the headline.

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◙ China Mobile (HKEx: 941) Responds to Obstacles in US, Believes Will Get License (Chinese article)

◙ Suning.com (Shenzhen: 002024) Launches Wine Channel (English article)

◙ DTS (Nasdaq: DTSI), Lenovo (HKEx: 992) Bring High-Definition Audio to Smart TVs (Businesswire)

◙ Renren (NYSE: RENN) Announces Unaudited Q1 Financial Results (PRNewswire)

◙ Vipshop (NYSE: VIPS) Reports Q1 Financial Results (PRNewswire)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Sharp Explores China Cellphone Tie-Up 夏普联手富士康打造低端手机

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There’s an interesting story out today saying that fading Japanese electronics giant Sharp (Tokyo: 3128) is exploring the possibility of a cellphone tie-up with Taiwan’s Foxconn (HKEx: 2038), the latest wrinkle in a story that is seeing a growing number of Japanese firms hand over many of their struggling consumer electronics to Chinese firms that specialize in low-cost manufacturing. The latest media reports indicate that talks are very preliminary, saying only that top executives from Foxconn and Sharp met in Beijing this week to discuss such a tie-up. (English article; Chinese article) It adds that Foxconn could find such a tie-up attractive as it seeks to develop its own brands and move away from its core contract manufacturing, a low-margin business that sees it make products for other companies such as Apple’s (Nasdaq: AAPL) popular iPhones. For Sharp, such a tie-up would be part of its ongoing strategy to either sell or outsource many of its less profitable businesses to other firms. In this case, Sharp is still clearly a recognizable name in the cellphone space, but it’s also a decidedly second-tier player and its cellphone operations are probably not very profitable. That could be a good fit for Foxconn, which could significantly lower Sharp’s manufacturing costs and also has good resources for developing new products. In fact, this deal, if it happens, would look strikingly similar to a growing relationship between Chinese PC specialist Lenovo (HKEx: 992) and Japan’s NEC (Tokyo: 6701). That relationship began last year when NEC and Lenovo formed a joint venture that saw Lenovo take over the operation of NEC’s PC operations. (previous post) Like Sharp in cellphones, NEC is a relatively well known PC brand, but also a decidedly second-tier player that is rapidly losing relevance outside its home Japan market. After that tie-up was formed, NEC announced later in the year that it was re-entering the China cellphone market after withdrawing several years earlier. (previous post) There were few details in that announcement, but the timing so close after the PC tie-up with Lenovo led me to speculate that NEC was going to rely heavily on Lenovo’s well-established sales channels in China to relaunch its cellphones in the market. I further speculated that if NEC was successful in gaining some market share, it could eventually put its cellphone business into another joint venture with Lenovo, effectively handing over the brand to the Chinese firm. Such a move would certainly make sense for Lenovo, as it wants to rapidly build up its cellphone business but has had trouble developing its own brand, especially at the higher end of the market where it faces still competition from names like Apple, HTC (Taipei: 2498) and Samsung (Seoul: 005930). I would give these latest talks between Sharp and Foxconn a 50-50 chance of resulting in a new joint venture, and would look for more similar tie-ups in the next couple of years.

Bottom line: Sharp’s cellphone talks with Foxconn have a 50-50 chance of producing a joint venture, and reflect the growing ties between Chinese and Japanese electronics makers.

Related postings 相关文章:

◙ Lenovo Sister Firm Looks to Japan, Taobao Quits “围城”日本：弘毅想冲进去 淘宝想撤出来

◙ NEC China Cellphones: New Lenovo Tie-Up? NEC计划重回中国手机市场 或与联想联姻

◙ Lenovo-NEC: Let the Defections Begin 联想与NEC结盟注定失败

News Digest: May 8, 2012 报摘： 2012年5月8日

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The following press releases and media reports about Chinese companies were carried on May 8. To view a full article or story, click on the link next to the headline.

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◙ Lenovo (HKEx: 992) to Launch Mobile Devices Facility in Central China (English article)

◙ GE (NYSE: GE) to Buy 15 Pct of China’s XD Electric (Shanghai: 601179) (English article)

◙ HTC Selects Spreadtrum’s (Nasdaq: SPRD) TD-SCDMA Baseband for Smartphone Series (PRNewswire)

◙ Alibaba Investigates Taobao Staff Bribes (English article)

◙ Shanda Cloudary Posts First-Ever Profit of $3 Mln in Q1 (Chinese article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

Alibaba’s Tianmao Takes on Electronics 天猫发力家电市场

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The e-commerce space keeps getting hotter and hotter, this time with word that sector leader Alibaba is gearing up to get into the ultra crowded market for home electronics. Its latest initiative will see Tianmao, Alibaba’s online business-to-consumer (B2C) shopping site formerly known as Taobao Mall, joining hands with many top brands to open a section specifically dedicated to household electronics, according to local media reports. (Chinese article) Its entry will come as a direct challenge to a number of major players already fighting for control of the space, including private equity-backed 360Buy, as well as publicly listed Suning (Shenzhen: 002024) and Gome (Hong Kong: 493). 360Buy actually began its life as an online electronics seller but later diversified into a wide range of other consumer goods, while Suning is better known as a brick-and-mortar electronics retailer that has aggressively expanded into e-commerce in the last 2 years. Gome is a relative latercomer to e-commerce, but recently made headlines when it signed a deal to team with Dangdang (NYSE: DANG) that would essentially see China’s largest publicly listed e-commerce site operate Gome’s online presence. (previous post) Alibaba clearly knows it will face stiff competition as such a late entrant to this part of the market; but as the clear leader of China’s broader e-commerce sector, with about a third of the market, the company clearly has the resources to make a serious bid for the space. The media reports are saying Tianmao has already signed up many major electronics makers for its new initiative, including names like Phlips (Amsterdam: PHG), Lenovo (HKEx: 992) and LG Electronics (Seoul: 066570) all set to offer their products on the new platform. The addition of such a major new player into the space will only turn up the already stiff competition, meaning many of these e-commerce companies, most of which are already operating in the red, could lose even more money. (previous post) Unfortunately for the competition, Tianmao is one of the few big e-commerce players that is still earning a profit, meaning it has more resources and time to spend on this initiative and less concerns about quickly turning a profit. That means we can expect another brutal war to erupt soon in this online space, pushing all participants further into the red.

Bottom line: Alibaba’s entry into the home electronics e-commerce will further heat up an already overheated space, prolonging losses in the market for at least another year.

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

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

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

Lenovo Sister Firm Looks to Japan, Taobao Quits “围城”日本：弘毅想冲进去 淘宝想撤出来

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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

◙ Baidu Dreams of Brazil 百度试水巴西

News Digest: March 22, 2012 报摘： 2012年3月22日

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The following press releases and media reports about Chinese companies were carried on March 22. To view a full article or story, click on the link next to the headline.

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◙ China Mobile (HKEx: 941) Chairman Wang Jianzhou to Retire Tomorrow (Chinese article)

◙ Blizzard (Nasdaq: ATVI), NetEase (Nasdaq: NTES) Renew World of Warcraft License in China (Businesswire)

◙ SMG’s BesTV, Bank of China (HKEx: 3988) Launch TV Banking Service (English article)

◙ Lenovo (HKEx: 992) to Shift Business PC Production to Japan – Report (English article)

◙ Jaguar Land Rover seals JV with China’s Chery (English article)

◙ Latest calendar for Q4 earnings reports (Earnings calendar)

NEC China Cellphones: New Lenovo Tie-Up? NEC计划重回中国手机市场 或与联想联姻

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What looks like a new wrinkle has emerged in the growing love affair between Chinese PC giant Lenovo (HKEx: 992) and Japanese electronics giant NEC (Tokyo: 6701), in what could well end up as a marriage that could serve as a template for similar Sino-Japanese tie-ups in the consumer electronics space. Media are reporting that NEC has announced it will once again enter the China cellphone market 6 years after its high-profile departure, with plans to sell a smartphone model, as well as 2 tablet PCs. (English article) Historians will recall that NEC left China back in 2006, at the time citing mismanagement for its decision to leave the world’s largest cellphone market. Of course the real issue was that its phones had become virtually invisible in the market, paralleling a trend in the rest of the world that has seen not only NEC but most Japanese brand cellphones and PCs become non-players nearly everywhere except for their highly protected home market. So what’s different now that would embolden NEC to return to China, the world’s biggest mobile market but also an incredibly competitive one where consumers are especially price sensitive and NEC has little or no brand recognition? The answer is: Lenovo. Last year the 2 companies entered into an interesting agreement that effectively saw Lenovo take over NEC’s PC operations through the establishment of a joint venture. (previous post) Lenovo followed later by saying it may move some of its production to Japan, in what looked like a bid to ease concerns from NEC’s Japanese customers who were undoubtedly worried that their computers could suffer a quality downgrade if all production was moved to China. (previous post) This kind of tie-up looked interesting as it had the potential to provide Lenovo with a quick entry to the lucrative Japan market that has been one of the toughest for foreign brands to tap due in part to local preference for domestic brands that are perceived as higher quality. It also gave Lenovo, the world’s second biggest PC maker, a new premium brand to market outside Japan through its numerous sales channels in both western and developing markets. There aren’t any details in the latest reports about NEC’s decision to re-enter China’s cellphone market, but I would be willing to bet that Lenovo, as China’s dominant PC player with about a third of the market, will be a strong partner behind the scenes, providing NEC with access to its strong sales and service networks throughout the country. Furthermore, while the Lenovo name is synonymous with good quality PCs in China, the same is hardly true for its cellphones, which have had a much more difficult time establishing a strong name in the company’s home market as it vies with better known names like HTC (Taipei: 2498), Apple (Nasdaq: AAPL) and up and comers Huawei and ZTE (HKEx: 763; Shenzhen: 000063). This NEC move back into China, if Lenovo is really involved, could provide Lenovo with an important new premium brand that doesn’t have any of the baggage associated with its own cellphones. That could pave the way for an eventual joint venture for the NEC cellphone brand similar to the 2 companies’ PC tie-up. In fact, TCL (Shenzhen: 000100; HKEx: 2618), another Chinese brand known for its cheap cellphones, made a similar shift with its purchase of the Alcatel cellphone brand name around 5 years ago, and Alcatel-branded phones now account for the lion’s share of its sales outside China. So, what exactly is the end game in this growing love affair between Lenovo and NEC? If the PC partnership proves successful in Japan and this new NEC cellphone initiative in China is also a success, I could easily see an eventual sale in the next 2-3 years that would see Lenovo acquire outright NEC’s PC and cellphone units, 2 of its main consumer electronics businesses. Such a deal could serve as a template for future tie-ups between Chinese electronics companies and their Japanese counterparts. Chinese companies could use such deals to shed their image as makers of cheap, lower-end products, while Japanese firms could shed their increasingly unprofitable and marginal electronics businesses.

Bottom line: NEC’s re-entry to the China cellphone market looks like the latest wrinkle in its growing ties with Lenovo, which could ultimately result in a longer-term marriage.

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

◙ Lenovo Results: Honeymoon Nearing an End? 联想并购後的蜜月期何时结束？

◙ Lenovo-NEC: Let the Defections Begin 联想与NEC结盟注定失败

News Digest: March 14, 2012 报摘： 2012年3月14日

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The following press releases and media reports about Chinese companies were carried on March 14. To view a full article or story, click on the link next to the headline.

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◙ Sina (Nasdaq: SINA) Weibo Says Real Name Registration Complete for 60% of Users (Chinese article)

◙ Jeremy Lin Said to Be in Talks to Endorse Geely’s (HKEx: 175) Volvo in China (English article)

◙ Lenovo (HKEx: 992), SugarSync Open Cloud Service to Consumers Worldwide (Businesswire)

◙ China’s Cable Broadband Households Reach 6 Mln (English article)

◙ Louvre Hotels Banks on Chinese Partner Jin Jiang (Shanghai: 600754) for Expansion (English article)

◙ Latest calendar for Q4 earnings reports (Earnings calendar)

Lenovo Completes Leadership Change, Yang Uninspired 联想完成高层调整，杨元庆难鼓舞人心

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Ambitious PC maker Lenovo (HKEx: 992), arguably China’s best known global brand, is sending out signals that it has completed a transition that will see founder and longtime leader Liu Chuanzhi formally bow out of the company, though the first comments from new head Yang Yuanqing are hardly inspiring. Liu was notably absent at the opening of the National People’s Congress that started this week in Beijing, with media citing an unnamed illness for his failure to attend an annual event he has gone to for years alongside the nation’s top politicians and business leaders. (Chinese article) At first I thought this might be cause for concern, as Liu was the main force that built Lenovo from a small PC seller in Beijing to the world’s second biggest brand through a series of acquisitions and strong focus on developing markets. But now we’re seeing that Yang, his hand-picked successor, is speaking for the company on the sidelines of the NPC in Beijing. That, coupled with the Hong Kong stock exchange’s disclosure yesterday that Yang has recently exercised a large number of options to buy Lenovo shares, seem to be the company’s way of saying that Yang is officially taking over at the helm of Lenovo and Liu will no longer take part in major decisions, following his formal retirement last year. (previous post) So, what exactly did Yang say at his first NPC since taking over at the helm? Instead of making grand visionary statements about where he sees the company going or what products and markets will power it into the future, he chose to talk about the more mundane subject of the burdens of China’s high value added tax and how that is making its products more expensive. (Chinese article) Clearly this issue is an important one for Lenovo, which still counts on China for half of its sales, and it’s also  quite possible Yang also made some visionary remarks that reporters simply chose to ignore. But from my perspective, these kinds of remarks don’t offer the most reassuring sign for investors, reflecting more the kinds of things a bureaucrat and manager would focus on rather than the bigger issues we should expect from the chairman of such a major company. Obviously you can’t draw too many conclusions from just one set of remarks like this. But history watchers will recall that Yang was formerly given the chairman’s job after Lenovo’s landmark purchase of IBM’s (NYSE: IBM) PC assets in 2005, only to have to step aside and let Liu return after the company ran into numerous problems several years later. The same could soon happen if Yang continues to perform like a bureaucrat and mid-level manager, boding poorly for the company’s longer-term future. And this time, Liu won’t be there to fix things if the company runs into problems.

Bottom line: Remarks by Lenovo’s new chairman at his first National People’s Congress reflect a lack of broader vision, boding poorly for the company’s longer term future.

Related postings 相关文章:

◙ Liu Steps Down at Lenovo — Again 柳传志再度卸任联想董事会主席

◙ Acer Trips, Lenovo Next? 联想应避免重蹈宏基覆辙

◙ Lenovo Results: Honeymoon Nearing an End? 联想并购後的蜜月期何时结束？

Baidu Dreams of Brazil 百度试水巴西

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After questioning most of Internet search leader Baidu’s (Nasdaq: BIDU) recent net initiatives as misguided, I’m happy to say it’s finally making a new and potentially promising move by exploring an expansion into Brazil. (Chinese article) Such a move looks particularly smart as it would leverage both Baidu’s experience in online search as well as its expertise in making products for developing markets specialist that often have many different characteristics from larger developed markets in the west. Media are reporting that Baidu is preparing to set up an office in Sao Paulo, Brazil’s largest city, with plans to enter the market by first launching an online encyclopedia similar to Wikipedia. While there are still no concrete plans for roll-out of a Brazilian search service, I would expect to see such a product probably within the next year as Baidu gets a better feel for the market. Followers of Baidu will know that the company took its first steps outside China several years ago with the launch of a search service in Japan. That initiative has been a failure to date, with the service only ranking around 800th in the Japanese market despite several years of operation. Largely as a result of the Japan debacle, Baidu’s overseas initiatives have lost around $100 million from 2008 to 2010. I’m still not sure why Baidu chose Japan for its first overseas step, as the market is already notoriously difficult for foreign companies and represents a highly developed and competitive Internet market where Baidu has little or no advantage, especially over homegrown players. By comparison, Brazil shares many characteristics with China, as both are BRICS countries that are have all seen rapid development over the last 5 years. While Baidu may not know much about Portuguese, Brazil’s native language, it certainly understands behavior patterns for advertising in this kind of a market based on its own success in China. It should be able to leverage that experience to boost its chances of success in the market, much the way that Chinese PC leader Lenovo (HKEx: 992) has found success in the last 2 years by re-focusing on its expertise in emerging markets. If Baidu can develop strong search algorithms for Portuguese, which should be possible with the right local talent, I would give this initiative a good chance of success, providing the company with a potential springboard to some of the other BRICS countries as it seeks to expand outside its home China market.

Bottom line: Baidu’s new move into Brazil looks like a smart move with good chances of success, leveraging on its expertise in both search and developing markets.

Related postings 相关文章:

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

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

◙ New Lawsuit Has Potential to Bite Baidu 百度或因新侵权诉讼案“受伤

HP: Abandoning China PC Market? 惠普能否继续在中国PC市场走下去？

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New data is showing that Hewlett-Packard’s (NYSE: HPQ) share of China’s PC market continued to plummet at the end of last year, a worrisome development for a company that is at once the world’s biggest computer brand but also seems unable to decide on its future direction in a PC market that will soon overtake the US to become the world’s largest. According to the latest data from IDC, HP’s share of the China PC market tumbled to 5.3 percent in the fourth quarter of last year, down from 8.5 percent in the second quarter, which was down from double-digits not long before when the company was one of China’s top players. (English article) The steep drop means that HP is just barely a top-5 player in China, with the latest data placing it behind market leader Lenovo (HKEx: 992), followed by Taiwan’s Acer (Taipei: 2353), US rival Dell (NYSE: DELL) and up-and-comer Taiwan’s Asustek (Taipei: 2357). HP’s rapid decline is due in no small part to confusion at the company’s headquarters over its future direction, following the departure of its widely respected CEO Mark Hurd in 2010 amid a scandal involving personal matters. Since then the company has announced plans to sell its core PC business last year, only to change its mind months later and force out the new CEO who made the decision. Such turbulence in the company’s top ranks is clearly not good for its longer term prospects, and its rapid fall in China is clearly an alarming sign as the country, already the world’s second largest PC market, prepares to overtake the US in the next few years to become the world’s biggest. Of course, many will argue that PCs could soon become an obsolete product anyhow, and that it’s more important to focus on next-generation products like smartphones and tablet PCs, which are more mobile and can perform many functions of PCs. But HP looks weak even in these 2 categories, and it’s probably fair to say its limited line of smartphones and tablet PCs are virtually unknowns in China. It’s probably too early to say HP is destined to become a non-player in China, as the company may finally be entering a new period of stability after the turbulence of the last 2 years. But unless it changes its game plan soon, it faces the very real risk of becoming a non-player in China, and ultimately losing its spot as the top global PC brand to the more focused Lenovo.

Bottom line: HP’s rapid fall in the China market reflects a broader turbulence at the company, which could result in its removal from the market if it doesn’t sharpen its focus soon.

Related postings 相关文章:

◙ Lenovo Considers Dangerous HP Computer Bid 联想应慎购惠普PC业务

◙ Acer Trips, Lenovo Next? 联想应避免重蹈宏基覆辙

◙ Lenovo Takes Backward Step With Compal JV 联想和仁宝合资建厂为倒退举动