Internet portal Sohu (Nasdaq: SOHU) is testing one of the worst IPO markets in recent memory with plans for listing one of its online gaming units, serving up a massive dividend and mildly upbeat quarterly results to generate hype for what otherwise looks to me like a very so-so offering. This latest plan comes against a broader backdrop of a dismal IPO market that has seen just 1 major offering for a Chinese firm in the US this year, as international investors shun Chinese stocks after a steady stream of accounting scandals that began more than a year ago. Further limiting its chances for success, this latest offering plan comes in the relatively uninspired online game sector, which is already quite competitive and where overseas investors already have a number of other choices in the form of companies such as NetEase (Nasdaq: NTES) and Perfect World (Nasdaq: PRWD), as well as Sohu’s own separately listed gaming unit Changyou (Nasdaq: CYOU).
Tag Archives: Sohu
Portals Shun Olympics, Baidu’s New JV 门户网站避开奥运，百度新设合资企业
Second-quarter earnings season and the London Olympics won’t begin until next week, but we’re already seeing signs that an ad slowdown is hitting profits at many Chinese Internet companies as they get set to report their latest results. Specifically, media are reporting China’s top 4 portals have decided to skip expensive rights for live coverage of Olympic events, and instead are opting to provide less pricey video-on-demand (VOD) rights that allow Internet users to watch recordings of their favorite sports after the events. (English article)
News Digest: July 4, 2012 报摘： 2012年7月4日
The following press releases and media reports about Chinese companies were carried on July 4. To view a full article or story, click on the link next to the headline.
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◙ Everbright Bank Said to Plan $1.8 Billion Share Sale (English article)
◙ Qihoo 360 (NYSE: QIHU) Rejects Allegations From Known Short Supporter (PRNewswire)
◙ Activision Blizzard (Nasdaq: ATVI), Tencent (HKEx: 700) In Long-Term Partnership (Press release)
◙ Sohu’s (Nasdaq: SOHU) Sogou Seeks New Investment After Alibaba Sale (Chinese article)
◙ China Mobile’s (HKEx: 941) Anhui Unit Allows Users to Move Cities, Keep Number (English article)
News Digest: July 3, 2012 报摘： 2012年7月3日
The following press releases and media reports about Chinese companies were carried on July 3. To view a full article or story, click on the link next to the headline.
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◙ Apple (Nasdaq: AAPL) Pays $60 Million to Settle China iPad Trademark Dispute (English article)
◙ Youku-Tudou Online Video Market Share Drops to 32.4 Pct in Q1 – Analysys (Chinese article)
◙ Youku (NYSE: YOKU) Announces Senior Management Promotions (PRNewswire)
◙ Sohu (Nasdaq: SOHU) Buys Back 10 Pct of Sogou Search Engine Held by Alibaba (Chinese article)
◙ Home Inns (Nasdaq: HMIN) Announces Acquisition of eJia Express Hotels (PRNewswire)
AsiaInfo Gets More Private Equity Interest 多家私募基金有意收购亚信联创
After several months with no news following an unsolicited buyout offer for AsiaInfo-Linkage (Nasdaq: ASIA), the telecoms software maker has burst back into the headlines with reports that it has attracted several more new potential buyers as it seeks to pump up its valuation amid a broader weak market for US-listed China stocks. This new signs of interest, which includes some major global private equity firms, could be a good sign for the broader sector of battered New York-traded Chinese stocks, as it means there is clearly some strong institutional investor interest in better-run companies despite weak broader market sentiment, which means we could see some other interesting buy-out offers in the months ahead.
Renren Weighs Game Unit Spin-Off 人人网考虑分拆游戏业务
Renren (NYSE: RENN) investors tired of seeing losses quarter after quarter could soon have another alternative as China’s leading social networking site reportedly plans to spin off its online game unit into a separately listed company. If true, the news would mark the latest plan by an Internet company to spin off an individual business into a separate unit, as part of a broader trend by this sector to provide investors with clearer choices focused on specific businesses like games or e-commerce. Many of China’s Internet companies, especially the older ones, often have lots of different businesses, from portals, to games, e-commerce and social networking, under a single company. One or more of the businesses are often profitable and end up subsidizing the others that are losing money — frustrating investors who might like the profitable units but care less for the loss-making ones. In this latest case, media are citing unnamed sources saying Renren is crafting a plan to spin off its game unit by September, and would eventually list the business separately with an IPO. (Chinese article) Renren may have hinted at this move when it released its first-quarter results last month, at which time it said its online game revenue nearly doubled to $17.5 million, accounting for more than half of the company’s total revenue. (previous post) I’m normally not a big fan of online game stocks, as business for such companies can vary widely due to their dependence on 1 or 2 popular titles for success. But in Renren’s case, the company actually looks a bit more interesting than traditional rivals like Shanda Games (Nasdaq: GAME) and The9 (Nasdaq: NCTY), which are simply game companies and little more. Renren brings the added advantage of millions of users for its core social networking site, which provide an instant audience for its games. For that reason, it could probably find more success with so-called casual gamers, the people who like to play games occasionally but aren’t as fanatical as hard-core players who can spend hours playing at Internet cafes. Renren hasn’t commented in too much detail on the game business, but presumably its profitable or would become profitable by the time of a public listing, most likely late this year or in early 2013. That would be an attractive alternative for investors, who have shunned Chinese IPOs for nearly a year now partly because most of the ones to list during that time were losing money. An IPO for Renren’s game unit would parallel a similar move by Internet portal Sohu (NYSE: SOHU), which spun off its gaming business into a separately listed company, Changyou (Nasdaq: CYOU) several years ago. Others reportedly weighing similar moves include gaming company NetEase (Nasdaq: NTES), which may spin off its portal business; and Internet giant Tencent (HKEx: 700), which recently reorganized and has discussed spinning off its e-commerce business. Look for more such spin-off plans in the next 12 months, potentially providing stock buyers with some more focused, and perhaps even profitable, China Internet investment options.
Bottom line: Renren’s reported plan to spin off its online games business is part of a trend that could see a flurry of similar moves and IPOs by profitable Chinese Internet companies in the next year.
Related postings 相关文章:
◙ Renren: China’s Next Gaming Company? 人人网：中国下一个网游企业？
Renren: China’s Next Gaming Company? 人人网：中国下一个网游企业？
Renren (NYSE: RENN) has reported a widening loss that should normally be worrisome, and yet investors seem to be focusing on surprising strength in the online game business for this leading social networking site, which could perhaps finally lead it to its goal of long-term profits. The upbeat news for Renren’s game business comes as another major online game developer, Japan’s Nexon (Tokyo: 3659), is also reporting strong growth in its China business, testifying to the resilience of this market dominated by teen-agers and 20-somethings who seem less like to reduce spending on their hobby even as China’s economy shows signs of slowing. In fact, the slowing economy hit Renren’s other main business, advertising, in the first quarter, with ad sales climbing an anemic 15 percent as the business experienced a “challenging period”, Renren said in its results announcement. The advertising slowdown is hardly unique to Renren, with other major ad-dependent companies also like Sohu (Nasdaq: SOHU) and Phoenix New Media (NYSE: FENG) also reporting weakness in the most recent quarter. But while Renren’s advertising revenue reached just $9.3 million for the quarter, online game revenues soared 90 percent to $17.5 million, meaning games now account for more than half of Renren’s revenue. Despite that rise, the company’s net loss ballooned to $13.6 million, far bigger than the $2.6 million a year earlier. Investors clearly seemed to be focused on the upbeat story in online games, bidding up Renren shares by nearly 3 percent in after-hours trading after the results came out. If online games can continue growing at a similar rate, the business could potentially lead Renren to the elusive goal of long-term profitability, although such a shift would make the company look more like an online game company competing with names like Shanda Games (Nasdaq: GAME) and NetEase (Nasdaq: NTES) rather than a social networking company like Facebook. If that happened, Renren certainly wouldn’t be the first to make such a transition, as NetEase itself started out as a portal company before becoming a gaming giant, and gaming leader Tencent (HKEx: 700) also rose to fame on the back of its popular QQ instant messaging platform. Of course, the big risk in moving into online games is becoming dependent on individual game titles as a major revenue source, meaning one needs to develop or license a steady stream of new games to stay successful. Meantime, Nexon, supplier of a popular gaming title to Tencent, has said its China sales also rose similarly by nearly 90 percent in the first quarter and should remain robust throughout the year, even as the broader China online game market is only expected to grow about 12 percent. (English article) All that says that there’s still plenty of growth opportunity in China’s online game market despite the broader economic slowdown, though companies with popular titles and a wider arrange of complementary social networking offerings like Renren and Tencent could be better positioned to thrive in the current climate.
Bottom line: An unexpectedly rapid growth in gaming revenue could help lead Renren into the profit column by the end of this year, transforming it into an online game play.
Related postings 相关文章:
◙ NetEase: Still a Gamer With WoW Renewal 网易续签《魔兽世界》运营权
Sohu’s Sogou Still Looking for Search Bite 搜狗壮志难酬
You have to admire the dogged determination of Sogou, the online search unit of web portal Sohu.com (Nasdaq: SOHU) that, after nearly a decade in business is still just a bit player in its space. Despite its lack of progress, Sogou is now telling the world about its latest strategy to steal market share from Baidu (Nasdaq: BIDU), the China Internet search giant which controls more than 70 percent of the market. (English article) The only problem with this latest plan is that most of us have heard this kind of talk before from Sogou, and the result is always a lack of any real progress. Let’s look at this latest plan, which has Sogou’s CEO saying the unit will rely on searches that focus on users’ needs rather than the more commonly used keyword approach used by most major search engines. He added that Sogou still isn’t profitable, and gave what looks like an impossible target of controlling 15 percent of China’s online search market by next year. All this sounds remarkably familiar to forecasts Sohu founder Charles Zhang gave me in an interview way back in 2006, a year or 2 after Sogou’s launch. At that time he boldly predicted his new unit could take around a third of China’s online search market within a few years. Of course that never happened, and Sogou now controls just around 2 percent of the market. Zhang loves to trumpet Sogou’s recent gains, which saw his search engine post revenue growth of more than 200 percent last year. Those gains did indeed look impressive, though when you’re coming off such a small base it’s certainly not impossible. But even that growth is showing signs of stalling, with the company recently predicting that Sogou’s revenues would just double in the current quarter. (previous post) I don’t want to dampen Sogou’s aspirations too much, especially since I think that China really needs a good competitor to challenge Baidu. But that said, Sogou might do well to take a look at Soso, the search engine unit of Tencent (HKEx: 700), China’s largest Internet company. Despite gaining success in many of the areas it has entered, Tencent failed to make much of an impact in online search despite major investment in Soso, which 6 years after its founding has even less market share than Sogou. After wavering on the future of Soso, Tencent reportedly decided just a week or 2 ago to sharply cut back the unit rather than close it outright, with plans to slash about half of its workforce. (previous post) Perhaps Sogou would be well advised to make similar plans, though Sohu hasn’t shown any signs of abandoning this money-losing unit. Then again, following a recent online video tie-up between Tencent and Sohu aimed at competing with the new industry leader formed by the marriage of Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) (previous post), maybe we’ll see a similar Sohu-Tencent tie-up in online search.
Bottom line: Sohu’s determination to keep funding its money-losing Sogou search engine seems destined to fail, and it might be better served by closing the site or looking for a merger partner.
Related postings 相关文章:
◙ Sohu Disappoints Again, LDK Cuts Inspire 搜狐再次令人失望，江西赛维裁员鼓舞人心
◙ Tencent Shakes Up Search, Group Buying 腾讯搜搜、高朋网巨
◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市
News Digest: May 5-7, 2012 报摘： 2012年5月5-7日
The following press releases and media reports about Chinese companies were carried on May 5-7. To view a full article or story, click on the link next to the headline.
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◙ China Postal Express Plans IPO to Raise $1.6 Billion (English article)
◙ Alibaba Several Weeks From Stake Buyback Deal With Yahoo (Nasdaq: YHOO) – Source (Chinese article)
◙ Telecoms Regulator Targets More Than 450 Mln 3G Users in 12th Five-Year Plan (Chinese article)
◙ UnionPay Preparing B2C E-Payments Drive With “Panbi” Rewards System (Chinese article)
◙ Sohu’s (Nasdaq: SOHU) Sogou Unveils Strategy to Steal Baidu Market Share (English article)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
Tencent Shakes Up Search, Group Buying 腾讯搜搜、高朋网巨
Layoffs and resignations are the main story at Tencent (HKEx: 700) these days, with the head of the company’s group buying joint venture reportedly resigning as China’s Internet leader also makes large job cuts at its Soso search engine. Both of these developments should come as a surprise to no one, and reflect an ongoing consolidation gripping the overheated group buying space in the former case, and a rapidly slowing advertising market in the latter. Let’s look at the group buying situation first, which has reportedly seen the CEO resign at Gaopeng, the 1-year-old group buying joint venture between Tencent and global sector pioneer Groupon (Nasdaq: GRPN). (English article) In fact, Gaopeng has struggled almost from the start due to its relatively late arrival to China’s group buying space, which is now in the midst of a painful consolidation. Reports of mass layoffs at the company began to emerge as early as last summer, and rumors that the company may actually close or merge with another partner continue to bubble up from frequently, with one such report emerging just weeks ago. (previous post) Gaopeng is hardly alone in this sector-wide crisis, which has started to hit even the industry’s largest players. Late last week reports emerged that a number of top managers had resigned at LaShou, in the latest sign of trouble for the industry’s leader that is facing a major cash crunch. (previous post) Others that have shown signs of major distress include 55tuan, as well as Groupon.cn, a homegrown Chinese player that is no relation to the US Groupon. Meantime, Tencent also appears to be scaling back its plans for Soso, its search engine that it hoped would compete with industry titan Baidu (Nasdaq: BIDU) for a share of China’s lucrative market. (English article) The reports are relatively vague, saying simply that Tencent was wavering on whether to sharply reduce the size of the 6-year-old Soso, which employs about 1,300, or to simply close it altogether. In the end it decided on the cutbacks, which will begin when people returned from the May Day holiday, according to the reports, citing an unnamed industry source. This latest move spotlights not only the strong grip that Baidu has on China’s online search market, with more than 70 percent share, but also the fact that the online search sector is also on the cusp of a major slowdown, fueled in part by the loss of advertising revenue from struggling companies like Gaopeng. The advertising slowdown led Baidu to report disappointing results last week, and earlier this week Sohu (Nasdaq: SOHU) also reported a sharp slowdown in the growth of its own online search site, Sogou. (previous post) Look for the painful retrenchment to continue in the group buying space, and for the advertising slowdown to sharply hit the top line of search engines and other companies that depend on such revenues in the months ahead. As the situation deteriorates, I wouldn’t be surprised to see Tencent shutter either Gaopeng or Soso, or possibly both, by the end of the year and quite perhaps much sooner.
Bottom line: Shakeups at Tencent’s online search and group buying units reflect broader industry malaise for both, with one or both units set for potential closure by the end of the year.
Related postings 相关文章:
◙ LaShou: On the Cusp of Implosion? 拉手网或已面临生死抉择
◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速
Sohu Disappoints Again, LDK Cuts Inspire 搜狐再次令人失望，江西赛维裁员鼓舞人心
As China returns to work after a long May Day holiday, the latest earnings released from online portal Sohu (Nasdaq: SOHU) and struggling solar firm LDK (NYSE: LDK) are showing that numbers don’t always tell the complete story, or at least not by themselves. In Sohu’s case, many of the numbers look good on the surface, but closer examination points to a sharp advertising slowdown that is already showing signs of hitting the broader Internet sector. Meanwhile, a highly troubled LDK has encouraged investors simply by filing its long-delayed fourth quarter report just before the final deadline, and also by announcing mass layoffs. Let’s look at Sohu first, which reported that revenue rose 30 percent in the first quarter of this year, but that its profit fell by a similar amount. (company announcement) The profit decline obviously wasn’t very helpful, nor was guidance that showed advertising growth would continue to slow. What’s more, Sohu said revenue from its Sogou search engine, hyped in previous quarters as a major new growth area, would roughly double in the current quarter — down sharply from the 184 percent growth in the first quarter and the nearly 250 percent jump in last year’s third quarter. The broader message was clearly not very positive, prompting a sell-off that has seen Sohu shares sink 10 percent since the results were announced. That followed a trend set by online search leader Baidu (Nasdaq: BIDU), whose shares have sagged 5 percent since it delivered a similar message with its latest earnings last week. (previous post) Look for other ad-dependent firms like leading portal Sina (Nasdaq: SINA) and social networking leader Renren (NYSE: RENN) to follow with similar messages in the weeks ahead. Meantime, LDK’s battered shares received a minor but surprising lift from the company’s latest results, in which it reported a massive $600 million loss in last year’s fourth quarter, as net revenue plunged by about half and looked set to tumble further in the current quarter as the global solar industry struggles in its worst-ever downturn. (company announcement) Some might say there was little to be excited about, but clearly some investors saw some light in the report, bidding up LDK’s shares by 7 percent the day after the numbers came out. Investors were apparently encouraged by comments that LDK has cut more than 5,000 jobs this year, and some were also undoubtedly happy that the company managed to file its fourth-quarter report before an April 30 deadline, after which it would have faced possible delisting. The storm is hardly over for LDK, though early signs of improvement for the entire solar sector could eventually help the company to pare its losses if it can managed to stay in business.
Bottom line: Sohu’s latest results point to a sharp advertising slowdown in the months ahead, while LDK will survive for another quarter after managing to report its results just before a deadline.
Related postings 相关文章:
◙ Slowing Ad Revenue Weighs on Phoenix 凤凰新媒体看淡广告收入前景
◙ Apple Feasts on China, Baidu Burps 苹果在华享受盛宴，百度盛宴停顿
◙ LDK Cuts, Suntech Waits As Solar Winter Nears End 太阳能行业冬季将结束：赛维裁员，尚德等待
