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Thursday, 10 September 2009, 07:32 HKT/SGT

Source: IRG
IRG Technology, Media and Telecoms Weekly China Market Review

HONG KONG, Sept 10, 2009 - (ACN Newswire) - The following is the China excerpt from IRG's TMT Weekly Market Review Aug 31 - Sept 6. IRG is a financial advisory and investment firm focused on the core growth sectors in Asia with particular focus on the telecommunications, media and technology (TMT).


- E-House Holdings Limited and SINA Corp. had a deal of merging E-House's real estate information and consulting services and SINA's online real estate business. SINA will inject all of its online real estate business into its majority-owned subsidiary China Online Housing Technology Corp. SINA had total revenues of US$90.3 million, compared to US$91.3 million in the same period in 2008 and US$73.8 million for the first quarter of 2009. Advertising revenues for the second quarter of 2009 was US$57.8 million. Non-advertising revenues for the second quarter of 2009 was US$32.5 million. Gross margin for the second quarter of 2009 was 56 percent. Income from operations for the second quarter of 2009 totaled US$13.6 million. Interest and other income for the second quarter of 2009 was US$1.7 million.

- The Alibaba Group and Zhejiang Daily Press Group invested a total of 50 million yuan (US$7.3 million) for the launching of a weekly fashion magazine, "Taobao Tianxia" which will also be published online. No other details have yet been disclosed.

- Taobao.com reported its strategy for its new application programming interface "Taobao Open Platform" (TOP). TOP will include open.taobao.com, which will target ordinary users and developers. TOP will also consider app.taobao.com, which will target sellers and Taobao community members. Commission fees, revenue sharing from plug-ins, software sales and dynamic advertising are the four revenue sources. Taobao's open platform had nearly 10,000 developers and almost 100 applications since the launch of its beta version.

- Google's Kai-Fu Lee will step down as president of the company's operations in China to form a venture in Beijing and will be replaced by Boon-Lock Yeo, director of the Shanghai engineering office, and John Liu, who heads the sales team in Greater China. Lee helped start Google's Chinese-language site, and oversaw the rollout of services including Google Maps, Google Music Search and Google Translate. China was home to 338 million Internet users at the end of June, more than the total population of the U.S.


- China's mobile search volume increased 120 percent year on year in the second quarter, reaching 272 million requests, with top search providers Baidu and Google securing almost the same amount of market share. Baidu and Google each handled about 25 percent of the total search requests, and competing search engine firms 3GYY, Yicha and Easou each handled about 10 percent of the total search volume. Page views in China's mobile search market reached 909 million in the reporting period. Baidu, with 33.7 percent of total market share, became the leader in terms of page views in the mobile search market while Google trailed behind with 19.5 percent.


- Chunghwa Telecom and China Unicom will work together to tap China's telecommunication-equipment distribution market by setting up a joint venture or inviting Chunghwa to hold stakes in a China Unicom-owned distributor subsidiary. The companies will focus on setting up a distribution network of equipment components, end-user equipment and service as well as after service of mobile phones. The two companies are still having meetings regarding the deal.

- China's self-developed 3G mobile communication standard TD-SCDMA (TD) have covered the country's 38 cities, and the base stations and subscribers respectively registered 47,000 and over one million. China Mobile signed a contract with China's 30 provincial and autonomous regional governments. The deal encompasses application support and development of TD technology in various regions. China Mobile has honored its promises that allow the 2G mobile service subscribers enjoying 3G services without changing their SIM cards, cell phone numbers and registration. The company improved the quality of its TD networks. Mobile phone connection rate was up 96 percent. Success rate of switching TD and 2G networks reached above 95 percent.

- ZTE Corp. said it will continue its growth in the second half, underpinned by strong demand for third-generation mobile equipment. First-half revenue was up by 40 percent due to the sales of its 3G telecom equipment in China. ZTE got 34 percent of China Mobile's equipment orders for its homegrown 3G network and 35 percent of China Telecom's orders for its 3G network. ZTE Corp. also said it is not interested in buying a stake in Alcatel-Lucent SA. ZTE and rival Huawei Technologies Co. may bid for a stake in the French-American telecom equipment manufacturer.

- China Communications Services Corp's first-half net profit increased 33 percent from a year earlier due to strong orders in its domestic market. Revenue was up by 32 percent and revenue from overseas doubled to 595 million yuan (US$87.1 million) from the same period last year. China Communications Services has benefited from an increase in spending by China's telecommunications companies on infrastructure after the issuance of third-generation licenses in China earlier this year.

- China's total telecom revenue reached 1.4 trillion yuan (US$205 billion) in the first seven months of the year, a 12.2 percent rise over last year. The number of net new mobile phone users for the first seven months was 61.4 million. The number of fixed line users lessened to 12.4 million in the period. The country had additional broadband subscribers of 12.55 million in the first seven months. Broadband subscribers totaled to 95.43 million. As a percentage of total revenue for the sector, mobile phones contributed 59.4 percent, an increase of 4.46 percent from last year, while data services, fixed line and long distance calls made up 40.7 percent. Beijing reshuffled the country's telecoms industry last year to create three full-service carriers, pitting China Telecom and China Unicom against China Mobile. The three carriers will release US$58.5 billion through 2011, building their 3G networks.

- China Mobile has signed a letter of intent for cooperation with Taiwan-based Industrial Technology Research Institute (ITRI) to jointly develop long term evolution (LTE) technology. The company had an agreement with MediaTek in developing TD-SCDMA and TD-LTE products and technologies. China Mobile will launch cooperative agreements with Taiwan's telecom industry in the 4G mobile communication field. China Mobile and ITRI will construct trial networks for TD-SCDMA and TD-LTE. This may surge telecom industry cooperation between Chinese mainland and Taiwan.

- China Telecom closed down its online application store during the first day of online beta testing because of an unanticipated level of industry attention and Web traffic. The online application store currently has 11 types of applications including games and mobile themes, and those related to recreation, lifestyle, reading, messaging, business, travel, education, finance and others. The app market had completed offline tests and would initiate online beta testing in the beginning of September.

- Unicom will release an application software platform, like Apple's APP Store, including Google's Android-based open source software. Unicom has produced its first batch of customized iPhones. This will be launched on September 30 2009. China Unicom had signed a three-year contract with Apple to sell iPhones in China with a first batch launch scheduled for release.

Media, Entertainment and Gaming

- Online game companies focused on Chengdu, Sichuan Province, southwest China, are hoping for possible projects there. Shanda acquired Simo Technology at a price of not less than 140 million yuan (US$20.5 million). Perfect World invested 100 million yuan (US$14.6 million) for the creation of an online game research and operation center in Chengdu. Chengdu B-ray Media acquired a 100 percent stake in Dreamwork Net Co., Ltd. worth 441 million yuan (US$64.5 million). Shanda also completed its acquisition of Xingman Technology for 140 million yuan (US$20.5 million).

- Active paying accounts for MMOPG grew 19% from the first quarter to 8.6 million as the company converted more free players to paid users and launched new games. On the other hand, active paying accounts for casual games declined 9.6% sequentially to 1.86 million with revenue slid 4.3% from a year earlier. Shanda has also filed an initial public offering of ADS in its online gaming unit, Shanda Games Ltd. which was founded by its parent in 2001., with proceeds possible for capital expenditures and future investments.

- After losing authorization of pillaring World of Warcraft (WoW), The9 is actively seeking a WoW equivalent to revive its corporate earnings. The9 is discussing with American game developer, Electronic Arts about introducing the latter's online games into China. The company's financial results show that its Q1 and Q2 net revenue dipped three percent and 37 percent year on year to 426.2 million and US$287.9 million.


- China Great Wall Computer Shenzhen Co. Ltd.'s profit surged by 121.79 percent year on year with sales increased over 30 percent year on year. The returns on net assets were 5.50 percent. The business of the firm's private brand expanded rapidly, and the sales of such products climbed six percent year on year. The business scale and profitability of the manufacturer's power source was accelerating with market share exceeded 35 percent. Non-power source business achieved great breakthrough with the sales soaring over eight times from the same period of 2008.

- China's e-book reader base grew at a speed of 55.7 percent yearly. Datang Telecom Technology Co., Ltd. launched the first electronic reader named AirPaper50T in the country, which is available for wireless communication and whose first-batch products will be sold in mid September. 3G reader terminals are an important product for the 3G business. China Mobile is cooperating with Foxconn Electronics in terms of e-books and cellphones. China Mobile has joined hands with Vodafone, Softbank, and Verizon to form a laboratory, part of its aim to develop new e-books.

Alternative Energy

- Evergreen Solar Inc. and Jiawei Solarchina invested US$450 million for the construction of the 500MW solar project. The production will start within three years and is expected to reach an annual output value of US$1 billion. Evergreen Solar signed a contract to produce its "String Ribbon" wafers at Jiawei solar facilities. Jiawei, on the other hand, will act on the wafers into Evergreen-branded panels.

- LDK Solar agreed with the Chinese city of Suqian to develop up to 300 megawatts (MW) of solar projects by 2015. LDK Solar's was partnering with Yancheng city to build up to 500 MW of photovoltaic solar power projects over the next five years. Domestic solar power producers, including Suntech Power and ReneSola will build big solar power plants in China. LDK Solar had huge net loss in the second quarter because of taking large inventory writedown.


- Lenovo Group purchased US$3.255 billion parts in Taiwan. Wistron Corporation, Guangda Computer, and Compal Electronics are the biggest winners in Lenovo's procurement, receiving orders worth US$1 billion, US$700 million, and US$600 million, respectively. Lenovo's procurement has focused on parts for its IdeaPad Series. VIA Technologies won an order from Lenovo valued at US$50 million, making it Lenovo's second largest processor supplier, alongside Intel.

- Acer Inc. registered NT$1.66 (US$0.05) in earnings per share (EPS) in the first half of this year. Acer had NT$119 billion (US$3.61 billion) in consolidated sales in the second quarter of this year. Non-consolidated sales include the products shipped to overseas subsidiaries in line with acceptable accounting standards. Sales performance' expectations were met in the second quarter. Acer's operating profit margins increased to 3 percent by 2010 due to the aggressive cost savings measures. Operating profit margins in the third quarter of this year should also climb to about 2.8 percent. The firm will have PC shipments in the third quarter to climb 35-40 percent from the preceding three months. Acer had been performing well compared with some of its peers in keeping its operating profit margins healthy by ensuring its production costs were low. Cheaper prices in its CULV ultra-thin notebook may drag the profit margins lower. Intel launched a consumer ultra-low voltage (CULV) chip that plans to bridge the gap between cheap netbook chips and more powerful and expensive chips used in traditional notebook PCs.

- Compal Electronics Inc. expects to exceed its quarterly shipment forecast because of demand spurred by Microsoft Corp's release of the Windows 7 operating system. Third-quarter shipments will probably increase more than 20 percent from the preceding three-month period. The company had previously expected shipments to rise 15 percent to 20 percent. Fourth-quarter shipments may climb 10 percent from the third. Contract manufacturers stand to benefit from increased orders from customers including Hewlett-Packard Co. and Acer as they prepare for the launch of Windows 7. Compal rival Quanta Computer and Acer said in the past month they're expecting higher shipments this quarter.

- Hon Hai Precision Industry decided to increase its investment in the e-book reader business and in retail channels for 3C products. Hon Hai will inject US$2 million into Guangzhou OED Technologies Co, which conducts research and development, manufacturing and sales of electrophoretic displays. The move came after Hon Hai was selected by China Mobile to help produce e-book readers. The first batch of e-book readers will be shipped in the first half of 2010. Meanwhile, Hon Hai will set up a trading company in Shanghai at a cost of US$10 million. The new company will help Hon Hai consolidate its layout in the mainland 3C retail market. Hon Hai invested in CyberMart, which enabled the Taiwan-based contract manufacturer to become one of the top three 3C products retailers in mainland China.

Hong Kong

- Foxconn International Holdings Ltd. will sell one of its handset-making factories in China to its Taiwan-listed parent for 223.8 million yuan (US$32.8 million) to fund general working capital, which will be subject to approval from the authorities in China and Taiwan. The disposal will simplify Foxconn's operational structure, increase management efficiency at its production facilities and lower general and administrative expenses. The company bought the factory as it needs to expand its current production capacity.

Topic: Research / Industry Report
Source: IRG

Sectors: Media & Marketing, IT Individual, Wireless, Apps
From the Asia Corporate News Network

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