IRG Telecom, Media, and Technology Weekly China Market Review

 
IRG Telecom, Media, and Technology Weekly China Market Review 
Hong Kong, Feb 25, 2009 - (ACN Newswire) - The following is an excerpt from
IRG's TMT Weekly Market Review Feb 16 - 22. 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) sectors. 
Internet 
- Leading Chinese search firm Baidu (US:BIDU) boosted income 31% in Q4 and 66%
for the full year.  Baidu, which has approximately 70% of China’s search
market, recorded earnings of 288.7 million yuan (US$42.3 million) for the
quarter, and 1 billion yuan (US$146.5 million) for 2008. Revenue grew 58% in
Q4 to 902 million yuan (US$132.2 million) with full-year revenue increased 83%
to 3.2 billion yuan (US$468.9 million). Revenue fell 1.8% from the third
quarter, in yuan terms, and net profit fell 7%.  Baidu's results showed
the effects of both China's economic slowdown and a move to stop taking
paid search ads from some customers, including unlicensed medical providers.
Baidu stopped taking paid search ads from unlicensed medical providers and
other customers in November after it was criticized for the practice by
Chinese state television. It said the move has resulted in a loss of around 5%
of revenue. 
Telecommunications 
- Huawei Technologies Co., Ltd. is scheduled to put its first version of
Android high-end smart cellphones into the market in the third quarter of
2009. The company plans to launch EV-DO-based and TD-SCDMA-based smart
cellphone products in succession. Smartphones are predicted to capture more
than 24 percent of the global cellphone market by 2011. And the percentage
will rise to 30 percent by 2012. Huawei has grown into a key player in the
world's networking and telecoms equipment arena and the leader in the
Chinese market. By 2008, its terminal products had been sold to 130 countries
and 470 telecoms carriers and it had been in cooperation with 35 of the
world's Top 50 Telecoms Carriers. Its service revenues reached US$4
billion, 85 percent of which was generated overseas, although the vendor
expects this ratio to change in 2009 due to the rollout of 3G in China. 
- China Broadband, Inc. (US:CBBD) announced that it has signed an agreement to
acquire AdNet Media Technologies Co., Ltd. The companies have entered into a
binding letter of intent to close the acquisition within 30 days of the date
of announcement. Pursuant to the letter of intent, China Broadband has agreed
to purchase AdNet China in exchange for stock only. In addition, certain
executives of AdNet will be appointed as officers and/or directors of China
Broadband at closing. AdNet China currently operates and is licensed to
operate in 29 provinces in China with servers in five data centers including
Wuhan, Wenzhou, Yantai, Yunan and with a master distribution server in
Tongshan. Partnering with a local advertisement agency, AdNet China provides a
network for multiple tens of thousands of daily video ad insertions to
entertainment content traffic. 
- Ericsson won 30 percent of a deal to build China Unicom's
third-generation mobile network in a recent tender. China Unicom (HK:762;
US:CHU) and China Telecom (HK:728; US:CHA) will spend around 30 billion yuan
(US$4.4 billion) each this year on building 3G networks. China Mobile will
spend 58.8 billion yuan (US$8.6 billion) in 2009 to build out its 3G network.
Ericsson's win from China Unicom was in line with expectations adding
that it had not affected the company's share price. Ericsson had won
slightly more of the order than expected. Ericsson posted a strong result for
the fourth quarter but gave no forecast for 2009. The telecoms sector in
general and the mobile segment in particular would be less affected by the
current economic downturn than most other businesses. 
- China Mobile Communications Corporation (HK:941; US:CHL) will invest another
US$500 million in Pakistan during year 2009. The money will be earmarked for
building new network capacity and other infrastructure, the CM Pak Ltd. (CM
Pak). The company had so far invested US$1.66 billion in Pakistan and offered
more than 41,700 jobs in the country. 
Alternative Energy 
- Chinese solar company Suntech Power Holdings Co. Ltd (US:STP), one of the
world's largest makers of the photovoltaic modules, posted fourth quarter
loss of US$65.9 million.  Solar power companies have suffered in recent weeks
as demand for new systems evaporated amid the banking crisis that has shut off
the flow of new financing to the industry. Also squeezing profit margins for
many companies is the jump in the supply of solar modules on the market and
the steep drop in the value of the euro - the currency used to buy the vast
majority of systems.  Suntech said it was seeking to triple its sales in the
U.S. to 120 megawatts in 2009. With the US$787 billion stimulus package, the
company expected the U.S. to have a total demand of between 400 to 700
megawatts in 2009, although still far smaller than the European market, where
Suntech shipped about 70 percent of its products in 2008, and earnings
suffered as the euro tumbled sharply against the U.S. dollar. CEO Zhengrong
Shi said the euro weakness had accounted for 8 percentage of the 15 percent
decline in the average selling prices for solar modules for the company during
the fourth quarter from the third quarter. For the first quarter, those
average selling prices are likely to drop about 10 percent from the fourth
quarter. Dr. Shi also said that declines in the cost of silicon, the key
material used to make solar modules, will outpace the decline in selling price
and help support margins. Revenue rose 4.2 percent to US$414.4 million. 
- China solar-cell maker Canadian Solar Inc (US:CSIQ) cut its 2009 shipment
outlook, citing uncertainty in financial markets, and does not expect revenue
to cover input costs in the fourth quarter of 2008. The company said that
gross margin in the fourth quarter is expected to be negative, reflecting the
weak euro, a decline in module pricing in December and an inventory
revaluation provision.  The solar-cell maker forecast 2009 shipments of 300 to
350 megawatts (MW), down from its prior outlook of 500 to 550 MW. For the
fourth quarter of 2008, the company forecast revenue of US$66 million to US$71
million, compared with analysts' average estimate of US $69.3 million. 
Mobile 
- KongZhong Corp (US:KONG), an interactive entertainment, media and community
services provider to mobile phone users in China, has joined force with
Media.titan24.com, a mainstream Chinese sports site, to tap mobile sports news
business as the 3G services are about to take hold in the country. KongZhong
became the exclusive broadcaster for news from Media Titan. KongZhong also has
cooperative deals with NBA. 
Taiwan 
- Overall production of Taiwan's integrated circuit (IC) industry is
expected to suffer a year-on-year slide of 26.9 percent this year as a result
of the global economic recession. The overall production of the IC industry
the backbone of Taiwan's industrial growth totaled NT$1.34 trillion
(US$39.4 billion) in 2008, down 8.1 percent year-on-year. Production marked an
alarming decline of 26.9 percent year-on-year. A breakdown compiled by the
department shows that output of the IC fabrication sector the key player of
the IC industry totaled NT$654.2 billion (US$18.9 billion) in 2008,
representing a decline of 11.2 percent compared to the year-earlier level. The
output of the semiconductor manufacturing sector declined 1.1 percent
year-on-year. 
- HTC (TW:2498) unveiled two new additions to its portfolio, building on the
touch-screen devices it launched commercially in 2008. But the company stayed
silent on the subject of a new Android-based phone, much to the obvious
disappointment of the media present at the HTC press event in Barcelona. It
had been hoped the company would say something about the G2, the follow-up to
the Android-based G1 handset being offered by T-Mobile. The Touch Diamond2
will be on the market from the beginning of Q2 this year and the Touch Pro2 at
the end of Q2. The HTC Touch Pro2 includes a feature called “straight talk”
that enables access to all conversations, whether voice, email or SMS, with
any contact simply via accessing the address book. 
- Acer Inc. (TW:2353) is aiming to get 10 percent of its revenue within three
years from a new line of smartphones it is preparing to launch in Barcelona.
The company's new smartphones will be rolled out in 12 countries first,
and will be later expanded to include other territories. Acer is the latest in
a string of companies to launch its own line of smartphones, with crosstown
rival Asustek recently also announcing a tie-up with navigation device maker
Garmin to sell co-branded mobile devices. The smartphone industry was one of
the few bright spots in the tech sector in 2008, growing by more than 22
percent even as the global financial crisis sapped demand for tech buys and
hurt the bottom line of many technology companies. 
- Quanta Computer (TW:2382) said its first-quarter shipments could fall by up
to 50 percent more than usual amid dampened consumer spending. The company
expects first-quarter shipments to drop at least 30 percent from the fourth
quarter, compared with a typical 20-25 percent fall in other years. The
company shipped 10.1 million laptops in the fourth quarter. Compal
Electronics, Quanta's rival, affirmed a previous forecast that
first-quarter shipments would drop by a more modest 20 percent, though still
down sharply from more typical drops of 10 percent or more. Quanta would
maintain its previous target of growing in line with the global PC industry
this year. Data research firms IDC and Gartner have cut their forecasts for
2009 personal computer sales. 
- A Taiwan banking consortium has agreed to give a new NT$3 billion (US$88
million) loan to struggling DRAM maker ProMOS (TW:5387), which needs the money
to help pay off bonds. Investors had bet that ProMOS Technologies Inc. would
get additional funds, sending ProMOS shares 7 percent higher to their daily
limit. However, the loan is NT$2 billion (US$57.6 million) less than ProMOS
originally planned to borrow. State-owned Bank of Taiwan would lend NT$700
million (US$20.2 million) to ProMOS, although the lending still needs final
approval from each banks' board. ProMOS has been scrambling for cash to
help repay a NT$11 billion (US$317.3 million) overseas convertible bond it
issued. The maker of DRAM chips, used mainly in computers would allow holders
of the bonds to sell back the notes starting, as the struggling company
scrambles to find money for the potential redemption. 
Hong Kong 
- Ma Huateng, chairman of Tencent Holdings (HK:0700; US:TCEHY), has disposed 2
million shares of the company, at HK$48.8 (US$6.3) and HK$48.7 (US$6.3)
apiece. The total consideration amounted to HK$97.5 million (US$12.6 million).
Ma's shareholding in the company has then dropped to 11.71 percent. 
- Lenovo (HK:992; US:LNGVY) finalized its housecleaning plans in Europe,
Middle East, and Africa. This time about 550 of its employees will lose their
jobs there. It is part of its global staff reduction scheme. Globally, the PC
brand will finally cut 2,500 jobs. But its employees in China are safe. The
third-quarter financial report of Lenovo indicated that it recorded US$735
million in sales from Europe, Middle East, and Africa in the third quarter of
2008, making up 20 percent of its total revenues. Shipment and sales of PCs in
theses areas were down 3 percent and 32 percent, respectively. Lenovo will
keep a keen eye on the low-end markets and move forcefully to raise its
profile in emerging markets and further diversify its product lines to spur
sales. Lenovo vowed to meet the needs of Chinese consumers for low-price PCs.
The Chinese PC maker has been losing ground in the low-end market for it has
been sticking too much to high-grade segments. 
About IRG 
IRG is a financial advisory and investment firm focused on the core growth
sectors in Asia with particular emphasis on the telecommunications, media and
technology (TMT) sectors. IRG's Financial Advisory business is
underpinned by the decades of experience in Asia of IRG's professionals,
resulting in a unique network of relationships with global and Asian
corporations, government institutions, and public and private equity
investors. IRG has developed and structured many of the largest and most
innovative transactions in the key growth sectors in Asia over the last
decade. IRG's Investment business is supported by its corporate finance
experience in Asia with over US$13 billion in completed public and private
markets transactions executed by IRG professionals over their respective
careers in Asia. IRG's platform covers Greater China (Hong Kong, China
and Taiwan), Japan, Korea, Singapore, Southeast Asia, and Australia. For more
information, please contact Juliette Chow at Tel: +852 2237 6000 or E-mail:
juliette@irg.biz 
IRG 
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