Commentary: Shanda, The9 play games, more

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Latest article on Shanda and other Chinese internet operators from www.marketwatch.com:
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Jockeying for holiday screen time
Commentary: Shanda, The9 play games, more

By Paul Waide
Last Update: 2:20 PM ET April 25, 2005

BEIJING (MarketWatch) -- CEOs at China's U.S.- listed technology companies probably owe Google a tip of the hat for the gains they booked late last week, but heading toward the May Day holiday week, Chinese stocks have a number of independent drivers, including earnings, product launches and holiday travelers.

Online games operators continue to hog the headlines in the Middle Kingdom. The market is looking ahead to the test-version release of Shanda's massive multiplayer online role-playing game Magic Land on Friday -- coincidently the date The9 Ltd. (NCTY: news, chart, profile) was going to release its own test version of World of Warcraft. The9 pushed World of Warcraft's test launch date forward to Tuesday.

Meanwhile, Shanda Interactive Entertainment Ltd. (SNDA: news, chart, profile) also signed a licensing deal with Turbine Games to operate Turbine's Dungeons & Dragons Online title in China, news that sent shares up 13.9% at $33.60 going into the Friday session.

Aside from vying for some of the same users, a week-long holiday gives the two online game operators some big chunks of gaming time with city dwellers who decide the holiday crowds are too much.

Asia's Golden Week holidays begin Friday and last about a week. Regional financial markets are closed most, but not, all days, while many businesses are virtually shut down for the whole period.

Local media reports that The9 will have 96 server groups online for the World of Warcraft test version release. To put that number in context, NetEase.com Inc. (NTES: news, chart, profile) has 198 server groups online to support 660,000 peak concurrent users for one of its games. The9 stock was up 5.8% at $17.94 going into Friday trade.

With NetEase and Sohu Com Inc. having already reported first-quarter earnings ahead of the May holiday, investors in pure wireless value-added services providers (WVAS) plays will be scrutinizing wireless revenues at both companies. However, there were no shocks to China's wireless value added services environment in the first quarter.

In its fourth-quarter release, Sohu (SOHU: news, chart, profile) said it expects non-advertising revenues of between $8 million and $8.5 million in the first quarter. The bulk of Sohu's non-advertising revenue is generated by wireless value added services, and if the revenue numbers are in line with the company's forecast, it won't be just Sohu breathing a sigh of relief.

Rounding up the other wireless players, Linktone (LTON: news, chart, profile) , Kongzhong (KONG: news, chart, profile) and Hurray Wireless were up 13.2%, 6.1%, 5% for the week going into the Friday session.

Online travel sites Ctrip Com International Ltd (CTRP: news, chart, profile) and eLong Inc. (LONG: news, chart, profile) should benefit from the May holiday. Ctrip will announce first-quarter earnings on April 28. A solid holiday season might pull eLong out of the rut in which its stock seems to be stuck. Even in a week where the company agreed to provide services to Yahoo China's travel channel, eLong was down 6.6% at $7.94 going into the Friday session.

As for the nation's biggest portal, Sina Corp. (SINA: news, chart, profile) , Chinese holiday makers will have to logon to check those results on May 5.

SEEC deal and IPOs

An official from SEEC Holdings (HK:205: news, chart, profile) , publisher of the widely respected Caijing magazine, last week revealed the media company is close to a deal with "four global publishing firms."

The deal is expected to result in SEEC adding a number of consumer titles to its portfolio of publications. China's consumer magazine industry continues to attract foreign title with Rolling Stone and InStyle two of the latest to have announced China publishers.

Writing security and encryption software and packaging SIM cards for cellular phones might sound like a small market, but Beijing-based Watchdata generated $59 million in revenues in 2004. The company re-filed its F-1 listing Deutsche Bank and Jeffries Broadview as co-underwriters a couple of weeks back. Look for the company to price in the coming week.

Chinese business to business site Alibaba's C2C subsidiary Taobao is fighting with eBay (EBAY: news, chart, profile) in its core marketplace business, but Alibaba appears to want to take the U.S. online auctioneer giant on multiple fronts. Alibaba has announced plans to expand the use of its online payment solution AliPay to independent merchants later this spring. Last week, Alibaba announced a deal with Visa that allows Visa users to transact using AliPay.

The filing for handset designer TechFaith's IPO is still reverberating across the industry in China. Recently, Shanghai's Yuwa flagged its intent to list later this year (word on the street has it that they are interviewing potential CFOs) and last week the virtually unknown Qiaoxing Universal Telephone (XING: news, chart, profile) announced plans to spin off its Shanghai-based handset design company Sunplus with a Nasdaq listing as the end goal.

With investors scouring the horizon for opportunities in China's nascent education sector, Softbank Asia Infrastructure Fund must be quietly patting itself on the back. In the first quarter of 2005, SAIF invested $14 million in ATA, an automated test system developer that provides testing services to public and private clients in China, including China's Ministry of Education. SAIF also invested $35 million in Beijing-based television home shopping outfit Acorn International in the first quarter.

Coming up

Last Wednesday, Datang Telecom Technology Co., Philips Electonics NV (PHG: news, chart, profile) and Motorola, Inc. (MOT: news, chart, profile) sponsored a third-generation (3G) telecom technology lab that displayed dual mode handsets using TD-SCDMA. That lengthy acronym stands for Time-Division - Synchronous Code Division Multiple Access and is basically China's homegrown 3G wireless telecom standard.

Up ahead, the International TD-SCDMA Wireless Summit in Beijing on Wednesday and Thursday seeks to tackle the next big issue: the commercialization of China's chosen "home grown" 3G standard. Most China telecom industry watchers are not expecting 3G licenses to be announced until late 2005, but with International Telecommunications Day coming up in May, we might see some small step forward on the 3G front.

Paul Waide is an editor at Pacific Epoch, the leading source of English language information on China's emerging media, entertainment and technology industries. Paul does not hold positions in any of the companies covered in this report. Email Paul at paul.waide@pacificepoch.com.