AOL Picks Partner for China Foray
Clay Chandler Washington Post Service
Tuesday, June 5, 2001
HONG KONG AOL Time Warner Inc. has chosen Legend Holdings Ltd., China's largest personal computer manufacturer, as its venture partner for entering the vast, though still unprofitable, market for Internet services in China, according to sources familiar with negotiations between the two companies.
The alliance with Legend, which makes a third of all personal computers sold in China, suggests that AOL hopes to replicate in China a marketing strategy that worked well for it in the United States: hooking new customers by "bundling" easy-to-use Internet services software on PC desktops.
Legend enjoys cordial relations with China's regulators and a strong reputation among Chinese consumers - assets that could help offset AOL's lack of operating experience in China and ease apprehensions among Chinese officials and consumers that the company will use its services to download U.S. culture and ideology into China.
"AOL has picked exactly the right partner for China," said David Cui, China Internet analyst for Merrill Lynch in Hong Kong. "This is an alliance that will be a powerful player in the China market from day one."
Even with Legend's help, it is unclear if the subscription model that worked so well for AOL in the United States can succeed in a country where disposable incomes are low, computer usage is in its infancy and government censorship is severe.
Several Internet analysts in Asia expressed concern that the AOL-Legend combination would bump up against China Telecom, the state-owned telephone giant that controls nearly 80 percent of China's Internet connections.
AOL's push into China is expected to speed consolidation of the country's battered Internet services industry.
Copyright © 2001 The International Herald Tribune
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