NEVER A DULL MOMENT ON "PHAN WORLD"->Hartcourt Realigns Business Segments for the Next Stage of Growth
Wednesday August 4, 8:00 am ET
LOS ANGELES, CA--(MARKET WIRE)--Aug 4, 2004 -- The Hartcourt Companies, Inc. (OTC BB:HRCT.OB - News) (Frankfurt: 900009), China's IT product distributor, retailer and service provider, announced the segmentation of its business into two groups, the Consumer Division and the Commercial Division. We believe that the division will enable Hartcourt to be more competitive in the markets where it competes and more focused on serving its customer needs.
The Consumer Division will primarily comprise of the merged operations of Guowei and Huaqing subsidiaries that Hartcourt acquired in April and February 2003, respectively. This new division will serve as a platform to expand our successful retail concept throughout the industry and in the process we expect to significantly grow our share of the market. The Commercial Division will primarily consist of the Challenger group of companies that Hartcourt acquired in December 2003. This new division will provide products and services to meet the growing needs of 6.6mil small and medium sized enterprises (SMEs) in China.
During the second quarter of 2004, the synergy created by the integrated retail operations of Huaqing and Guowei has generated a significant increase in revenues and net income before taxes. As a result, the integration of the remaining operations of the two companies is to be completed before the year-end. At the same time, Huaqing has re-evaluated its previously announced intention to acquire Pengyang, a notebook computer retailer in Shanghai. Huaqing concluded that it will not pursue the acquisition due to additional cash contribution that would be required, and because it believes Pengyang will produce a lower rate of return than Huaqing had originally anticipated. Huaqing has also sold the equity position of its Hangzhou subsidiary to a third party. We do not believe the sale of Huaqing's Hangzhou subsidiary will affect the overall financial performance of Huaqing.
The new Consumer division will not include the Newhuasun and Wenzhou Zhongnan subsidiaries. After many rounds of negotiation, Hartcourt was unable to acquire the additional equity interests in Newhuasun to gain majority equity. In addition, the Newhuasun business requires additional working capital which Hartcourt does not believe is appropriate to contribute unless it has majority ownership of Newhuasun. As a result, Hartcourt is searching for a suitable buyer for the sale of its equity interest in Newhuasun. In addition, Hartcourt has re-evaluated its investment in the Wenzhou Zhongnan subsidiary due to Hartcourt's view of the limited market opportunities in Wenzhou. Hartcourt has reached an agreement with the minority owners of Zhongnan to rescind the original acquisition contract with all the shares issued relating to the acquisition to be returned to Hartcourt for cancellation to prevent unnecessary shareholder dilution.
In addition to the internal growth of Challenger, Hartcourt will seek acquisitions and strategic alliances to provide new products and services targeting China's SMEs and the government sectors. These products and services will encompass the areas of IT hardware and software, application services, Internet content and digital communication. The previously announced acquisition of ServiceNet, a HP equipment service provider, will not be completed in order to avoid potential conflicts of interest between ServiceNet's relationship with HP and with Challenger's relationship with IBM, for which it serves as a distributor.
We expect that our business segmentation will allow Hartcourt to better synergize its various operations and lead to improved overall financial performance. We believe the segmented business strategy will enable Hartcourt to expand into higher valued-added businesses with a wide range of products and services to meet the fast growing needs of China's SMEs in the IT market.
About Hartcourt
Hartcourt's achievements and operations could be viewed on its Web site, www.hartcourt.com.
Forward-looking statements
The statements made in this press release, which are not historical facts, contain certain forward-looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement.
Contact:
Contact:
Ms. Tingting Ni
Tel: 8621 5213 8810
Fax: 8621 5213 8870
Email: ir@hartcourt.com
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Source: The Hartcourt Companies, Inc. |
