Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Zi-Corp (ZICA), formerly MCUAF -- Ignore unavailable to you. Want to Upgrade?

To: shust who wrote (1089)	7/30/1999 8:11:00 AM
From: sPD	Read Replies (1) \| Respond to of 2082

"Series of China deals keeps Zi shares on the boil" Excellent coverage of the conference call in today's Financial Post. Robert - thanks for your summary of the call.

To: shust who wrote (1089)	7/30/1999 8:14:00 AM
From: sPD	Respond to of 2082

Report on Zi by Groome Capital's Sean Chen on July 16 Zi Corp's: stock jumps 51.9% on news of China deal Software Company Overview Calgary-based Zi Corporation develops and markets Chinese character-based language applications and Internet products and services. It has offices in Canada, China and the United States. Development On Wednesday July 14 th , the company announced that it had entered into a licencing and royalty agreement with Xiamen Overseas Chinese Electronic Co., Ltd. (Xoceco). Xoceco will use Zi Input Software on its GSM (Global System for Mobile Communication standard) digital cellular phones sold in China and elsewhere. Further details of the agreement were not released. The stock reacted positively to the news. On the TSE, Zi Corp. was up 51.9% on Thursday, closing at $4.83. On NASDAQ, trading moved the stock to US$3 3/16. Today, the stock is up $0.92 intraday on the TSE. Vast Market Potential The China GSM cellular phone network had approximately 26 MM subscribers at the end of 1998. According to industry estimates, it will grow to approximately 40 MM by the end of 1999, and 50 MM for 2000. In China, the overall market penetration for cellular phone is approximately 2%, and 8% for major cities, such as Beijing, Shanghai and Guangzhou. The current Chinese network is based on the GSM standard. In contrast, the North American network is a mix of GSM and CDMA (Code Division Multiple Access) standard. As a barter to gain entrance into the World Trade Organization, the Chinese government has agreed to add CDMA to its network. By creating a future dual mode cellular network, the Chinese government is indicating an interest to provide more investment opportunities for foreign investors. As big players like Ericsson, Motorola and Nokia migrate their product lines toward CDMA and dual mode cellular phones, domestic producers are getting into the cellular phone manufacturing business. According to our industry sources in China, there are approximately 20 domestic manufacturers geared up to produce GSM phones. The first manufacturer marketed its first model in October 1998, and Xoceco introduced a model in January 1999. The unit price for its domestic model is approximately 1000 Yuan, or about C$160, which is significantly lower than the average price of comparable foreign brand models, usually in the range of 30% to 50% higher. Currently, consumers are more inclined to purchase comparable foreign brands than domestic models, as they are willing to pay more for the perceived value and fashion sense. According to the most recent Chinese industry survey, foreign brands account for over 90% of Chinese cellular handset sales. The major foreign players are Motorola, Ericsson, Nokia, Philips, Mitsubishi, Samson, Simmons and Alcatel. The GSM phone margin is approximately 25% and declining. The transition to CDMA phones will enhance those margins for the foreign manufactures. Currently, the domestic manufacturers do not have the technological skills to produce CDMA phones. Consequently, they are forced to enter into a declining margin sector of the market. Domestic competition is fierce in the market, and with large and established foreign competitors in the market, it would be difficult for Xoceco to capture more than 1% of the market. Zi Corp. already has an agreement with Ericsson and Xoceco for its Zi Input Software. The next logical choices would be Nokia and Motorola, although Motorola is using its own Chinese character software. Zi Corp.'s software can be used on many other devices, such as Personal Digital Assistants, TV set-top boxes, pagers, kiosks, game consoles and computers. With over 1.2 billion people in China, Zi Corp's software has a vast market to explore and many applications which have not even been considered. The underlying language processing architecture could be adapted to support other languages and the company is actively pursuing this avenue. We are actively following Zi Corp. for any further developments. An investment in ZIC may be particularly suited for investors with above-average risk tolerance, who are seeking a potential for capital appreciation and who have diversified investment portfolios.