Coupla Reuter articles about future of China dot-coms...
=========================
SHANGHAI, July 7 (Reuters) - Chinese dotcoms are still
hatching plans to list overseas, seemingly undaunted by
Netease's <NTES.O> flop on its Nasdaq debut last week.
But analysts said on Friday the allure of China's Internet
start-ups appeared to be fading for investors who question
unproven business plans and inexperienced management teams.
Pioneering Chinese Internet plays rose to dizzying heights
on their Nasdaq debuts, but now they too have lost much of
their value amid volatility in the U.S. high-tech market this
year and growing scepticism from investors.
Chinadotcom <CHINA.O> ended its first day on Nasdaq a year
ago in stunning fashion, its shares trebling from an IPO price
of $20. Sina.com <SINA.O> shot up 22 percent from its issue
price of $17 in April.
Then came Netease's dud. The Internet portal closed its
first day on the Nasdaq a week ago at $12 against an IPO
price of $15.50. It closed at $14 on Thursday.
After peaking in mid-March, Nasdaq has seen see-saw trading
and is down more than 20 percent.
Chinadotcom's share had dwindled to $18 by Thursday. But
Sina has bucked the trend, closing up at nearly $30 on
Thursday.
DON'T LOOK BACK
China's Internet firms say they are undeterred.
"Our IPO plan has not changed one bit regardless of Nasdaq
performance or a particular stock's performance," said Shao
Yibo, chairman and chief executive of e-auctioneer Eachnet.
Shao, Eachnet's founder, had said earlier he planned to
list the Shanghai-based firm overseas by the end of this year,
even though he had enough venture capital money to last for the
next few years.
"In the next month or two, we will have more money coming
that is going to last three to four years," Shao said.
Shanghai's Stockstar.com, which plans to raise about $100
million in the next 12 months from its IPO, is also undaunted.
"It's not going to affect my plans. Once I think our
business is mature enough I will go ahead with a listing," said
Gao Limin, chief executive officer of Stockstar.com, which
helps clients set up websites for online stock trading.
"I'm quite confident that Netease will exceed its IPO
price, but how far it goes as a company will depend on how it
modifies its business to suit the whole environment," Gao
added.
Sohu.com has also forged ahead with listing plans. Its
shares debut on the Nasdaq on July 12.
But analysts said the novelty of Asian dotcom plays on
Nasdaq appears to have worn off and investors are realising it
might take several years before these firms can turn profits.
Some analysts suggested a rethink of listing plans.
"The firms should give serious thought about overseas
listings," said Norman Yu at Sun Hung Kai Investment Services
in Shanghai.
"Investors usually expect to get their profits from listed
firms as soon as possible. But most Internet companies right
now don't see any prospects of making profits," Yu said.
NO CHOICE
But other analysts said that without profits, the firms had
little choice but to seek listings abroad.
To list on China's main boards, a firm must have three
straight years of profits. Chinese web firms can't even muster
the one year of profits that will be needed to list on a
proposed second board for high-tech and private firms.
"Local web firms can't list on the second boards which the
government plans to enact because they will have to generate a
year's profits first," said Zhang Xiongfeng, analyst at Daiwa
Securities in Shanghai.
Analysts also said the firms needed sound business models
just like any Old Economy firm in order to survive.
"You've got to be able to budget, control inventory. It's
not just the business model but the experience," said Stephen
Brown, head of research at Kim Eng Securities in Hong Kong.
"Just because you do business using a browser doesn't mean
that business is any different," Brown said.
Eachnet, the online auction site, said its model was good
and was confident that money would soon be flowing in.
"We have a plan to gradually charge consumers for selling
their products at our site," Shao said.
"We should be able to get profits by the end of next year."
REUTERS
========================
Thursday July 6, 1:01 am Eastern Time
China Web portal shakeout seen amid scant revenue
By Tony Munroe
HONG KONG, July 6 (Reuters) - With ever-more general interest Web sites in China chasing limited advertising dollars and still-distant e-commerce revenue, mainland-focused portals face a shakeout, industry sources and analysts say.
Investor skepticism was reflected in last week's initial public offering of Beijing-based Netease.com Inc (NasdaqNM:NTES - news), which landed with a thud on Nasdaq.
Already delayed and scaled-back, the Netease IPO was priced at US$15.50 a share and ended its first day of trading at US$12.125, recovering somewhat on Wednesday to US$13.125.
That reception could bode ill for rival China portal Sohu.com (NasdaqNM:SOHU - news), which is set for a July 12 Nasdaq IPO, analysts said.
``There's only room for so many horizontal portals in any market, and China won't be an exception to that,'' said Stephen Moss, chief executive of online ad firm DoubleClick Asia, who said he is bullish on China's longer-term online ad prospects.
``You'll have a couple of dominant horizontal portals -- three maybe -- but I don't think the market can sustain the number of portals you have there today,'' he said.
Some analysts said China is such a large and diverse market it will be able to support five or six portals.
THE FUTURE ISN'T NOW
Besides Netease and Sohu, Sina.com (NasdaqNM:SINA - news), Chinadotcom (NasdaqNM:CHINA - news), upstart Tom.com and U.S.-based Yahoo! Inc (NasdaqNM:YHOO - news) are all portals slugging it out for ``eyeballs'' in China's fast-growing Internet market. U.S.-based Lycos Inc (NasdaqNM:LCOS - news), which is awaiting a license from the Beijing government, also said it expects to enter the market soon.
``The China portal market was crowded a year-and-a-half ago,'' said Joseph Sweeney, research director at the Gartner Group, who forecast ``a lot of bloodletting'' among greater China portals.
Analyst Pete Hitchen of Salomon Smith Barney said portals outside of the top three ``are going to be fighting for breath.''
Still, the number of Internet users in China is poised to explode, from 7.2 million users this year to 44.2 million in 2005, Salomon Smith Barney recently forecast.
But Salomon Smith Barney also predicted mainland online ad revenue would total just US$26 million next year -- at the low end of recent estimates. That figure could grow to US$111 million in 2005, the report said.
China e-commerce revenue, meanwhile, will total just US$4 million this year and US$15 million next year before mushrooming to US$496 million in 2004 and US$1.25 billion in 2005, according to Salomon Smith Barney's forecast.
ENDURANCE TEST
In the near-term, then, stamina will be crucial to survival, analysts said, as portals try to attract as many users as possible, then figure out how to make money from them.
Sina, the market leader based on Chinese government polls, is burning cash at a rate of about US$7 million to $8 million a quarter with about US$133 million on hand, enough to pay for growth to mid-2003, a recent Lehman Brothers report said. The site more than doubled its registered users to five million between December and April, the report said.
Hong Kong-based Tom.com, which recently launched a series of ``vertical'' portals following a much-hyped IPO that raised HK$876 million (US$112 million), said its monthly ``burn rate'' was HK$40 million (US$5.13 million) as it develops its site.
``They're all hoping for substantial growth in the online advertising market, which I think will surprise people on the upside,'' said Lehman's McKeever. ``Whether these companies can endure while the advertising market reaches a scale to generate some significant revenues -- well, that's a question.''
Consolidation among China portals appears inevitable, while less-popular sites could be doomed, industry sources said.
Lycos, for one, said it has a handful of joint venture prospects in China and is on the hunt for acquisitions. ``We are thinking seriously of acquiring other good portals or Web sites,'' said James Cheng, Lycos general director for greater China. |
