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Posts Tagged ‘YOKU’

Why are E-Commerce China Dangdang’s shares on fire?

There’s one stock in particular that drubbed my portfolio last year, and it happens to be E-Commerce China DangDang (NYSE:DANG). Fanfare was high when DangDang made its initial public offering in December 2010. That early love affair with “China’s Amazon” wore off quickly, though, and investors dumped shares like crewmen bailing water in a leaky boat.

DangDang shed more than 80 percent of it’s value in 2011 as shares free-fell from $30 to $4 a pop. I cringed every time I checked my 401K. But something magical seems to be happening for shares in 2012. Over the past month, DangDang has shot up 98 percent. What gives?

Here’s my assessment of why DangDang shares are recovering:

1) More users, more cashflow. DangDang used money from its IPO to expand its offerings and bolster the company’s distribution system. That’s helped drive up the number of orders at the site by 32 percent over the past year (per Fool.com). The site’s also driven up its total number of users to 5.5 million, up 36% over last year.

2) Renewed interest in Chinese stocks. With the Federal Reserve’s recent announcement that it plans to keep interest rates near zero until at least 2014, investors’ risk appetite has grown quickly. That’s pushed up a lot of Chinese stocks – and DangDang’s going along for the ride. Other winners include social networking company Renren Inc. (NYSE:RENN), up 60 percent since the start of the year, and video-streaming company Youku Inc. (Public, NYSE:YOKU), up 45 percent.

3) Robust EPS growth. According to CNAnalyst, DangDang’s long-term annual EPS growth should hit 53.3 percent. That puts it ahead of just about every top small-cap stock on the market besides Indian travel company MakeMyTrip Limited (NASDAQ:MMYT).

4) A new e-book platform. DangDang launched its e-book platform in December for use on iPhones, iPads and PCs. 50,000 book titles are available and each sale should net the company 20 percent of the sale price. Writer Kevin Chen expects DangDang’s ebook sales to start manifesting themselves in the company’s earnings reports in Q2 2012.

There are warning signs, though. For one thing, DangDang’s already blown through a lot of price targets for the company. Brokerage analysts have set an average target price of $8.01 (per CNAnalyst). DangDang’s competition could IPO soon, too (see our 2012 tech IPO calendar for more).

Despite the challenges the company faces, and the fact that it controls just 2.3 percent of the of B2C ecommerce market in China, investors seem to have warmed back up to DangDang. Shares still haven’t hit my dollar-cost-averaged price, but it’s a step in the right direction.

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Tudou IPO: Is Tudou stock a buy?

Despite some catty disagreements between Tudou Holdings’ CEO and his ex-wife, it appears the online video sharing site will soon IPO on U.S. stock exchanges.

The move has been delayed for several months for unspecified reasons even as rival site, Youku.com (NYSE:YOKU) enjoyed a spectacular IPO in December. YOKU shares have risen more than four times their IPO price of $12.80, and it will be interesting to see if investors greet Tudou shares with the same enthusiasm.

Traffic at the two online video sharing sites is nearly even. Alexa.com ranks Youku as the 10th-most-visited site in China, but Tudou’s not far behind in the No. 12 slot (as indicated by the red line below):

Source: Alexa.com

Still, there is no clear-cut winner in the market yet, and there probably won’t be anytime soon. The question is which company will differentiate itself first as China’s leading video site? Investors will get their chance to make their bets soon enough.

Tudou IPO: Key Facts and Figures

Profits? Not yet. Tudou lost $55 million last year, more than twice its loss in 2009. About a third of that loss was attributed to share-based compensation and “fees paid to third-party advertising agencies” (per the Wall Street Journal). Youku fared somewhat better with a 2010 net loss of $31.5 million. Throughout 2010, Tudou generated revenue of $43.3 million while Youku’s revenues were $59.6 million.

Ex-wife? That spat between Tudou CEO Gary Wang and his ex-wife could have serious implications for the company. Wang’s ex believes she’s entitled to half of his Tudou holdings. If that’s upheld in court, it could fundamentally shift the power structure for the company creating as much internal pressure as external pressure from rivals like Youku and Baidu’s (NASDAQ:BIDU) Qiyi.com. “Under PRC law and judicial practice, in principle, community property during marriage should be equally divided upon divorce, subject to any agreement reached by the divorced couple and other principles such as the impact on the continuous operation of the involved business,” Tudou writes in its recently-amended F1 filing.

The true “YouTube of China?” Youku relishes its nickname as the “YouTube of China,” but in fact both Tudou and Youku have diversified by offering pay-as-you-go, professionally produced content.

“Through building long-term partnerships with copyright holders and communicating with our media partners, Youku Premium is creating a whole new way for people to find and watch the content they want, when they want it,” Youku founder and CEO Victor Koo said in January.

Tudou has also branched out from user-generated video. Not only does the company license professionally-produced content for paying members, it also produces its own in-house premium content (including That Love Comes in November 2010 and last month’s debut of Utopia Office, which has been compared to the U.S. sci-fi show Fringe).

Still, user-generated content remains the heart and soul of the site with users uploading more than 40,000 video clips to Tudou last year. Total user registrations on the site climbed from 56.4 million in 2009 to 78.2 million by by the end of 2010.

Coming to a Chinese mobile near you. One of the brightest spots in Tudou’s business plan comes from a partnership with China Mobile – the PRC’s state-run mobile company that happens to operate the largest telecommunications network in the world. “We … began generating revenues in January 2010 from our mobile video services, which we provide primarily through a video channel with China Mobile, and we had an aggregate of approximately 15.8 million users with a total of approximately 27.7 million clip views in 2010,” Tudou writes.

China Mobile users can opt to pay a monthly subscription fee for the service. As the number of smartphones proliferates behind the Great Wall, expect mobile revenue to start contributing a lot more to Tudou’s bottom line. Still, it’s unclear how long it will take Tudou (or Youku for that matter) to start generating profits. In the meantime, a lot of investors seem to have their fingers crossed hoping for the best.

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A Sina Weibo IPO could be in the works as China’s Twitter moves to Weibo.com

China’s popular Twitter-like site Weibo may have taken a step closer to an IPO yesterday by unmooring itself from Sina.com. No longer will users have to click or type their way to t.sina.com.cn. Instead, they can type in Weibo.com to access the microblogging site instantly, according to Penn Olson.

Back in February, I wrote a post titled Will we ever see a SINA Weibo IPO? I speculated then that SINA Corporation (NASDAQ:SINA) would be silly to spin off its fastest-growing business. I may have jumped the gun.

All systems seem to be pointing to a Weibo IPO sooner rather than later. First, there was a thinly-sourced report in March from China’s 21st Century Business Herald that claimed Sina was in talks with several investment banks as it mulled a Weibo IPO.

Now, there’s a move to separate the microblogging site from Sina.com by giving it its own domain. Perhaps it’s just a matter of time before we get our hands on an official S-1 filing.

For now, users will be able to use t.sina.com.cn AND weibo.com. Eventually the two sites will be merged, and traffic going to t.sina.com.cn will get re-directed to Weibo.com. The re-branding should help raise public consciousness for Weibo in China and abroad.

“We have successfully built Sina microblog Weibo into the largest and most influential social media platform in China, with user base increasing by more than 25 times in 2010,” Sina’s CEO Charles Chao said after the company’s Q4 earnings report last month.

The total number of Weibo users doubled to 100 million in the four months leading up to the report, and Sina’s in the process of deploying an advertising and a virtual goods marketplace on Weibo. While the microblogging service is yet to generate any revenue, analysts still believe Weibo could be valued at $3 billion or more.

And judging by the success of several recent tech IPOs out of China (including YOKU, DANG and QIHU), a Weibo IPO has the potential to turn into a public spectacle – especially if the site could beat Twitter, LinkedIn and Facebook onto stock exchanges.

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The unofficial tech IPO calendar for 2011

After a few terrible years for IPOs, some exciting technology companies look like they’re ready to step up to the IPO plate in 2011 or 2012. Here’s an unofficial list of 23 tech companies that – according to rumors from the Wall Street Journal and TechRice among other sources – might go to market this year or next:

star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small 58.com IPO? China’s for-profit version of Craigslist.org, 58.com’s got a robust user base. A recent browse through the site’s classified ads in Beijing showed more than 1.2 million listings for people looking for roommates – and that’s just in one city! The site ranks 34th in online traffic in China, according to Alexa.com.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small 360buy.com IPO? The third-largest online retailer in China, 360buy.com just secured a nice chunk of change from Wal-Mart. They got more than $500 million in all. As I wrote previously, 360buy.com controls 2.5 percent of the e-commerce market in China. That may not sound like much, but that’s more than 3.5 times the e-commerce marketshare enjoyed by competitor China Dangdang, Inc. (NYSE:DANG).

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star-icon-smallstar-icon-smallstar-icon-small Demand Media IPO? A content factory that uses an army of freelancers to churn out “How To” articles, Demand Media has turned the written word into a commodity on eHow.com. All told, eHow produces enough text to fill more than four English language Wikipedia’s every single year. And their so-called “evergreen” articles aren’t pegged to specific dates, so they’ve got a very long shelf-life of search-engine friendly content that’s perfectly suited for advertisements.

Update: Demand Media IPO’d on Jan. 26, 2011 under ticker symbol DMD. Check out my latest post on the company: Will Demand Media’s (DMD) stock recover from Google shock? Absolutely.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Facebook IPO? I can’t say much that hasn’t already been said about Facebook, except this: they’re the only Web-based company in U.S. that’s positioned to truly challenge Google in the coming years. As they expand into search, virtual goods, e-commerce and mobile, Facebook seems to be taking over the internet. Indeed, the site currently accounts for 25 percent of ALL pageviews in the U.S. Even with a $75 billion+ valuation, Facebook still looks cheap to me.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Groupon IPO? Groupon’s found the holy grail of online marketing: a simply way to marry coupons and local businesses. To use it, just give Groupon your email address and they send you a daily offer from a local business. If you like the offer (which is often a coupon or gift card that’ll save you 50 percent or more at a local restaurant, hobby shop, etc.), you can buy the coupon, print it out and redeem it anytime before the expiry date. The company’s already rejected a $6 billion buyout offer from Google, and they’re in the early stages of expanding into China. The only problem? Google’s got Groupon on their hit list now, and an all-out war is probably in the making.

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star-icon-smallstar-icon-smallstar-icon-small Hulu.com? A streaming video site with backing from media heavyweights like News Corp. (NASDAQ:NWSA), Walt Disney (NYSE:DIS), and NBC Universal, Hulu claims to be operating at a profit with 2010 revenues around $260 million. The company’s biggest competitor is streaming giant Netflix, Inc. (NASDAQ:NFLX), which now has a market cap of $9.6 billion.

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star-icon-smallstar-icon-smallstar-icon-small Jiayuan IPO? The leading online dating site in China, Jiayuan’s the 55th most-visited site in China, and it boasts at least 25 million members. The company makes money by charging for memberships (about $6 a month for a “Diamond Membership”), selling virtual currency and other romantic add-ons. Jiayuan has attracted capital from New Oriental Education & Technology Group (NYSE: EDU) among other investors.

Update: Jiayuan shares started trading on May 12, 2011 under ticker “DATE” on the NASDAQ. Check out my latest post on the company: Jiayuan.com IPO: 3 reasons to invest in Chinese dating site.

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star-icon-smallstar-icon-smallstar-icon-small LinkedIn IPO? A social networking site for professionals, LinkedIn boasts more than 90 million members from around the world. The company lacks the sex appeal of some of the other tech IPOs on the docket, but it does seem like its network might be easier to monetize than, say, Twitter, since it can capitalize on hiring solutions, advertising aimed at professionals and premium landing pages.

Update: LinkedIn IPO’d on May 19, 2011 under ticker symbol “LNKD.” Check out my latest post on the company: 3 reasons NOT to invest in LinkedIn IPO.

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star-icon-smallstar-icon-smallstar-icon-small LivingSocial IPO? The biggest and most well-known Groupon competitor, LivingSocial offers daily deals from local and national retailers. LivingSocial got a big boost when it announced that Amazon.com, Inc. (NASDAQ:AMZN) was investing $175 million in the company. Soon after, LivingSocial offered its members a $20 Amazon gift card for just $10, and they netted both companies more than $13 million up front in the deal.

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star-icon-smallstar-icon-smallstar-icon-small Nuomi IPO? An ultra-deep discount coupon site, Nuomi’s fighting for attention in what will soon be a very crowded market. Still, they’ve got decent ownership in Oak Pacific – the parent company of “China’s Facebook”: RenRen. And they’ve got a decent idea: do as Groupon does. The company sells coupons online for a limited time. At least one theater owner who partnered with Nuomi was thrilled with the results: “I’d say this is a miracle,” producer Lei Zile told the Global Times last July. “I’ve talked to older producers about this and they all said it was a miracle in the history of stage plays. 100,000 tickets were sold in one day. You could call it encouraging.”

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star-icon-smallstar-icon-smallstar-icon-small Pandora IPO? An online music streaming site, Pandora grew out of the Music Genome Project, which attempts to categorize music based on more than 400 variables. Using that information, Pandora can build “custom” radio stations after you’ve entered a song or band that you like. The site’s enjoyed a big surge in popularity with wider-spread adoption of smartphones that allow streaming music anywhere, anytime. Despite the fact that Pandora shelled out more than $30 million in royalties in 2009, the company still managed to make its first profit that year, netting some $50 million. In 2010, profits were estimated to be around $100 million largely on the strength of premium ad-free streaming accounts and partnerships with car manufacturers that are installing Pandora direct from the factory.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Qunar IPO? An online travel booking site in China, Qunar’s Web traffic is pacing Ctrip.com’s (NASDAQ:CTRP). Both companies operate in the same niche, but Ctrip’s more well known in the West since its IPO came in 2003. Since 2003, shares in Ctrip have risen more than 750 percent. Competition in the sector seems to be heating up as Tencent Holdings, Ltd. (HKG:0700) recently invested in 17u.com, another Chinese travel site that’s currently a distant third behind Ctrip and Qunar.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Renren IPO? A glaring example of the copyright issues that plague China, when RenRen.com launched in 2005 as XiaoNei.com, the site looked like it was an official Facebook product. It even identified itself as “A Mark Zuckerberg Production” at the bottom of its pages. After getting bought out by Oak Pacific Interactive in 2006, the company’s since tried to carve its own niche – and its done well. RenRen.com currently has more than 160 million registered users in China, and it’s the country’s 16th most-visited site.

Update: RenRen went public on May 5, 2011. Shares have collapsed more than 30 percent since then. Check out my latest post on RENN: RenRen IPO: 5 things you don’t know about ‘China’s Facebook.’

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Sunity IPO? A Chinese version of Zynga, Sunity Online Entertainment Ltd. makes Web-based games and will soon start launching mobile apps, according to the AP. The company racked up $9.54 million in revenue in 2010, up from $8.25 million in 2009. Sunity generates 52 percent of its revenue from Qihang (QHG) – a subscription-based cards and chess game, according to Gaming-Hub.com. Another 8 percent of the company’s revenue comes from Han Dynasty Game (HDG) – a free Chinese mythology role-playing game that makes money off the sale of virtual goods.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Skype IPO? Skype’s VoIP services offer businesses and individuals a free or low-cost way to make international calls, host video conferences and shares files online. With the company’s recent $100 million acquisition of mobile video streaming service Qik, it’s clear Skype’s getting aggressive about making a push into the smartphone market.

Update: Microsoft acquired Skype on May 10, 2011 for $8.5 billion.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Taobao IPO? It’s unclear whether or not Taobao will IPO in 2011 or 2012, but it is, hands down, my favorite stock on this list. Taobao controls 75 percent of the e-commerce market in China with it’s psuedo-eBay-style site. There, consumers can buy products from other consumers or businesses at auction or at set prices, although auction-style buying seems to have fallen out of favor on the site. Credit Suisse analysts expect the e-commerce market to more than quadruple in China by 2015, and Taobao will easily be the biggest beneficiary of those gains. They seem to have seen the writing on the wall, too, as the company’s investing $3 billion to $4.5 billion into a warehouse network that will make shipping throughout China more efficient.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Taomee’s 61.com IPO? A Chinese social networking site aimed at children and parents, 61.com has some 20 million users ages 6 to 14, and Forbes reported revenue projections of more than $30 million in 2010. The subscription-based site lets kids hang out in virtual worlds (the Seers for the boys and the Moles for mixed-gender users), and parents are invited, too.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Tudou IPO? While they may be playing second fiddle to Youku.com, Inc. (NYSE:YOKU), video streaming site Tudou.com gets nearly as much traffic. The site’s ranked by Alexa.com as the 11th most-visited Web site in China. Youku.com’s ranked as the 10th most-visited site. Youku’s spectacular November IPO could foreshadow another buying frenzy in Tudou even though its unclear when or how either company will get profitable.

Update: Despite an ongoing legal battle between Tudou’s CEO and his ex-wife, the company appears to be moving closer and closer to an IPO. Check out my latest post on the company: Tudou IPO: Is Tudou stock a buy?

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Twitter IPO? Microblogging site Twitter still isn’t profitable, but it looks like it’s getting serious about making money after staggering valuations put the company’s market cap around $3.7 billion. Twitter appointed its former COO Dick Costolo as CEO late last year, and Costolo’s tasked with ramping up revenues. A report out yesterday by online research firm e-Marketer Inc. estimates the company will generate $150 million in ad revenues in 2011 and $250 million by 2012. I’ve also blogged in the past about what I see as Twitter’s secret key to making money.

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star-icon-smallstar-icon-smallstar-icon-small VANCL IPO? An up-and-coming online clothing retailer in China, Vancl.com’s got excellent pedigree in site founder Chen Nian who sold his last project, Joyo.cn, to Amazon. Vancl.com’s focus on clothing has helped it capture nearly 30 percent of all online clothing sales in China, and the company expects its warehouse space to triple by the end of the year. Last year’s sales at Vancl were expected to be up more than 300 percent, according Businessweek.com.

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star-icon-smallstar-icon-smallstar-icon-smallstar-icon-small Yandex IPO? My second-favorite stock on this list, Yandex.ru is likely among the least well-known of the stocks, too. Expect to hear a lot more about Yandex if the company IPOs on the NASDAQ. The leading search engine site in Russia, Yandex claims revenue spiked by 43 percent to $410 million last year. Google holds the No. 2 slot in Russian search engine usage and the American search company posted revenue of some $69 million in Russia in 2009. Yandex.ru is the most-visited site in Russia and the 25th most-visited site in the world, per Alexa.

Update: Yandex IPO’d on May 24, 2011. Check out my latest: Yandex IPO: 5 reasons to invest in Yandex stock.

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star-icon-smallstar-icon-small Zhenai IPO? A Chinese dating site, Zhenai.com claims more than 26 million registrations as of August 2010. While the site gets far less traffic than its biggest competitor Jiayuan, Zhenai adds a human touch to the matchmaking process by having trained matchmakers help users find the best possible matches.

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star-icon-smallstar-icon-small Zynga IPO? An online game maker, Zynga’s most famous for its iPhone and Facebook apps Farmville and Cityville. The company boasts a market cap of $5.8 billion on SharesPost. Sound like a lot? At least Zynga’s not having much trouble making money. Zynga likely generated revenue of more than $500 million last year, Lou Kerner, an analyst at Wedbush Securities, tells Dealbook. That’s up from about $300 million in 2009. That’s not bad, especially since Kerner estimates the company has profit margins of some 20 percent.

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Tudou IPO: Is Tudou stock a buy?

Youku stock crumbles after silent period ends

After the mandatory silent period lifted yesterday on Youku.com, Inc. (NYSE:YOKU) and E-Commerce China Dangdang, Inc. (NYSE:DANG), stock analysts were finally allowed to weigh in on whether or not investors should buy into the companies. Despite powerful IPOs, analysts weren’t too enthusiastic on the so-called “YouTube” (Youku) and “Amazon” (Dangdang) of China, though.

Piper Jaffray gave both stocks a neutral rating. Goldman Sachs and Cowen concurred. Goldman’s James Mitchell pointed out that Youku “could get profitable quickly,” though according to CNBC.com, “perhaps as soon as late this year or early next year.”

Still, Mitchell was careful to point out that YouKu faces rapidly rising costs as video content producers demand more money for their product. Licensing fees for the movies that YouKu sells as online streams rose by more than 90 percent in 2010. If that trend continues, Youku has little hope of making money by selling streaming video, and the company will have to rely heavily on some form of ad-supported site content.

The demure reception by analysts seemed to cool investor excitement over the stocks yesterday as Youku fell more than 9 percent to $34.09 a share and Dangdang dropped 8.3 percent.

Still, the story’s complicated by the strange, almost-maniacal outburst Dangdang’s CEO posted on a Twitter-like site in China on Sunday evening. Guoqing Li was apparently miffed that Morgan Stanley (NYSE:MS) bankers talked him into offering Dangdang shares at $16. “I held back a breath and silently cursed you motherf**kers,” Li wrote online.

Even after the substantial drop in price yesterday, though, Dangdang’s shares are up 94 percent since the company’s IPO and Youku’s shares are up 166 percent. Only time will tell if the companies can hold investor interest long enough for them to start making serious money.

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Youku.com, Inc. (YOKU): Three reasons to avoid China’s Youtube?

I sold my short-term stake in Yokou.com, Inc. (NYSE:YOKU) yesterday and the spate of negative press has me wondering if now’s the perfect time to short some of the company’s shares. In just over a month, the so-called “YouTube of China” has surged to a market cap of $3.85 billion. That’s a frightening thought for a company that’s yet to post a profit. Here then are three reasons to consider selling Youku short:

1) Youku.com’s valuation problem. Investors are so bullish on YOKU, they’ve pushed the company’s value 150 percent higher than rival Web company Sohu.com Inc. (NASDAQ:SOHU), which runs a search engine, tv.sohu.com, online games and other portal content. That doesn’t make much sense when you dig through both companies’ financials. Sohu.com posted earnings per share of nearly $3.50 during 2010 – good enough to lock away more than $130 million in the bank. By contrast, Youku.com lost $25 million during the first three months of 2010. Youku’s Q4 earnings are on the way, but I wouldn’t be expecting big profits anytime soon.

2) China’s pirating problem. China’s reputation for infringing on copyright and intellectual property laws doesn’t just apply to fake Rolexes; it applies to premium online content, too, and according to business writer Alfred Little, Chinese Web streamers are quite adept at finding free episodes of the latest movies and TV shows online. “Chinese don’t log onto Youku to watch (user-generated content like) a chipmunk with a dramatic stare, but to watch the latest episodes of copyrighted content such as Grey’s Anatomy, Korean soap operas or the news,” Little writes.

Since Youku.com is the country’s most visible Web streaming site, it’s the first site that the government cracked down on for posting copyrighted material. That means, Youku has gotten bogged down in legal suits and been tasked with policing its site for illegal content. All the while, Chinese surfers are moving onto other less popular sites (or utilizing torrenting) to view pirated content.

3) Youku’s business plan appears destined for failure, and the company itself pointed out one of its inherent shortfalls in its IPO filing: “The average license fee for television serial drama has increased in 2009 by more than 200% as compared to 2008, and such fee has increased in 2010 to date by more than 100% as compared to 2009,” the company wrote. “The average license fee for movies has also increased in 2010 to date by more than 90% as compared to 2009.” Youku’s plan to offer paid access to premium programming will have to match those rising costs in order for their Netflix-like approach to streaming to prove profitable. It seems unlikely that Chinese viewers would be willing to keep paying higher prices for content that they can (at the moment) find elsewhere.

Until the Chinese government gets serious about stopping copyright infringement, Youku will keep treading water, or worse. The company might be able to leverage earnings from its IPO into a new business model, but until that model materializes, don’t expect Youku to start earning cash anytime soon.

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Youku.com (NYSE:YOKU): China’s Netflix (NFLX) and Youtube all in one?

While I gobbled up some shares in Youku.com, Inc. (NYSE:YOKU) during the company’s IPO, I’m starting to wonder if I made a poor decision. If the company can’t take its sudden windfall from this massive IPO and start making cash, I’ll run for the hills, but I’m willing to give Youku the benefit of the doubt for now. Here’s why:

1) Good lineage. Youku.com was founded in 2006 by Victor Koo, the former President of the wildly successful Chinese Web portal Sohu.com, Inc. (NASDAQ:SOHU).

2) Size. Youku.com is China’s biggest online-video company. If the company can maintain its position and continue its growth, it stands to be just as much of a cultural force as YouTube is in the U.S. Let us not forget either that China already has more Web users (an estimated 420 million) than the entire population of the U.S. – and there are still hundreds of millions more Chinese who will likely keep the Web growing in China for several years to come.

3) Direction. Since filing for its IPO, Youku has maintained that it will use its IPO funds to “upgrade technology, buy videos and expand sales and marketing” as it looks to change from a user-generated video site into more of a premium-based video site along the lines of Netflix, Inc. (NASDAQ:NFLX). Already Youku licenses professionally-produced videos from more than 1,500 content partners. Netflix’s model is obviously more profitable than YouTube’s. If Youku can maintain its market leadership and meld subscription-based services with free user-generated videos, it should have the best of both worlds in a single online destination.

Youku’s CEO Koo also emphasizes the company’s desire to move into the mobile video streaming market. Good thinking. China’s got the largest mobile market in the world with more than 750 million mobile users generating more than $7.55 billion in subscription fees every month (the equivalent of $2,900 per second!). If Youku can get a small piece of that income, they could quickly move their books into the black.

4) Growth. According to Youku’s IPO filing, revenue at the company increased 135 percent to 234.6 million yuan ($35.1 million) in the first nine months of 2010. Sales at the company have more than doubled this year, and the Chinese online video market has more than doubled, too. As the company changes tack from user-generated video to professionally-produced content, it’ll be interesting to see if they can keep costs low and start turning a profit. If they do that, maybe buying into Youku’s IPO won’t turn out to have been such a bad idea after all.

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Top seven largest Chinese tech stocks of 2010

Tencent Holdings Ltd. (HKG:0700) has knocked Apple, Inc. (NASDAQ:AAPL) off its perch to become the world’s best-performing technology company, according to Businessweek.com. Boasting China’s largest market cap for a tech company on the strength of its free instant messaging platform Tencent QQ, or, simply, QQ, Tencent commands more cash than even Baidu.com, Inc. (ADR) (NASDAQ:BIDU).

Over the past 12 years, QQ has helped grow Tencent from from an instant messaging business into a sort of Wal-Mart of services for China’s Web user. The company makes online games, provides Internet dating services and online storage. Most of its income, though, comes from the premium services it provides for its QQ users. For a modest monthly fee, you can add things like avatars, games, music, virtual pets and more to your IM account, and since Tencent has more than 636 million users, those modest fees have started piling up as monumental mounds of cash. We all know, too, that growth in China’s Internet market shows no signs of slowing.

Here’s a run-down of four other Chinese tech stocks you might want to consider investing in:

1) Baidu.com, Inc. (ADR) (NASDAQ:BIDU). The most popular search engine company in China, Baidu is the seventh most-visited Web site on the Internet. Available in China at baidu.com, they’ve also recently branched out into Japan with their domain baidu.jp. The company’s stock isn’t cheap, though, as it trades at a P/E ratio of 81 (compared to Google’s P/E of 24).

2) NetEase.com, Inc. (ADR) (NASDAQ:NTES). The owner of a popular Chinese Web portal, NetEase’s 163.com is the sixth most-visited site in China, which gives it more traffic than American heavyweights like ESPN, Craigslist and CNN. One of the company’s most successful products is its online role-playing game Fantasy Westward Journey.

3) SINA Corporation (NASDAQ:SINA). A news and blogging site that caters to a wide audience in China, sina.com and its subdomains attract some 3 billion page views per day. The company’s $4.3 billion market cap makes it the fourth-largest tech company in China.

4) Sohu.com, Inc. (NASDAQ:SOHU). A search engine and online gaming company, Sohu.com often falls under the giant shadow cast by Baidu, but the company’s still got a market cap of $2.5 billion, and it trades at a much more reasonable P/E ratio than Baidu (20 vs. Baidu’s 81). Sohu was ranked by Fortune as the world’s 12th fastest-growing company in 2010.

Other Chinese tech stocks to keep an eye on:

Youku.com, Inc. (ADR) (NYSE:YOKU). The Chinese version of YouTube.com, Youku.com is (like its American counterpart) yet to make a profit, but that hasn’t stopped them from an IPO on American exchanges. Over time, Youku’s focus has shifted exclusively from user-generated videos to professionally-produced videos, which it licenses from more than 1,500 content partners. Call it the Chinese equivalent of Netflix, Inc. (NASDAQ:NFLX).

Shanda Interactive Entertainment Ltd. (ADR) (NASDAQ:SNDA). China’s leading publisher of online games (and a major online and paper-bound book publisher), Shanda claims to have more than 1.2 million users playing its online games at any given time – and that’s based on numbers from 2005! The company’s trading at a P/E ratio of 20.4.

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Shifting IT from India to China? iSoftStone Holdings Ltd. (NYSE:ISS) says yes in monster IPO

Never mind the fact that iSoftStone Holdings Ltd. (NYSE:ISS) is entering the crowded world of China-based IT outsourcing. Investors want a piece of the great Asian binary machine. They want it so much that they pushed up shares in Youku.com Inc. (NYSE:YOKU) during last week’s IPO more than 100 percent in three trading days! Shares in Youku.com have since re-traced about 50 percent, but it’s still remarkable that there’s such an enormous appetite for stock in companies that are as yet unprofitable.

Shares in iSoftStone Holdings Ltd.  (NYSE:ISS) IPO were up 28 percent

The latest Chinese tech stock IPO to hit the NYSE, iSoftStone Holdings Ltd. (NYSE:ISS), had an impressive outing during Day One of trading yesterday. ADR shares were up nearly 28 percent in the company’s IPO. Not bad for a company that saw its profits tumble 86 percent year on year. Revenue at iSoftStone looks much better, though. After generating $36.4 million in 2007, the company grew revenues to $82.5 million in 2008 and $134.4 million in 2009.

Earnings from the stock sale should help iSoftStone’s bottom line, as the company looks to compete with other names in the Chinese IT outsourcing space. Three main competitors stand in their way: VanceInfo Technologies Inc. (NYSE:VIT), Camelot Information Systems Inc. (NYSE:CIS) and HiSoft Technology International Limited (NASDAQ:HSFT).

Of the three, Camelot is easily the largest with a market cap of $3.5 billion. The Beijing-based IT company also provides financial services information and is trading at a P/E of 40+. They’re followed by VanceInfo, which provides offshore technology services for American, Japanese and European companies. VanceInfo currently has a market cap of $1.4 billion and is trading at a P/E of 53+.

HiSoft, on the other hand, seems to have flown under the radar with a market cap of just $686 million and a current P/E ratio of 7.2. The company primarily provides IT services for American and Japanese companies. It’s yet to be seen if iSoftStone will have the staying power of its competitors, but expect their entrance onto the world stage to increase competition for foreign contracts. May the company with the lowest costs wins.

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E-Commerce China Dangdang: Buy the dip? (NYSE:DANG)

E-Commerce China Dangdang (NYSE:DANG)

After ending its first week of trading up 105 percent, it’s hard to imagine that there wouldn’t be some profit-taking in E-Commerce China Dangdang (NYSE:DANG). Now, it’ll be interesting to see what stance the real money takes on DANG. Is now the time to buy and hold?

Since launching in 2000, E-Commerce China Dangdang has slowly positioned itself as a sort of Amazon.com, Inc. (NASDAQ:AMZN) of the East. China’s leading online book seller, DANG controls 50 percent of the online market for the $4.6 billion book publishing industry on the mainland. In the first nine months of the year, DANG has brought in $2.4 million in net income, and that growth seems to be accelerating.

Quarterly growth in net sales was up 295% over last year according to the company’s latest earnings release. That’s good enough to make DANG’s business more than twice the size of Amazon.cn – the Chinese version of Amazon.com. Still, investors seemed more than willing to jump ship on DANG today as the stock started declining with the opening bell and kept falling throughout the day.

When it was all said and done, DANG lost more than 11 percent. That doesn’t breed confidence if you bought in on Friday, but investors can take solace in the fact that another Chinese tech stock, Youku.com, Inc. ADS (NYSE:YOKU), fell even further. Something of a Chinese version of YouTube.com, shares in Youku.com plunged nearly 19 percent today after the company’s IPO last Wednesday – the same day of DANG’s IPO.

The choice in the battle between the two stocks (Youku and DangDang) is obvious in my mind: go with the company that’s actually making money right now; not the company that could be making money five years from now. That’s DangDang. And, if you’re willing to ride the roller coaster for a couple years, I don’t expect you’ll be fretting over an 11 percent drop in a single day. Rome, as they say, wasn’t built in a day. Neither was Amazon, and neither will China’s leading online e-commerce site. If DANG proves to be that site, it could be rewarding. Just take a look at Amazon’s chart over the past 13 years, and you’ll see a stock that’s up 10,000 percent. That’s a result I’d be happy with – even if it takes 13 years.

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