|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's range||1,242.00 - 1,242.00|
|52-week range||1,242.00 - 108,200.00|
|Beta (5Y monthly)||0.92|
|PE ratio (TTM)||N/A|
|Forward dividend & yield||N/A (N/A)|
|1y target est||N/A|
(Bloomberg) -- Donald Trump’s WeChat ban targets a celebrated Chinese innovation at the heart of the world’s largest mobile gaming and social media empire, threatening one of the more eye-catching stock rallies of 2020.It’s hard to overstate WeChat’s importance to Tencent Holdings Ltd. It’s the means through which Tencent introduces a billion people to games and other online content, funneling trillions of dollars in annual payments to brands from Apple Inc. to Walmart Inc. WeChat’s reach underpinned Tencent’s $280 billion gain in market value since a March 18 Covid-19 trough -- equivalent to one Samsung Electronics Co. and the fifth biggest dollar-gain on the planet over that period.Trump single-handedly stopped that rally cold. The U.S. President signed an executive order last week to ban U.S. entities from dealing with WeChat -- along with TikTok, ByteDance Ltd.’s viral video platform -- in 45 days. Confusion and uncertainty reigned as investors grappled with the vague edict. Tencent shed $66 billion over two days before it partly bounced back.Executives unfurling earnings Wednesday will seek to reassure the market it can withstand a White House campaign that’s already ensnared Huawei Technologies Co. and dozens of Chinese up-and-comers. A U.S. official clarified the sanction involves only the app and not its owner. But the sweeping language of Trump’s order -- which bars “transactions” with the Chinese company -- leaves the door open for the administration to extend it well beyond WeChat, dubbed Weixin locally.“It’s really a gut punch to those companies when you look at their global expansion plans,” Wedbush analyst Daniel Ives told Bloomberg Television. Tencent’s stock stood largely unchanged ahead of the results this afternoon.Why Tencent and WeChat Are Such a Big Deal in China: QuickTakeThe WeChat operator is doing well in the short run: analysts on average foresee a 27% rise in June-quarter revenue and a 13% spike in net income. But investors appear divided over the fate of China’s second largest corporation. Options on the company -- contracts that let the holder buy or sell stock at a pre-agreed price -- suggest traders are bracing for a 5.7% swing in Tencent’s shares after it unveils earnings, or roughly four times the usual band.The three most popular options as of Wednesday included a bullish contract that projected a roughly 16% rise to HK$600 by September’s end and a bearish one that suggested a 20% plunge, Bloomberg data showed. But the put-to-call ratio, or the number of traded sell options divided by the number of buy contracts, is near its lowest since May, suggesting more upbeat than bearish investors still.The widening gulf reflects the central role WeChat plays in Tencent’s empire, and the outsized fallout now that it’s in Trump’s cross-hairs. Started in 2011 as a WhatsApp clone, the service has become deeply ingrained in Chinese life, indispensable to the hordes who use it to chat, shop, watch videos, play games, flirt, order food and taxis. It pioneered the all-in-one or super-app concept by embedding lite apps or mini programs -- a model emulated by Alibaba Group Holding Ltd. as well as Facebook Inc. Its success sprang in part from the fact that China banned global services such as WhatsApp, Twitter and Instagram, allowing WeChat and a host of other Chinese equivalents to flourish in an alternate internet realm.Today, if the Chinese company is a mashup of Facebook, Netflix, WhatsApp and Spotify, then WeChat is the smartphone and payments backbone that ties them all together.“The impact on valuation would be more severe if the implementation included banning all transactions of Chinese businesses of U.S. companies with Tencent as a whole, as this would also hurt Weixin, advertising in mainland China by U.S. affiliated firms, the international cloud business, the international gaming business, and so on,” Morningstar analyst Chelsey Tam wrote this week.At a minimum, Trump’s order likely gets WeChat removed from Apple and Google’s mobile stores, which in turn means suspending updates or even blacking out a service vital to communications on the factory floor, in households and the boardroom. And if American consumer giants like Starbucks Corp. and Walmart are prevented from doing business with WeChat in China, Tencent may also take a blow to advertising and e-commerce sales.But the ban has wider implications. Even if the executive order doesn’t cover WeChat China, it could hamstring Tencent in other ways. Take Tencent’s $15 billion cloud services and fintech division, a major driver of growth over past years. If American firms can’t sell servers to support WeChat, that effectively means they can’t sell to Tencent itself unless the messaging service can be completely ring-fenced. Secretary of State Michael Pompeo has already urged American companies to cut ties with Chinese cloud providers including Tencent and Alibaba, part of a “clean internet” campaign.Read more: Trump Ban on Top Messaging App Risks Snarling Global BusinessThen there’s Tencent’s cash cow. Gamers the world over were among the fastest and loudest opponents of the action, going online to campaign to save titles like PUBG Mobile and Call of Duty Mobile. Tencent has some $22 billion of investments in U.S. gaming assets and companies from Activision Blizzard Inc. to Fortnite maker Epic Games Inc. and League of Legends developer Riot Games Inc.What Bloomberg Intelligence SaysThe spilling over of U.S.-China tension into the software realm, marked by President Donald Trump’s executive orders against Tencent and ByteDance, could increase risks for global video-game makers if business operations are forced to decouple. Tencent has at least $22 billion of gaming investments in the U.S. that, if bans widen, may face forced divestment similar to ByteDance’s TikTok, while Activision Blizzard risks losing 10-20% of Blizzard revenue generated in China through its partnership with NetEase.\- Vey-Sern Ling and Matthew Kanterman, analystsClick here for the research.Tencent in recent years has searched for ways to extend its dominance of China’s social media and gaming scenes internationally, with mixed success. Its smaller global exposure now becomes an edge over upstart ByteDance, whose TikTok is the first truly successful Chinese-made internet service.Now it’s turning inward faster than before. On Monday, Tencent kicked off a deal to merge game-streaming platforms DouYu International Holdings Ltd. and Huya Inc. into a $10 billion local leader. Last month, it offered to buy out and take private domestic search engine Sogou Inc.But Beijing’s own moves could complicate the matter. China has threatened to retaliate against what it perceives as rising U.S. aggression, but any attempt to undercut American operations in China could hurt Tencent and potentially complicate matters for non-U.S. players.“Uncertainties still exist for Tencent and other Chinese internet companies with business in the U.S., and Chinese pure-plays will be perceived as safer by investors,” Bernstein analysts including David Dai wrote in a report.(Updates with Tencent’s shares from the fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Qualcomm Inc.’s lucrative patent licensing business lives on, after a court rejected a requirement that the company renegotiate billions of dollars worth of agreements with smartphone makers.The chipmaker won a major victory Tuesday in a federal appeals court, which ruled that a judge was wrong to side with the Federal Trade Commission in 2019 in finding that Qualcomm had violated antitrust law. The appeals court also vacated an order that the company redo licensing accords with smartphone makers like Apple Inc. and Samsung Electronics Co. Such licenses generated $4.6 billion in revenue for Qualcomm last year.Qualcomm climbed 2.3% on the news to close at $108.83 in New York trading.“The court’s ruling is disappointing and we will be considering our options,” FTC Bureau of Competition Director Ian Conner said in a statement.The case won’t return to the trial judge, but the FTC can ask that it be reconsidered by the full appeals court. If Tuesday’s ruling stands, it’ll represent the end of years of legal and regulatory entanglements for the company. In July, Qualcomm announced that China’s Huawei Technologies Co. has signed a licensing deal and paid up on withheld patent fees. That agreement has brought Huawei, the last major holdout, into the list of Qualcomm’s customers.“The court of appeals unanimous reversal, entirely vacating the district court decision, validates our business model and patent licensing program and underscores the tremendous contributions that Qualcomm has made to the industry,” Don Rosenberg, executive vice president and general counsel for Qualcomm, said in an email.Kevin Cassidy, an analyst at Rosenblatt Securities, said the ruling removes an overhang on Qualcomm’s shares.“We see the combination of another successful defense of its business model and the recent licensing agreement with Huawei as giving investors an additional degree of comfort as a long-term investment,” he said.Read More: Qualcomm Shares Rise on Strong Forecast, Huawei AgreementQualcomm is the largest maker of chips that run the computer functions in smartphones and connect them to cellular networks. That business provides it with the bulk of its revenue. The majority of profit comes from licensing patents that underpin how all modern phone systems work. It charges fees that are calculated as a percentage of the selling price of handsets and paid by the phone makers.In May 2019, U.S. District Judge Lucy Koh in San Jose, California, ruled that the company was charging phone makers “unreasonably high” licensing fees and thwarting competition. She ordered the chipmaker to negotiate licensing agreements with customers “in good faith” and without threatening to cut off access to its products. Koh’s order was put on hold pending appeal.Qualcomm argued on appeal that its licensing business benefits the whole industry by speeding up improvements to smartphones and the services they support. The company emphasized that it doesn’t stop rival chipmakers from accessing its technology. Instead, fees are charged to phone makers who pay a percentage of the selling price of each handset.The FTC case, filed in 2017, is among numerous challenges to Qualcomm’s practices from competitors, customers and regulators worldwide. The San Diego-based company has weathered most of those, winning in court or settling, and maintained its right to charge the fees. Koh’s ruling was the biggest remaining challenge to the licensing model.In a rare split among antitrust regulators, the U.S. Justice Department lined up with Qualcomm against the FTC , arguing that Koh’s ruling could undermine American leadership in technologies including 5G wireless networks.The appeals court said in its 56-page ruling ruling that Koh “went beyond the scope” of antitrust law. Qualcomm’s “no license, no chips” policy does “not impose an anticompetitive surcharge on rivals’ modem chip sales,” nor does it undermine competition in the market.While the Justice Department’s arguments that Qualcomm is critical to America’s supremacy in 5G weren’t mentioned in the opinion, the court noted Qualcomm’s “significant contributions to the technological innovations underlying modern cellular systems.”Qualcomm has argued that the regulatory actions against it around the world -- including in Korea and Taiwan -- were initiated at the urging of customers who were seeking an advantage in contract negotiations or to avoid paying for its inventions. Those customers are now licensees, it said.“Even before today, those companies for the most part, had already demonstrated that they were basically willing without further attempts like this to engage with us in license negotiations,” Rosenberg said in an interview. “They’ve all signed up.”The case is Federal Trade Commission v. Qualcomm Inc., 19-16122, U.S. Court of Appeals for the Ninth Circuit (San Francisco).(Updates with Qualcomm general counsel’s comment in final paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Xiaomi Corp. celebrated its 10th anniversary with the launch of some new products and the promise from its chief executive officer that it’ll become “a major force in China’s manufacturing sector that no one can ignore” over its next decade.Co-founder and CEO Lei Jun took the stage on Tuesday to recount Xiaomi’s history -- born as an internet upstart that disrupted China’s retail status quo -- and plot out a markedly different course for its future. “Xiaomi will systematically empower China’s manufacturing industry with internet know-how,” Lei said. “Smart manufacturing will fuel the prominent growth of Chinese brands.”Xiaomi said it has developed a fully automated smartphone assembly line and its investment arm has invested in about 70 semiconductor or smart-manufacturing firms. The smart factories that Xiaomi envisions would compete with manufacturing specialists like Foxconn, also known as Hon Hai Precision Industry Co., which has previously made similar efforts to smarten up its processes. For Lei, it’s an essential move to ensure Xiaomi’s prosperity, as “we can’t defend our industry position without continuing to move forward.”For the present, Xiaomi remains focused on its consumer business, which was graced by the launch of a new flagship Android phone in the 6.7-inch Mi 10 Ultra, adding to the rapidly expanding stable of 5G smartphones. The device differentiates itself with a 120x zoom system nestled in a large multicamera array on its back along with a super-fast 120W charger in the box. It starts at 5,299 yuan ($763) and will be available from Aug. 16. Alongside it, Xiaomi also unveiled a transparent OLED TV set and a Lamborghini Edition GoKart, burnishing its credentials as a company willing to make bold design decisions.Now the world’s fourth-largest smartphone brand, Xiaomi was founded by a team including serial entrepreneur Lei and former Google engineering director Lin Bin in Beijing in early 2010. Pioneering an internet-based sales and marketing model, Xiaomi became an instant hit in China where most mobile devices were sold by brick-and-mortar resellers and telecom carriers.The company distinguished itself by selling phones with sleek designs -- commonly accused of imitating Apple Inc.’s iPhone too closely -- the most up-to-date processors and prices that were a fraction of those from competitors like Apple, Samsung Electronics Co. and Lenovo Group Ltd.In an effort to expand its appeal and markets beyond China, Xiaomi made a big splash in 2013 by hiring Google’s Hugo Barra, then Android vice president, to lead its international efforts. With his help, the company undertook a campaign to shed its widespread image as an iPhone copycat and invested more in developing its own design and engineering credentials. The company expects to spend 10 billion yuan ($1.4 billion) on research and development this year, Lei said.At the zenith of its powers, Xiaomi briefly held the No. 3 spot among global smartphone makers and was China’s leader. But around 2016, local competitors Oppo and Vivo cut into Xiaomi’s market share by adopting the opposite strategy to Lei’s online focus: enlisting tens of thousands of private electronics store owners to sell their devices in small towns and villages. The move unlocked access to rural residents eager for their first smartphone, a market with hundreds of millions of potential buyers that Xiaomi wasn’t able to reach.After some supply chain issues around the same time, Xiaomi slumped to seventh in global smartphone shipments, according to IDC data, and Lei hired former Qualcomm Inc. executive Wang Xiang to steer Xiaomi’s new international expansion strategies from India to Spain and the U.K.The Chinese company has been on a recent run of introducing futuristic-looking phones featuring industry firsts, such as bezel-less screens and exotic materials like ceramic bodies. Lei has also tried to lift Xiaomi beyond smartphones with an expansive array of other consumer products that can be purchased from the company’s online store, including laptops and luggage.The Beijing-based company has invested in a large number of hardware startups to make Mi-branded appliances and electronics from rice cookers to scooters. Yet the efforts have so far failed to convince investors that Xiaomi is an internet company rather than a hardware vendor. Xiaomi’s stock has mostly traded below its initial public offering price since its debut in Hong Kong two years ago.(Updates with CEO quotes from first paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.