Hartcourt Companies (fka HRCT)

[Penny_4UR_Stocks]

MARGIN MARGIN MARGIN!!! This new acquisition has some enormous ramifications to net profit and ultimately our S/P. ServiceNet has a 20% margin. The reason that Best Buy, Circuit City, and Conn's push the extended warranty so hard is because it is one of the highest margin products they sell. Most extended warranties never get used. If HRCT is successful upselling its customer base to the "service plan" at POS we could see a substantial increase in service revenue and resulting margins.

We have been valued by the market based upon net profit, not gross revenue. This acquisition is the first that has the potential to significantly increase net profit over the next year. Looks like our new President has already added strategic thought leadership and "Dell" type insight.

HRCT sells mobile phones as wells as computer equipment. The mobile phone market is exploding in China. Notice that Sony, Samsung, Toshiba, and Ericsson are ServiceNet customers. So in addition to the carrier rebate for initializing a phone, we should now be able to sell "insurance" (the service plan upsell for a replacement phone) for cell phones as well as computer equipment.

FROM THIS MORNINGS' PR:

"Established in 2000, ServiceNet provides a wide range of IT services to several multinationals in China, such as HP, Dell, Philips, Toshiba, Sony, Samsung, Seagate, etc. The types of services include Authorized Service Center, On-site Services, Hardware Support, System Maintenance, RMA management, and FA Testing. It also provides IT outsourcing services to other multinationals like BAT and Ericsson. Its service network covers 15 major cities in China, including Shanghai, Guangzhou, Xiamen, Hangzhou, Xi'an, Shenzhen, and Kunming, etc. It has over 200 engineers and recorded 4.6mil USD in net revenue in 2003 with about 20% net margin. ServiceNet expects to increase significantly its service offering and coverage, and to expand into the Northern China market in 2004. More details on ServiceNet can be obtained from its web sites, www.servicenet.com.cn."