taken from the January 20, 2005 press release...
As part of its strategy to shift its operations to high-profit, high-growth segments of the Chinese IT market, Hartcourt also intends to divest its operations in low-value, low-margin segments of the market. In line with this strategy, Hartcourt's Board of Directors has authorized the sale of its Do-It-Yourself (DIY) business back to the original owners. China's computer DIY market, in which retail stores assemble desktop computers immediately upon customer request, experienced a significant downturn in the fourth quarter of 2004. The price level for low-end branded desktop computers in China declined to that of non-branded DIY desktops, taking a substantial share of the market away from existing DIY business. Meanwhile, the pricing for notebook computers continued to erode significantly, leading to notebook computers becoming an attractive alternative to desktop computers. These factors have caused a rapid decline in market share of the entire DIY segment. Hartcourt's DIY business has recently suffered sales decline and substantial margin erosion in line with the rest of industry. Hartcourt currently has a 50.5% equity interest in a leading DIY chain store in Shanghai, for which it paid a substantial premium above the market value in 2003 in order to gain entry into the business. A final agreement is expected to be reached in the first quarter of 2005. Hartcourt will likely suffer a loss upon the sale of its ownership interest.
