Article:Listing rush begins anew
Apr 3 2001 9:46AM
Homeway
While most venture capitalists are pulling stakes out of the battered high-tech stock market, Chinese software companies are doing the opposite: planning a new gold rush through getting listed on the mainland, Hong Kong and overseas markets.
The move was heralded by Shenzhen-based Kingdee International Software Group Ltd, which became the first listed software company from the mainland on the Growth Enterprises Market in Hong Kong in February.
Following Kingdee's footsteps, Top software - a Chengdu-based high-tech firm - succeeded with an initial public offering (IPO) in Hong Kong last Friday.
Officials from other major industry players including the Beijing-based Kingsoft, Start-Sunway and Federal also claimed last week on E-Shock talk show that they were going full steam towards listing in the near future.
Federal, the biggest software retailer in China, recently unveiled its IPO plan to get listed in Hong Kong later this year. Kingsoft, which focuses on office applications and game software, plans to try to get listed on the proposed second-board market on the mainland. Start-Sunway said it was gearing to get listed by the end of next year.
Analysts said behind the gold rush was nervousness of getting knocked out as most of Chinese software companies are facing two major problems: shortage of capital and small-sized operations, according to Business Weekly.
As most software companies are private firms, IPOs serve as a quick way to channel capital for long-term development and to bring them closer to the world market. It will also benefit their brand reputation and overseas business, analysts say.
Kingdee piled up US$9 million through its IPO, which the company said would be used for future acquisition, business software development and sales network expansion.
Daniel Huang, vice-president of Kingdee Software Technology (Shenzhen) Co Ltd, said the company's IPO marked the company's most critical step towards becoming the biggest industry player in China.
"What Kingdee cares more about is that our IPO will bring us to a globalized and mature capital market and elevate our reputation in the world," said Huang.
Kingdee has set up an international business department to rival its US counterparts. This year, sales of their enterprise management software overseas will contribute 7% to its total sales, Huang said.
Start-Sunway, another major software company, is even more ambitious: It announced recently it would establish a research and development (R&D) center in the US Silicon Valley and the revenue from the international market was expected to account for 30% of the total.
"We should not totally depend on the existing team to develop the international market," said He Enpei, president of Start-Sunway.
"We hope to have talents with international background in our management team and an R&D team, which will bring us a tremendous edge." However, many industry analysts doubt how far the IPO fever can carry Chinese software companies under many bottleneck problems yet unsolved, such as management and piracy.
"IPO could not guarantee sufficient capital and sustainable development of software businesses. This is obvious over-optimism in the industry," said Yu Fang, a Beijing-based industry analyst.
"Domestic software companies should focus on their core operations while increasing their business scale and get ready for international competitions," he said.
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