ZKEM - - Press ReleaseSource: chinadotcom corporation
chinadotcom Unit Signs a Definitive Agreement to Acquire a Profitable And Leading Mobile Application Developer in China
Tuesday March 18, 8:03 am ET
Earnings Accretive Acquisition Brings High Margins and Recurrent Revenues from China's Rapid Growth SMS Market
HONG KONG, March 18 /PRNewswire-FirstCall/ -- chinadotcom corporation (Nasdaq: CHINA - News; Website: www.corp.china.com ), the leading integrated enterprise solutions company in Asia, today announced that hongkong.com Corporation, its 81%-owned subsidiary and Hong Kong GEM (Growth Enterprise Market) board-listed company, has signed a definitive agreement to acquire a 100% stake in the holding company of Newpalm (China) Information Technology Co., Ltd. ("Newpalm"), a leading mobile software platform developer and application service provider in China, for a first installment of US$14 million in cash and the rest on an earn-out basis over the next two years. While it has had a relatively short operating history, Newpalm is a rapidly growing, profitable company with projected annual sales of US$12 million for 2003.
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Newpalm has direct connections in 22 provinces with local network operators with a strong presence in Shandong, Zhejiang and Jiangsu Provinces and service coverage throughout China. Newpalm has six offices across the country with a total sales and customer support force of around 100 professionals. Since its entry into the SMS business, it has built a substantial base of 2.8 million paying subscribers in China with a current growth rate of over 40% per quarter. It is viewed as one of the top mobile software platform developers and mobile application services providers such as SMS applications, in terms of subscriber base and revenue size.
Newpalm has principally developed its own intellectual property of mobile applications and products compatible with GSM and CDMA networks based on an open-architecture technology platform that supports SMS (Short Message Service) and MMS (Multi-Media Message Service) and allows rapid capacity expansion. This platform is network-independent, and is connected to both major mobile telecom operators, China Mobile Communications Corporation (CMCC) and China Unicom. Earlier versions of this mobile application platform have been used by China Unicom in Fujian. In addition, Newpalm runs two R&D (Research and Development) centers, in Beijing and Nanjing, with over 40 professional application developers.
"This is our first major move to participate in the fast growing mobile data business in China and provides synergies with hongkong.com's existing business in SMS and the planned rollout of online games," said Rudy Chan, Chief Executive Officer of hongkong.com Corporation. "The SMS business in China has shown significant growth over the past year. Leveraging our online capabilities, this acquisition will add 2.8 million paying subscribers and will bring additional wireless and non-advertising revenue. In addition, it is expected to expand and accelerate our planned product offerings of online games and SMS-related content."
Mobile phone users have been growing rapidly in the China market. China's MII (Ministry of Information Industry) survey indicates that in 2002, mobile users in China reached 200 million. SMS has also been experiencing exponential growth in China. According to a report by Pyramid Research, total SMS revenues in China in 2002 were around US$750 million and are expected to reach US$16 billion by 2007, generating greater comparable revenues than all of Western Europe.
John Xiao, Chief Executive Officer of Newpalm (China) Technology Co., Ltd., said, "The mobile data service market is one of the fastest growing sectors in China. Our proven track record in this market sector and our state-of-the-art development platform, coupled with chinadotcom's strong financial position and online capability, I believe will further strengthen our market position and increase our market share in this growing market."
"This acquisition fits well into our investment criteria as Newpalm is profitable and offers additional, high-margin, recurrent revenue streams," said Daniel Widdicombe, Chief Financial Officer of chinadotcom corporation. "The sophisticated and advanced mobile application platform developed by Newpalm should help our subsidiary, hongkong.com, build a scalable business in China's rapid growth mobile data market."
The impact of this acquisition on chinadotcom's 2003 results will depend on the timing of its closing. chinadotcom expects for this to occur in April 2003 although it cannot make any assurance that the transaction will close at such time or, since the transaction is subject to customary closing conditions, for it to be consummated should those conditions not occur.
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