February 19th, 2003
Dear Friends:
It has been over a year since I wrote a shareholders' letter. The Hua Qing acquisition announced today is such a milestone for Hartcourt's future that I felt I had to share some thoughts with you.
First and foremost, Hartcourt will be the biggest shareholder of Hua Qing with the control of the Board of Directors. As such, we shall be able to book the revenue and profit generated by Hua Qing. In 2003, Hua Qing revenue (projected $77 Million) will be much larger than the revenues shown by Chinadotcom, Sina or Sohu or NetEase, which have over $300 Million of market capitalization each.
In addition, the niche PC market targeted by Hua Qing is growing faster than China's economy itself. Being the leader of the market in the most competitive city of China (Shanghai) means that Hua Qing has the know how to gain and maintain its market position. If Hua Qing could grow at a conservative rate of 20 percent per annum and if it could acquire a few major competitors in other cities along the way, we should be as big as Legend within 5 years.
We are impressed with the management too. They found this company 10 years ago and never suffered an operating loss. Their healthy balance sheet shows extreme prudence and conservatism.
For the last 9 months since we started the negotiation, David Chen and his team have worked long hours and overcome countless challenges from skeptical businessmen, difficult bureaucrats and determined foes to complete the deal. If his team would show the same diligence and perseverance in expanding Hua Qing operation, Hartcourt will fulfill its mission in the most spectacular manner ever.
On behalf of all Hartcourt shareholders, I would like to express our sincere appreciation for this accomplishment. David Chen, Richard Yan, Linda Sun and Wenny He all deserve a big applause.
Hartcourt is finally turning a new page with the acquisition of Hua Qing Group. When it completes the spin-off of all other loss-making subsidiaries, Hartcourt will become what it sets out to be: a profitable innovative enterprise operating in the fastest-growing economy of the world.
Meanwhile, the subsidiaries (Elephant Talk, Sinobull, StreamingAsia, AI-Asia and E-Education) will grow stronger and better in their own way. Their future success, after a period of nurturing by Hartcourt, will be shared partially by all Hartcourt shareholders.
Our original mission is to create a conglomerate of hi-tech companies, all inter-related. Because of the severe tech crash, we could not keep these companies together under one roof, but even as they are separated, they symbolize the success of the mission. We did what we said we are going to do.
We did the impossible. Hartcourt will never be weakened again. We learned our lesson, we persisted and we are moving to a new height.
The bashers and the naysayers will continue to predict that Hartcourt would be bankrupt within a few months, like they have always claimed throughout the last 5 years. However, it is clear that Hartcourt, with a solid bottom line and substantial revenue, shall have the final words.
Now that Hartcourt has proved itself to be alive and well, despite the market crash, we are asking all of you to spread the words on our team performance. Active participation by shareholders in our PR campaign will be the most effective weapon of all. Please consider all possible avenues to publicize the Hartcourt story. Your PR contribution will do wonder to speed up our journey.
Goethe said it best, "A leaf that is destined to grow large is full of grooves and wrinkles at the start. If one has no patience and wants it smooth offhand like a willow leaf, there is trouble ahead. Be patient and let nature take its course."
We only just begin.
Best
Alan
Forward-looking statements
The statements made in this press release, which are not historical facts, contain certain forward-looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement.
Dr. Alan Phan, Chairman
Hartcourt Companies Inc.
China Tel: 8621 5213 0673
China Fax: 8621 5213 0664
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