Those Years When I Was Forced to Top the Forbes List

Chapter 375 Invitation and Execution

The meeting lasted for more than an hour.

We mainly discussed the arrangements for the Kunlun Mobile Alliance.

Tianyu is definitely among the first batch of products to be launched.

In fact, Bird's sales reached 15 million last year, several million more than Tianyu. However, the company had too many distractions. On one hand, it was determined to cooperate with a French telecommunications company, Sagem, to develop the "fighter jet among mobile phones," with almost all the technology hollowed out and completely controlled by others. On the other hand, it also wanted to invest in the automotive industry and develop engines, with a budget of less than 80 million for smartphones.

This is a listed company with a market value of 50 billion, and its stock price has been rising recently.

Even with 80 million, it's not as good as a factory in Huaqiangbei.

Currently, more than 50 factories in Huaqiangbei are undergoing mergers at Qidian's request, with the ultimate goal of merging into fewer than 20 companies. Each company must have a capital scale of at least 100 million yuan and pay Qidian a technical guidance fee starting at 5 million yuan.

Bird has already been listed as the second batch by Chen Xuebing, and has not been downgraded to the third batch, because feature phones will not be completely replaced in the short term.

They're holding off for now to fulfill their orders for 2GTurnkey chips and batteries.

However, their sales network is very large, with 28 provincial companies, 300 offices, and thousands of sales staff. It's like a small horse pulling a big cart. 3G Magic Cube is short of people for its upcoming nationwide expansion, so Chen Xuebing asked Lu Weibing to send people to keep an eye on the provincial companies of Bird in Sichuan, Jiangxi, Anhui, and Hebei, ready to take over their departing sales staff at any time.

According to Mr. Wang, the general manager of China Mobile, the next batch of 3G base station tenders will be held in June this year, in these four provinces.

This led to a conversation about 3G.

In the first batch of 3G base station orders, Spreadtrum won bids in Shanghai and Tianjin, Huawei TD Tech won bids in Shenyang and Qinhuangdao, ZTE and Ericsson won bids in Beijing and Shenzhen, Fiberhome and NEC won bids in Xiamen, and Datang Telecom, in partnership with Alcatel, won bids in Guangzhou.

Currently, Spreadtrum and Huawei are jointly building four cities. In reality, Huawei's orders are being fulfilled by Spreadtrum itself, while Spreadtrum's orders are being handled by Huawei, which sends two 3G working groups to provide guidance and a technology sharing package, charging Spreadtrum a technology cooperation fee of 8% of its sales revenue.

With a gross profit margin of around 20%, Huawei takes half of it.

Moreover, in terms of base station chips, Huawei is only temporarily using Spreadtrum's newly developed SC8810. Huawei HiSilicon is developing TD chips, and the next batch of orders may require its own products. ZTE has already used its own chips, as has Fiberhome NEC. Only Datang is purchasing Spreadtrum chips, and the number of competitors in the chip market has suddenly increased.

In terms of infrastructure, Gu'an Construction is currently overwhelmed with other projects and has no time to take on more. Its collaboration with Spreadtrum and ZTO Third Engineering Bureau is generating almost no profit.

This batch of orders totaled over 13 billion yuan, with Spreadtrum receiving 38 billion yuan and an additional 600 million yuan in chip orders. However, the total profit was less than 500 million yuan, after deducting the nearly 100 million yuan R&D investment and tape-out costs for the SC8810.

If we have to cooperate with Huawei again for the next batch of orders, the profit margin won't be very high.

Chen Xuebing stated that the next technology cooperation fee can only be 5%, and the cooperation between the two parties is limited to this year's orders. This year, whether it is an acquisition or a technology license, they must get rid of the technical restrictions on the base station business, part ways with Huawei, and increase investment in base station chips to gain a generational advantage over other companies.

The main concern is that both ZTE and Huawei are involved, and the fear is that they might lose their temper and start a price war.

Despite the seemingly good relationship between Xu Zhijun and Hou Weigui at the TD conference, these two families are sworn enemies.

From a power supply product lawsuit between the two companies in 98, to the technical standards war in the construction of China Unicom's CDMA network, to ZTE's whistleblowing in the Indian market in 03, and then to ZTE's half-price offer in the Nepal market in 04, Huawei has even resorted to diplomatic complaints.

Chen Xuebing also knew about a simple business battle between the two companies later on: On the day of the overseas bidding, Huawei sent people to ambush ZTE's office and rammed the car of ZTE's bidder. ZTE could only prepare several copies of the bid and send three teams to submit the bid.

Currently, the focus is on domestic development, and since TD is a political mission, malicious competition could force cost-cutting, sacrifice equipment performance and stability, affect network quality and user experience, and ultimately damage the reputation and market competitiveness of the TD standard. Therefore, both companies are currently being relatively cautious and have not dared to act recklessly.

China Mobile's bidding rules also place more emphasis on factors such as technical solutions, service capabilities, and delivery guarantees, rather than simply awarding the contract to the lowest price.

However, China's 3G network construction is currently in a relatively long window of opportunity for China Mobile and TD-SCDMA. CDMA2000 and WCDMA will not be available until after 08. It is hard to say whether the two companies will start fighting over TD-SCDMA again during this period.

When the eldest and second eldest brothers fight, the rest of them suffer.

Compared to the two giants, Spreadtrum is just a small boat in the communications market. If it cannot make breakthroughs in its core chip field, it will be difficult to maintain its composure when storms come.

Wu Ping, on the other hand, was full of confidence: Huawei HiSilicon, ZTE's IC design department, and Seoul were all being sold.

Chen Xuebing reiterated: Spreadtrum is about to go public in the US, and its label is that of China's rising third largest telecommunications equipment manufacturer, not a baseband chip designer.

The difference between the two is several times.

After the meeting, it was already evening.

Chen Xuebing changed his clothes and went for a night run, enjoying the night view of the North Bund.

Ren Ying also changed into a set of gym clothes and took the initiative to accompany them.

They walked in silence until they reached the riverbank, where Ren Yingcai said, "The valuation of Huayi Brothers is a bit difficult to discuss; I'm not quite sure."

"Hmm." Chen Xuebing leaned on the railing by the river, breathing in and out.

Ren Ying continued:

"This year's stock market is overheated, and investment valuations are generally very high. Their expected valuation is 3.5 million."

"Based on their net profit of 06 million in 4000, this valuation is about right."

"Comparing the transaction references, in 2005, Jack Ma acquired 13.5% of Huayi Brothers' equity for 10 million yuan, with a valuation of 74 million yuan at the time. Last year, Focus Media invested 20 million yuan to acquire 10% equity, raising the valuation to 200 million yuan."

Chen Xuebing then turned his head and asked, "Jack Ma also invested?"

"Yes, it's an individual investment. Wang Zhongjun also said that he has a good relationship with Jack Ma, likes movies, and that Jack Ma likes to make friends with celebrities. He also plans to increase his holdings in the future."

Ren Ying made a gossipy remark, then added:

"But their revenue depends on the IP of their artists, and they have few fixed assets. Last year's revenue increase was mainly due to the 30% growth rate of the film market. I think it's not very stable. Their valuation is mainly based on brand and resource barriers. If their artists leave again and they don't make any good movies, their valuation will drop significantly. But I looked at their recent film plans. Feng Xiaogang just finished filming 'Assembly' and showed me the script. I think it's pretty good."

"You like doing the math, you're too meticulous," Chen Xuebing chuckled. "What about your intuition?"

“A dandy, a gambler, with an idealistic expansionist logic.” Ren Ying thought for a moment, then shook her head and said, “Wang Zhongjun doesn’t seem like a businessman.”

"Isn't this a business run by the two brothers? Where is Wang Zhonglei?"

"I didn't see him. He went home for the Chinese New Year and then went abroad. I spoke to him on the phone once. He didn't seem like a businessman. He didn't seem to know much about the company's finances. Actually, I think this company is quite risky."

Chen Xuebing smiled.

Some successes in this world are indeed puzzling. Judging from Ren Ying's feelings alone, probably no institution would participate in their investment at this stage.

Jack Ma may genuinely crave fame. He also understands that Focus Media, having raised $05 million in its 1.7 NASDAQ listing and possessing ample cash reserves, urgently needs diversified investments to hedge against the risks of relying solely on its building advertising business. Jiang Nanchun claims to be building a "Chinese media empire," and film and television content can create synergies with its advertising channels.

Both Jack Ma and Focus Media's small-scale participation had their own purposes: one for celebrity social networking, and the other for celebrity resources, and both involved an element of chance.

However, the world is fair. Huayi Brothers was lucky to ride the wave of the rapid development of the mainland film industry and succeeded, but later lost because of its own misconceptions.

“Your idea may be correct, keep your point of view, but this investment should still proceed as originally planned. Since Jack Ma and Focus Media have taken a portion of their shares, we still need to leave them some money so that we can distribute the shares to those artists.”

"The investment was carried out in two phases. The first phase involved contacting the company to acquire 20% of their equity for 75 million yuan, which they valued at 350 million yuan. The second phase involved contacting Focus Media to acquire their equity for 30 million yuan. Focus Media doesn't have much influence in the investment world, so there's no need to keep them around, as it would be detrimental to our subsequent IPO process."

Chen Xuebing has decided to use Huayi Brothers' listing as one of the models for the Long March Securities operation. The stock performed well in the first few years after its listing, and rose dozens of times during the bull market in 15, which is enough to boost market confidence.

The company's celebrity resources are also very useful for Weibo.

As for whether to help them in 15 years, that depends on the situation.

"I'll also make a condition for them: they need to set up a high-end clothing factory for traditional ethnic costumes and hand-embroidered ancient costumes, located in Chengdu. There are many ethnic minority embroiderers in the surrounding cities and counties. Costumes for Huayi Brothers' films should be ordered from this clothing factory first. I can also invest in a clothing brand store to help them sell their products. In the future, all the shopping malls we build will have this store."

"A garment factory?" Ren Ying frowned. She remembered that Chen Xuebing had mentioned it before, on the way he picked up Chow Yun-fat and Gong Li.

But I don't quite understand.

Chen Xuebing smiled and said, "Last time I took a trip around Sichuan, and I thought the embroidery there was quite beautiful. I think high-end ethnic clothing is a business opportunity. But you don't need to explain to Huayi Brothers that if Jack Ma can have a hobby, why can't I? By the way, when you go to Chengdu, help us choose a location for this clothing factory. It should be near a school. Many of the ethnic minority embroiderers have to take care of their children, so we need to address their concerns."

“You’ll have to talk to the Chengdu government about that. A whole bunch of children are going to school. I don’t have the power to do that. Also, you’ll have to negotiate the acquisition of Focus Media.”

Ren Ying immediately returned the unfinished tasks to her boss.

Chen Xuebing glanced back at the Pujiang Hotel behind him, a building with over a hundred years of history. It served as the trading hall of the Shanghai Stock Exchange in the 90s and is now a key venue for foreign affairs and government receptions.

He pointed to the Pujiang Hotel and said:

“Alright, Focus Media is also a Shanghai company. You book a private event at this hotel for a day and set a time. I’ll have someone arrange it with them, and we’ll talk here.”

When he first arrived in Shanghai, he should have made an appointment with some of the local merchants to meet them.

Especially in the real estate sector.

To avoid a chaotic fight if we meet at an auction later.

Sometimes, a meal together can create more opportunities for interaction and avoid unnecessary competition.

The Long March is over, and the investment community can also make some appointments.

"Oh, right," Ren Ying suddenly remembered something and said, "the Hong Kong internet conference you arranged with Mr. Wu of Wharf Holdings is still not ready. Isn't it supposed to be the spring conference?"

Chen Xuebing waved his hand: "No rush, the spring equinox is on March 21st, spring hasn't officially arrived yet, what's the panic?"

The conflict in Chengdu is still far from over.

The Economic and Technological Development Area (ETDA) issued a notice of breach of contract by Hutchison Whampoa, which sparked some discussion. Hutchison Whampoa also refuted the ETDA's claim of "breach of contract" through the South China Morning Post, stating that it was a legitimate act by a Hong Kong businessman to protect his rights. However, it did not mention any intention to file a lawsuit, and it seemed that it did not intend to take the matter seriously. The matter was thus dropped.

This slap didn't hurt Hutchison Whampoa at all; they might even feel like they'd been tricked.

Only when he also acquires that piece of land in Chenghua can he truly strike at their sore spot.

"When you go to Hong Kong for a meeting, you need to invite guests in advance. Who are you planning to invite from internet companies? Tencent? I guess they definitely won't go. We're representing Shenzhen to negotiate, and we don't even have the support of local internet companies. You've also offended Hutchison Whampoa, so things might not go too smoothly in Hong Kong. I think you should try to find Jack Ma and get a few internet entrepreneurs on your side to boost your momentum. By the way, NetEase is in Guangzhou, you can contact NetEase."

Ren Ying said with some worry.

Chen Xuebing's lips twitched: "What do you want with NetEase? To make games in Hong Kong? Do you know why I'm holding this meeting? Hong Kong's data transit channel now has a processing delay of more than three seconds. More than three seconds, do you know what that means for online games?"

Hong Kong is now one of the world's top three international internet exchange centers, with its submarine fiber optic cable capacity accounting for 37% of Asia's total. However, only 8% of its cables are directly connected to the mainland, and these cables mainly serve multinational corporations from Europe and the United States.

Data is shared between the two locations, which are connected by a GFW (Great Firewall of China) internet firewall system.

This system is used to suppress certain speech and to store the information of mainland internet users within mainland China to ensure the security of personal information.

Content on Hong Kong servers is not subject to censorship by the Great Firewall (GFW), but mainland companies cannot use Hong Kong servers directly. Their data must undergo an "open-box inspection" process, which causes significant delays.

This level of latency is almost equivalent to technical isolation. Tencent's attempt to set up game servers in Hong Kong in 2005 was brought down by latency issues.

Mainland companies simply cannot operate Hong Kong internet directly on the mainland. They must create a separate corporate IP in Hong Kong, completely isolating their operations from those on the mainland. This is almost equivalent to creating a completely independent internet system in tiny Hong Kong, which is definitely not cost-effective.

He plans to build a data transit channel and establish a big data center in Qianhai, partly to solve this auditing problem.

If the data flow privileges in Qianhai are approved, and with the big data center replacing the GFW's delayed review and automatically and quickly filtering some sensitive information, the latency issue can be reduced to within 0.8 seconds. Even if it cannot solve the interoperability problem for online games, at least communication and consumer apps will be able to use it.

Therefore, all internet companies that want to facilitate data flow between mainland China and Hong Kong will have to buy review traffic from Qianhai, and business will be booming.

Upon hearing the three-second delay, Ren Ying realized she had made a mistake and felt embarrassed.

"You didn't tell me about this, so I have no idea what you're planning."

Chen Xuebing smiled.

What's there to say? This meeting is one that cannot and should not succeed.

Hong Kong's internet business is not so easy to penetrate.

This was just a test. Success would be enough to provoke the Li family. In fact, he hadn't even planned to invite any internet companies.

For the Hong Kong business to succeed, a decisive action must be taken to make an example of them.

However, inviting Jack Ma seems like a good idea as well.

This guy loves to create hype; he might be able to make the occasion bigger.

"Then let's invite Jack Ma. He happens to be a shareholder of Huayi Brothers, so we can discuss both matters together."

(End of this chapter)