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Apple Finds Solace in Strength of China Sales


Caterpillar and Sina also make the news.

China Watch: Top Business News From the World's Second Largest Economy
Global mobile phone sales slowed down in the first quarter of 2013, with research firm Gartner saying that only one region, Asia Pacific, registered sales growth.

According to Gartner, close to 426 million mobile phones were sold worldwide, which was a 0.7% increase from a year ago. However, sales in Asia Pacific grew a strong 6.4% year-on-year.
An Apple store in Shanghai

"More than 226 million mobile phones were sold to end users in Asia/Pacific in the first quarter of 2013, which helped the region increase its share of global mobile phones to 53.1% year-on-year," said Anshul Gupta, principal research analyst at Gartner. "In addition, China saw its mobile phone sales increase 7.5% in the first quarter of 2013, and its sales represented 25.7% of global mobile phone sales, up nearly 2 percentage points year-on-year."

For the quarter, Apple (NASDAQ:AAPL) saw sales to end users hit 38.3 million units, with mainland China alone contributing almost 7 million units thanks in large part to the reduced price of the iPhone 4.

"Apple is faced with the challenge of being increasingly dependent on the replacement market as its addressable market is capped. The next two quarters will also be challenging, as there are no new products expected to be coming before the third quarter of 2013," said Gupta.

In terms of global smartphone market share, Apple remained in second place and saw its share dip to 18.2% from 22.5%. Samsung (OTCMKTS:SSNLF) remained the top dog with a 30.8% share, which was an increase from 27.6% in 2012. LG Electronics (OTCMKTS:LGEAF), Huawei Technologies (SHE:002502), and ZTE (SHE:000063) filled up the rest of the top five.

Policy Shift in China to Boost Foreign Carmakers

Foreign automakers such as General Motors (NYSE:GM), Toyota (NYSE:TM), Volkswagen (OTCMKTS:VLKAY), and Honda Motors (NYSE:HMC) received good news this week as China announced that it will adopt policies to boost foreign auto investment in western China.

China's National Development and Reform Commission said in a statement that from June 10, foreign auto investment will be offered preferential treatment, though no details were offered, Automotive News reports

For seven years, foreign carmakers had enjoyed subsidies on their Chinese investments, but the NDRC removed them from its list of industries that could obtain government incentives in January 2011 because of a problem of overcapacity. Analysts now worry the problem might rear its head again.

"The change in policy direction is meant to boost foreign investment and economic growth rather than for the need of the auto industry," said Zhang Xin, an analyst with Guotai Junan Securities Co. in Beijing. "It could well cause an increase in excess capacity and make it more difficult for local automakers to compete with foreign companies."

Sina Sees Loss Narrow in First Quarter

Sina (NASDAQ:SINA), which owns Weibo, China's largest Twitter-like microblogging service, posted a first-quarter net loss of $13.2 million, compared with a loss of $13.7 million a year ago. The improved figure was still far from the consensus estimate of $5.6 million however.

With more and more of its 500 million Weibo users accessing the service through mobile devices, Sina has had to increase spending to improve its offerings on smartphones and tablets. The company's advertising revenue was also hurt, thanks to the slowdown of China's economy, which has also affected the earnings of other Internet firms like Baidu (NASDAQ:BIDU).

"Sina's costs on development and staff is quite big," Deco You, a Beijing-based analyst at Internet consulting group iResearch, told Bloomberg before Sina's earnings announcement. "The company lacks new revenue drivers."

In April, Sina sold an 18% stake of Weibo to Chinese e-commerce giant, Alibaba Group, for $586 million with the aim for improving advertising revenue.

For the second quarter, Sina projects net revenues of between $143 million and $147 million, including advertising revenue of $117 million to $119 million. The analysts' consensus forecast now is $144 million.

Caterpillar Gets Reduced Purchase Price in Accounting Scandal Settlement

It's small comfort, but Caterpillar (NYSE:CAT) has managed to negotiate a reduction in purchase price for the Chinese mining equipment company whose accounting irregularities compelled Caterpillar to write down some $580 million.

In November 2011, Caterpillar had agreed to acquire ERA Mining Machinery, a unit of China-based Mining Machinery. However, in January this year, Caterpillar reported a "deliberate, multi-year, coordinated accounting misconduct" at Siwei, a subsidiary of ERA, which forced the industrial giant to take an impairment charge.

As part of the accounting fraud settlement, Caterpillar's total outstanding payments to Mining Machinery were cut to $29.5 million from $164.5 million.

''We are pleased to resolve these issues with the MML Parties, which, as we move forward, will position Caterpillar to put greater focus on improving the Siwei operation,'' said Steve Wunning, Caterpillar group president with responsibility for Resource Industries.

Twitter: @sterlingwong
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