Early this year, China IPOs and Net deals were hot. Well, now they are burning investors.
One of this year's Chinese Net IPOs, Linktone
Linktone, among the leading wireless service providers in China, primarily developing entertainment and media ringtones and gaming applications, reported its earnings yesterday. The growth was heated for the second quarter as revenues surged from $3.3 million last year to $12.1 million. The sequential growth rate was 29%. In the second quarter, Linktone posted net income of $3.5 million, which compares with $800,000 last year.
But though the numbers look great, investors are concerned that growth for the company is starting to slow in this competitive market.
Much of the company's revenues -- roughly $11 million -- come from short messaging services, or SMS. About $1.1 million come from such things as multimedia messaging services (MMS), Java games, and voice entertainment services. SMS is a big market in China, as is attested by such players as NetEase.com
The critical leap for companies such as Linktone is the transition into next-generation, 2.5G wireless applications. There are a variety of start-ups vying for the space, such as Wirejack.com. In fact, public companies are looking at these private start-ups as a way to leverage into the next generation. For example, this year VeriSign
So, with valuations getting crunched relentlessly, expect the deal-making to rev up as buyers look for bargains.
Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.