CDC
Besides not being much of a China play, CDC may also not be the best investment play. The company reported mixed second-quarter results late last week and is warning investors that initiatives to improve its long-term performance "may result in a near-term adverse effect on the financial results of the company."
CDC's operating income went from a loss of $2 million to a profit of $1.2 million, although net income was barely in the black. Enterprise software is the company's primary business -- it made up 65.8% of total sales this quarter -- and total software revenue soared 76%, mostly because of the acquisition of Ross Systems in August 2004. You may be thinking those are Chinese sales, but you'd be wrong. Only 10% of sales came from the Asia-Pacific region. The good old USA (and maybe a little bit of Canada) accounted for 49% of this quarter's sales.
The company runs information technology, Web development, and business services companies in Hong Kong, Australia, Korea and the United States, and this sector, making up 15.8% of total sales, saw a revenue decline of 1.6%. CDC gave no specific explanation for the flat results.
The mobile services division, a meager 13.3% of total sales, does focus entirely on the Chinese market. After sifting through how this revenue is reported (the company presents it as net for Q2 2004 versus gross for Q2 2005), readers will find that gross revenue of $8.6 million this quarter was down from gross revenue of $10.3 million for the comparable quarter last year. The only good news here was that quarterly revenue for advanced mobile products soared 85% to $4 million.
The bottom line is that there are plenty of other ways to invest in China than through CDC. For exposure to Internet access and games, check out Motley Fool Stock Advisor pick Sina
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Fool contributor W.D. Crotty dos not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.