CDC has tried to make it a go as an enterprise software company. While this segment remains the largest part of the CDC revenue mix, it has been a slow growth endeavor for the company. It's CDC's 77% stake in the faster-growing China.com portal -- and its initiatives to grow its mobile and Internet gaming business -- that have inspired investors lately, as key players like NetEase (NASDAQ:NTES) are producing fat net margins that are several times over the 10% to 11% that CDC is forecasting for all of 2006.
Online gaming is where it's at in China. CDC is already a legitimate player there with the popular Yulgang game. Yesterday it announced that it has acquired the license to introduce Special Force -- a hot game in Korea's Internet cafe community -- into China later this year.
It's a move that we can't dismiss lightly. One licensed game can turn around an entire company. Just see how well it worked out for The9 (NASDAQ:NCTY) after it rolled out a licensed version of World of Warcraft in China. These days, as many as 630,000 die-hard gamers have been paying to play The9's game at the same time.
However, CDC's Yulgang isn't billed by the minute. It's actually a free ad-supported game where players can pay up for virtual goodies. That's a radical departure from what companies like The9 and NetEase are doing, even though Shanda Interactive (NASDAQ:SNDA) recently turned to an ad-supported format for some of its older titles.
Hopefully Special Force will prove to be the sticky elixir that elevates CDC to the same playing level as the competition. Shanda, The9, and NetEase all easily trounced second-quarter profit targets earlier this month.
Can CDC become the next hot online gaming stock in China? Your move, CDC.
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Longtime Fool contributor Rick Munarriz believes in the sector, but he does not own any of the companies mentioned in this story. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.
