When China cuts its nose off, its always a great buying opportunity.

March 26, 2010

Google is planning so say bye bye to China – China doesn’t seem to be backing down. They are fixing bayonets and holding true to the line – true to the communist spirit of “if you are not with us, you are against us.” They have even begun to isolate Google by leveraging on their arm twisting strategy to influence other players in the region to either boycott or make life difficult for Google – the strategy is as old as the hills, poison the wells, burn the hamlets and hopefully, Google will realize it doesn’t pay to fuck with the Chinese – there’s only one problem here, life isn’t that simple – nevermind that China was the one who started this cyber war. Nevermind that in December, the Chinese cyber squad even tried to steal  intellectual property from Google. They were so good, they even had the courtesy to leave enough breadcrumbs to be traced to a computer school that’s operated by the PLA. So much for their super duper cyber kamikaze program – their motto seems to be, “we missed the boat!” Only for the rest to exclaim, “our aim must be improving!”

Fact is Google’s pull out will hurt China in more ways than I can possibly elaborate – the effects are not only devastating from a research and development standpoint. But it will also have a ripple effect that is likely to be felt across the tech supply pipeline starting from the internet, finance, technology, media, gaming and even all the way up to Wall Street (as so many Chinese firms are already listed there). This will all take some time to pan out. But pan out I assure you it will- and the effects will be devastating – I don’t really believe the Chinese fully understand the tech implications of all this. It takes imagination.

One area that will be hardest hit is online gaming. This brings me to a stock pick that I have been shadowing recently – check out Shanda Games Limited (Nasdaq ticker: GAME) – let me give you the low down on this stock. They have tons of money, but they don’t know what to do with it – as for their business model its slightly two rungs higher than Cluedo and tic-tac-toe. This is probably the only online gaming firm on this planet that claims that online Xian Chee (Chinese chess) is the hottest thing since Janet Jackson’s bobbies decided to do an impression of the movie “Alien,” with Ben Affleck (yes, there was a time when all I wanted was to see her naked, but these days, I just wish she put on some curtains) . Cut to the chase this stock is currently getting hammered left, right and center – they have no idea where they are going and I strongly believe the management of Shanda is consulting a monkey in a Fu Manchu suit that winds up a black box to churn out I Ching anagrams to help them make their corporate decisions  – wonder no more why Shanda has shed nearly 35% of it’s value this month alonea and is now trading at $7 / my feel is firms like Shanda will be one of those who will feel the shockwaves of the Google pull out – as what many people do not realize is when firms with a critical intellectual mass like Google decide to pull the plug on China – it’s really like a travelling circus troupe packing up and moving along – a whole lot of stuff accompanies the circus troupe, magicians, acrobats, wire walkers, fire eaters, dancing girls, cooks, blacksmiths, elephants, monkeys and talking parrots etc – same holds true for  tech enterprises, developers, imagers, copy screen visualizers, formatters, coders and a whole lot of skill that takes 20 years to develop will just all go up in smoke. Worse part is all these deficits will be like pancreatic cancer to the gaming industry – usually when the intellectual capital drops gaming is the first to register the loss in business IQ – it just dives like a submarine!

My bet is Shanda is going to have to tie up soon with another foreign firm who can supply the much needed mojo. Or maybe they will just buy up their own stock – either way as an investor you cannot lose with this stock. This stock is set to fly not because the management is smart; but because they are so dumb, they have absolutely no idea how to grow an online gaming industry, but they are prepared to do almost anything along with paying any price just to maintain a beach head in the gaming scene – that may not make one ounce of sense from a business enterprise perspective – but my feel is Shanda just wants in so badly, they are really not so different from the Chinese Government who are even prepared to pour billions into something so senseless as the great Chinese fire wall – that simply means on the short term, you can never lose as an investor – as what we are dealing with is not business in the conventional sense as it remains a mad firm that is really so fixated with the gaming scene they are even prepared to burn down the whole house just to keep going on full steam.

This just means they right for the picking because my gut feel tells me a flying saucer is going to land very soon in their backyard. Only one thing is clear, I don’t expect this company to survive for more than 2 years maximum – the way I see it, it#s already dead – just remember when the time comes to sell, take your knife out and slit her throat! Sorry, it’s nothing personal, it’s just business.

Keep an eye on Shanda. Like all Chinese based firms with dodgy accounting she’s good for only bang bang, thank you and bye bye.

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