As world waits for Alibaba IPO filing, Chinese tech giants Tencent, Foxconn gather at Stanford [San Jose Mercury News]
(San Jose Mercury News (CA) Via Acquire Media NewsEdge) Oct. 03--STANFORD -- If you're wondering why so many people in Silicon Valley are closely awaiting an IPO filing by Chinese Internet giant Alibaba, consider what happened Thursday at Stanford University's annual China 2.0 conference. On a sun-dappled day on the Farm, leaders of some of China's other tech titans described in dizzying terms the Internet's growth there.
Tencent president Martin Lau said that when his company, which makes popular messaging apps including QQ and WeChat, opened its doors in 1998, there were 4 million Internet users in China. Today, that number is approaching 600 million -- nearly twice the entire population of the United States.
Alibaba, which among other things runs online marketplaces akin
to eBay (EBAY), is expected to file shortly for an initial public offering of stock. Some analysts predict the company could command a $120 billion valuation when it begins trading, which it's expected to do on the New York Stock Exchange.
That valuation would not only eclipse the first-day record set by Facebook but would also be good news for Yahoo (YHOO), which owns 24 percent of Alibaba.
"It's a great company," Lau told this newspaper of his rival. "I've actually been encouraging people to invest in them."
Lau's company, which also makes lucrative gaming and mobile apps for the Chinese market and runs a social network called Qzone, is expected to bag $2.6 billion in net profit this year, according to analyst estimates compiled by Bloomberg. Mobile Internet usage, Lau and others at the conference said, is exploding in China.
But the Stanford alum, who in graduate school was classmates with the founders of Yahoo and Google (GOOG), also said the Web is good for more than making money. "We're making society more transparent," Lau said, citing a micro-donation system that he said has let 19 million Tencent users give to charity. "Together, we are really making a positive impact on Chinese society."
Other speakers at the conference included Gary Locke, the U.S. ambassador to China; Hugo Barra, who last month left his job as head of product at Google's Android unit to join Chinese smartphone maker Xiaomi; and the CEO of SINA, which runs a Twitter-like microblogging network that boasts more than 500 million Chinese users.
David Chao, a venture capitalist at Menlo Park firm DCM, told the audience that venture investment in China has picked up over the past year after "a mini-Ice Age" caused by concerns over financial transparency, government fraud and a tough IPO market on U.S. and Chinese exchanges.
But while he praised the growth of China's Internet economy, Chao and others said many of the country's biggest players have simply replicated business models from successful companies in the United States, South Korea and Japan.
"WeChat is a copy of KakaoTalk in Korea," Chao said in a gentle dig at Lau's
At a later panel, tech investor Michael Marks countered that if China's consumer software market wants for innovation, it's the opposite in hardware. "You're constantly innovating on the factory floor," said Marks, who spent 13 years as CEO of contract manufacturer Flextronics and now manages private equity fund Riverwood Capital.
Sharing the stage with him was Sidney Lu, chairman and CEO of Taiwanese contract manufacturer Foxconn Interconnect Technology, which makes cables and connectors for many PC manufacturers.
"In manufacturing, the margins are lower, so any innovation is important," said Lu, whose company recently spun out from Foxconn Technology Group. The parent company is best known as a manufacturer for tech giants such as Hewlett-Packard (HPQ) and Apple (AAPL) -- and has come under fire in recent years for its factory conditions.
Under pressure from Apple, the company last year instituted a series of wide-ranging reforms, which included significantly boosting wages and cutting worker hours to more closely resemble the Western workweek.
Asked in a private interview how those commitments have impacted Foxconn's bottom line, Lu said increased automation has made the company more efficient and boosted revenues -- but with a trade-off. Head count at his division has dropped 40 percent, to about 70,000 people.
"That way, we can increase wages and keep everybody happy," Lu said. "Actually, not a whole lot of them want to work in the factories anyway."
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.
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