Monday, February 21, 2005

Shanda takes a piece of Sina

Pacific Epoch run stories about connection between Sina and Shanda Paul Waide was the person who posted the news. Last Friday, Shanda Interactive had filed documents with US SEC, saying that Shanda and Skyline Media Limited, which is Shanda’s CEO Chen’s investment company, had bought 19,5% of Sina, between January 12 and February 10. In other Epoch news it was stated that Sina is not planning to device any poison pill arrangements.

So, what do I think about this? Shanda was and still is loaded with cash. They announced their desire to move outside online gaming arena and this they are now doing. Earlier I was raising my concern on their expansion, because they could loose their focus while fostering new businesses. This sudden move towards Sina erases those fears of mine. If they manage to buy Sina, they will have ready entity that can handle on its own.

There are some clouds on horizon. Sina just made a remark that Chinese government plans on restricting the marketing of astrological services and Sina has large revenue coming in from such services. This will shadow Shanda’s growth expectations. Other concern is more traditional, how can they get synergies from this marriage, if it is to happen? It will be very hard to do any cross selling between these companies Shanda will benefit from new advertising channels, so there still are some opportunities to benefit from. Sina claimed that they will not device any poison pill to make it expensive for Shanda to buy more shares. Remains to be seen if Shanda will go all the way. Seems like their CEO is on a mission, though, so I place my money on acquisition.
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