NEC takes 6% stake in Chinese software firm
( 2002-10-10 09:59 ) (1 )

Japanese IT giant NEC strategically lined-up with fledgling Chinese counterpart SinoCom on Wednesday by investing HK$12 million (US$1.5 million) in the software developer.

NEC's move, which also involved its wholly owned subsidiary NEC Soft Ltd, is an encouraging sign for China's software developers in the aftermath of the global software market downturn.

According to the deal, NEC and NEC Soft both injected HK$6 million (US$769,280) for an aggregate 6 per cent stake in SinoCom.

The fund will be mainly used to finance SinoCom's business expansion in software outsourcing development in the Japanese market.

More than 90 per cent of the company's software outsourcing business floods to Japan, a country that has strong cultural links with China, which is billed as one of the advantages for the Chinese software developers.

NEC will overweight on Chinese companies like SinoCom, which are low in cost but high and stable in quality, said Toshio Morita, general manager of NEC's overseas System Integration Department.

"After the tie-up, our outsourcing turnover from our Beijing branch to the Japanese market will jump to more than 1 billion yen (US$8.04 million) from 700 million yen (US$5.63 million) in 2001, and the total turnover will be between 1.2 to 1.3 billion yen (US$9.65 to US$10.46 million)," company Chairman Wang Zhiqiang said on Wednesday.

The seven-year-old Beijing-based software developer is also planning an overseas listing within a year.

"We hope we could file an initial public offering on a market that has a Chinese cultural background," said Wang, when answering whether the company will select Tokyo or Hong Kong as the overseas listing venue.

But he said the amount of funds the company wants to raise and the total amount of shares that are to be issued are still being reviewed by its foreign underwriters.

Apart from the Japanese market, the company is planning to further extend its reach into the European and US markets, which is mostly monopolized by Indian software developers.

Prior to Wednesday's move, NEC and NEC Soft had already injected 18 million yen (US$144,851) in 2000 into SinoCom's Japan operations to acquire a 49 per cent stake.

"Our major concern today is to expand our business to a higher platform to major markets in the world," said Wang Xubing, president of the company, whose major business arena ranges from software development to system integrations for banking, securities and telecom companies.