Chinadotcom’s Software Offerings

I remember Chinadotcom from the late 1990s when it started off as a portal. It raised a lot of money (over $500 million) via two Nasdaq offerings. What is it up to now? Business Week writes:

In the past year, Yip’s chinadotcom Corp. has bought companies or formed partnerships in the U.S., Canada, and India — while preparing to shed one of its key businesses in China. The reason: CEO Yip requires knowhow to turn chinadotcom into a provider of enterprise software to Chinese manufacturers.

Yip wants to focus on software — a business chinadotcom has long been quietly building. For years, the company has resold Western programs that help Chinese businesses streamline their production, manage contacts with customers, and organize their human resources departments. To prosper in that field, though, chinadotcom needs its own software, Yip says. So in February, the company completed a $56 million buyout of Pivotal Corp., a 420-employee developer in Vancouver that specializes in customer-relationship-management programs for small and midsize businesses. Another acquisition, of Atlanta’s Ross Systems Inc., is almost sealed. And last year, chinadotcom paid $50 million for IMI Corp., a maker of supply-chain-management software.

Another of Yip’s ambitions is to turn chinadotcom into a software outsourcing shop. Though the company has just 140 programmers in China today, Yip expects to have 1,000 within three years. To boost expertise in outsourcing, chinadotcom formed a joint venture with India’s vMoksha Technologies.

Even after the recent deals, chinadotcom has more than $250 million left over from its 1999 initial public offering and subsequent stock issues. “Unlike so many of the dot-coms that raised money, chinadotcom didn’t blow through its cash,” says Jason D. Brueschke, an analyst at Pacific Growth Equities in San Francisco. And while chinadotcom was never a star, last year it turned its first profit, earning $15.4 million on sales of $89 million.

Still, analysts like Brueschke say Yip’s change in strategy is smart. Brueschke predicts that software sales will help chinadotcom more than double its earnings to $38 million this year and $51 million in 2005 as Chinese companies seek to boost productivity and efficiency. To be sure, Yip will face plenty of competition. SAP is pursuing small and midsize customers in China, while Oracle Corp. has opened development centers in Beijing and Shenzhen, and is sponsoring educational projects nationwide. But with its foreign technology and Chinese pedigree, chinadotcom could be the one to beat.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.