A few days ago, I was at Great Wall Club’s Global Mobile Internet Conference in Beijing and I heard a speech from Michael Song, CEO of Sky-mobi.  And I immediately knew what meant by talking up one’s share price.

Hangzhou based Sky-mobi runs an App Store over feature phones.  (Most of these use Mediaktek chipset.) It is the largest of its kind in China.  In the twelve months ended March 2010, the company has over Rmb 540 million revenue and over Rmb 120 million in operating profit.  But it was not well received in Nasdaq.  Its  share price plunged 33% off its IPO price (US$8) on its first day of trading (Sky-Mobi, a Disappointing IPO)

The speech is about Song’s experience of getting his company listed in Nasdaq – mainly focus on the last few months. Michael said how he addressed investors’ greatest concerns:

1) operators.  In the past, Sky-mobi suffered whenever operators tighten their user protection policies. Song said they are cooperating with the operators.

2) Tencent.  Investors are concern if Tencent want to take Sky-mobi’s business.  Song said they are partnering with Tencent, which is moving toward an open platform policy of its own.

3) Android.  If more phones use Android operating system, which allows users to freely download apps, there is no need for Sky-mobi’s App store, which runs on feature phone only.  Song’s said the rate of decline of feature phone might not as fast as people expected.  And, they have an Android plan of their own.

And, how he saw there is no bubble in the mobile internet sector, as this will be opportunities much bigger than the tradictional internet (even 1000 times).    In the last three months, share price of Sky-mobile has increase more than 4 times to US$21.67  (closing price last Friday.)

He delivered his speech with such a passion that, right after the speech, I immediate wanted to open my check book and buy some of Skymobi’s share.  But, as I discussed with more people in the industry that day, I started to rethink about this.

“Of course, he can make a great speech. That is what they did during the roadshow.  They practiced until everything is perfect and tell a great story to investors,” said a friend, who is the CFO of an internet company, which listed a few years ago.

The three concerns he mentioned is real, especially the last one: the rise of smartphone and Android.  NetDragon just mentioned its 91 assistant has 35 million users.  And this is only 90% of all iPhone users  and half of the Android phone users in China.  A year ago, there are only 3-4 million iPhone users in China and roughly the same or even less Android users.

Sky-mobi’s strength is still on feature phones, the previous generation products.  Even it has a plan for Android, going forward, its dominance will be much less than before.

Sherman So

Author of Red Wired: China's Internet Revolution, the first book to completely survey the nature of China's internet. (http://redwiredrevolution.com/) She previously was the lead China technology reporter...

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