ATLANTA and BEIJING, Nov. 17 /Xinhua-PRNewswire/ -- Following the
release of CDC Corporation's Q3 2006 results and the company's earnings and
operations review conference call, the company received and continues to
receive questions from investors, many of which are similar inquiries. The
company believes that it would be beneficial to highlight these similar
inquiries, together with the company's response, in this press release so
that all shareholders may have the opportunity to read the company's
responses. The information contained in this press release is not meant to
be considered in isolation of, or as a substitute for, the review of our
earnings results and summary financial statements issued on November 14,
2006 and the related conference call replay, each of which investors may
access via the company's website at http://www.cdccorporation.net.
The similar inquiries and the company's respective responses are as
follows:
1. Why did the company give out year guidance, for 2007, for the first
time in the company's history?
As we have noted to investors previously, the company has been radically
transformed since its inception as a China orientated Internet portal and
web consulting company in 1999. Through both acquisitions and organic
growth, the company has evolved into a leader in enterprise software
applications and services. CDC Software contributed approximately 78% of
the company's revenues in both Q3 of 2006 as well as the year to date
September 30, 2006. The company is also much more global in scale with 46%
of Q3 2006 revenues coming from the Americas, 19% from EMEA and the balance
from Asia Pacific.
Also, in contrast to the company's earlier years of operations, a
significant component of the company's revenues are now recurrent in
nature. As a result of tightly targeted industry focus and continued
investments in industry-specific applications, CDC Software enjoys a
customer satisfaction and maintenance renewal rate of over 90% and a high
level of continuing investments by existing customers. This was
demonstrated by the 316 customers who upgraded or purchased additional
enterprise software licenses in Q3 of 2006.
In addition, the company generates a high level of service revenue,
which provides the company higher visibility. Given the relative size and
stability of our recurrent revenue stream, the broader geographic balance of
our operations and the significantly more diversified revenue components
within the company as compared to historical results, we enjoy better
predictability in revenues and earnings visibility and we believe we in a
comfortable position to provide out year guidance for the first time in the
company's history.
2. Given CDC's strong balance sheet why did the company decide to raise
more money through the issuance of exchangeable convertible notes?
While historically CDC has been fortunate to have a healthy cash
position while continuing to generate free cash flow from operations, the
company believes that additional cash would give the company the necessary
flexibility to pursue larger acquisitions which may be key to helping the
company to reach the next level of growth and success. In today's hyper-
competitive environment for acquisitions fueled by private equity billions,
the company was previously constrained in both the size of possible
transactions as well as the structure of the consideration. The proceeds of
the notes will help alleviate this concern and significantly open up the
playing field as we execute our strategic investment initiatives over the
next 6-12 months.
The notes were structured creatively to unlock shareholder value in some
of our subsidiaries while reducing potential dilutive effect to CDC
shareholders. It carries a very attractive cash coupon of 3.75% a year and
its initial conversion price of $10.37 represents an appealing premium for
the company's shares.
About CDC Corporation
The CDC family of companies includes CDC Software focused on enterprise
software applications and services, CDC Mobile focused on mobile
applications, CDC Games focused on online games, and China.com focused on
portals for the greater China markets. For more information about CDC
Corporation
(Nasdaq: CHINA), please visit http://www.cdccorporation.net.
About CDC Games
CDC Games Limited is focused on building a diversified mix of online
game assets and strategic alliances and is a business unit of CDC
Corporation. CDC Games is one of the market leaders of online and mobile
games in China with over 37 million registered users.
About CDC Software
CDC Software, The Customer-Driven Company(TM), is a provider of
comprehensive enterprise software applications and services designed to help
businesses thrive and become customer-driven market leaders. The company's
industry-specific solutions are used by more than 5,000 customers worldwide
within the manufacturing, financial services, health care, home building,
real estate, and wholesale and retail distribution industries. CDC
Software's product suite includes Pivotal CRM (customer relationship
management), c360 CRM add-on products, industry solutions and development
tools for the Microsoft Dynamics CRM platform, Ross ERP (enterprise resource
planning) and SCM (supply chain management), MVI real-time performance
management, IMI warehouse management and order management, Platinum China HR
(human resource) and business analytics solutions. CDC Software is ranked
number 18 on the Manufacturing Business Technology 2006 Global 100 List of
Enterprise and Supply Chain Management Application vendors. For more
information, please visit http://www.cdcsoftware.com.
About China.com Inc.
China.com Inc. (stock code: 8006; website: http://www.inc.china.com), a
leading MVAS and Internet services company operating principally in China
was listed on the GEM of the Stock Exchange of Hong Kong Limited on March 9,
2000. In December 2000, China.com Inc. was admitted as a constituent stock
of the Hang Seng IT and IT Portfolio Indices.
About CDC Mobile
CDC Mobile is focused on providing MVAS products to subscribers in China
and is a business unit of CDC Corporation.
Cautionary Note Regarding Forward-Looking Statements
This press release includes "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of
1995. These forward-looking statements include statements regarding future
revenues, potential new acquisitions, potential carve-outs of CDC Software
or CDC Games, the use of proceeds from the offering, potential dilutive
effects of a conversion on CDC Corporation and other statements that are not
historical fact, the achievement of which involve risks, uncertainties and
assumptions. If any such risks or uncertainties materialize or if any of
the assumptions proves incorrect, our results could differ materially from
the results expressed or implied by the forward-looking statements we make.
These statements are based on management's current expectations and are
subject to risks and uncertainties and changes in circumstances. There are
important factors that could cause actual results to differ materially from
those anticipated in the forward looking statements, including the
following: (a) the ability to realize strategic objectives by taking
advantage of market opportunities in targeted geographic markets; (b) the
ability to make changes in business strategy, development plans and product
offerings to respond to the needs of current, new and potential customers,
suppliers and strategic partners; (c) the effects of restructurings and
rationalization of operations; (d) the ability to address technological
changes and developments including the development and enhancement of
products; (e) the ability to develop and market successful Advanced Mobile
Products; (f) the entry of new competitors and their technological advances;
(g) the need to develop, integrate and deploy enterprise software
applications to meet customer's requirements; (h) the possibility of
development or deployment difficulties or delays; (i) the dependence on
customer satisfaction with the company's software products and services; (j)
continued commitment to the deployment of the enterprise software solutions;
(k) risks involved in developing software solutions and integrating them
with third-party software and services; (l) the continued ability of the
company's enterprise software solutions to address client-specific
requirements; (m) demand for and market acceptance of new and existing
enterprise software and services and the positioning of the company's
solutions; and (n) the ability of staff to operate the enterprise software
and extract and utilize information from the company's enterprise software
solutions. Further information on risks or other factors that could cause
results to differ is detailed in filings or submissions with the United
States Securities and Exchange Commission made by CDC Corporation in its
Annual Report for the year ended December 31, 2005 on Form 20-F filed on
June 21, 2006. All forward-looking statements included in this press release
are based upon information available to management as of the date of the
press release, and you are cautioned not to place undue reliance on any
forward looking statements which speak only as of the date of this press
release. The company assumes no obligation to update or alter the forward
looking statements whether as a result of new information, future events or
otherwise.
