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Vipshop Forecast Soft, Raising Concerns About Slowing China Economy

China e-commerce company Vipshop Holdings ( VIPS ) reported strong fourth-quarter earnings but shares fell as first-quarter guidance fell short. The Q1 shortfall reflects economic uncertainties in China and elsewhere as well as competitive pressures from Alibaba ( BABA ) and JD.com ( JD ),  China e-commerce companies. Late Wednesday, Vipshop reported revenue of $2.15 billion, up 65% in local currency year over year. Vipshop posted a 58% increase in the number of active users to 19.8 million and a 67% increase in total orders of 65 million. Earnings per share minus items of 18 cents rose 66% in local currency, beating the consensus estimate of 16 cents. Vipshop stock was down nearly 12%, near 11, in early afternoon trading in the stock market today . JD stock was down 3.5%, near 24.75. Alibaba was down 1.6%, near 66.17. Vipshop expects Q1 revenue to rise 37% to 43%, but analysts expected 44% growth. Last year’s Q1 revenue doubled from the year-earlier quarter. It did not provide an earnings forecast. “Longer term, we remain optimistic on the discount retailing market and continue to believe in Vipshop’s strategic value in the space, which is mainly driven by the company’s merchandising capability and large scale,” wrote Summit Research analyst Henry Guo in a research note. China online gaming company NetEase ( NTES ) reported Q4 earnings late Wednesday that topped forecasts, but its profit margin disappointed and NetEase stock was down 16%, near 134. China Economy An Issue For Vipshop, Others The decline in China Internet stocks come as worries grow about a slowing economy and concerns of Chinese government restrictions on trading. The Shanghai composite, China’s benchmark index, fell 6.4% Thursday. The Shenzen composite, roughly equivalent to the Nasdaq, fell 7.3%. China search leader Baidu ( BIDU ) is set to report earnings after the close Thursday, with analysts looking for guidance on China’s ad market amid an economic slowdown. Baidu stock was down nearly 4%, near 157, Thursday afternoon. Baidu this month announced that it had received a nonbinding proposal from two Baidu executives to acquire the company’s fast-growing Qiyi video unit for $2.8 billion. JD is slated to report Q4 earnings before the market open on Tuesday. The focus is expected to be on JD’s push into online-to-offline (O2O) retailing and other new businesses. JD is banking on its O2O business to help it compete in China’s burgeoning e-commerce arena vs. China e-commerce leader Alibaba and others. Tencent Holdings ( TCEHY ), China’s leader in messaging and gaming, is set to report earnings before the market open March 17. It’s traded in the U.S. over the counter. Tencent, Alibaba, JD and Baidu are the four largest Internet companies in China. On Jan. 28, Alibaba reported earnings for its fiscal third quarter ended Dec. 31 that topped Wall Street expectations. Vipshop is an online discount retailer that sells branded apparel, accessories, home goods and other lifestyle products. It specializes in so-called flash sales, in which a set number of goods are sold over a limited time. “As we diversify our product offering and further enhance the customer experience, we are confident in our ability to drive further growth and value for investors,” Vipshop CEO Eric Shen said in the company’s Q4 earnings release . Vipshop spotlighted its strength in mobile, which accounted for 82% of the total value of goods sold on its website, up from 66% in Q4 2014. It said orders for Vipshop’s core flash sales business jumped 126%. Strong growth in customers and orders in the quarter “implies strong brand awareness among consumers, despite increasing competition in flash sales category from Alibaba and JD.com,” wrote Guo.

AT&T Leads In Private Cloud, OpenStack Software: Goldman Sachs

AT&T ( T ) will likely be the biggest user of OpenStack cloud computing software worldwide, says a Goldman Sachs report on growth in private clouds. “AT&T will likely become the largest OpenStack environment in the world, as they expect to build out their private cloud to 500,000 nodes (servers) and span across hundreds of data centers,” said Heather Bellini, a Goldman Sachs analyst, in a research report. AT&T and Verizon Communications ( VZ ) in January joined Facebook ’s ( FB ) Open Compute Project , which helps companies design and build low-cost data centers with open-source software. Behind VMware ( VMW ) and Microsoft ( MSFT ), OpenStack is the third-most-popular software technology for private clouds  —  data centers that operate behind a corporate security firewall. OpenStack helps corporate IT departments manage data centers packed with computer servers. Rackspace Hosting ( RAX ) and government space agency NASA co-developed OpenStack in 2010, aiming to make the software a cloud computing standard. Many companies now back OpenStack, including Hewlett Packard Enterprise ( HPE ), Red Hat ( RHT ), Intel ( INTC ), IBM ( IBM ), Cisco Systems ( CSCO ) and Dell. AT&T plans to transform its massive network by 2020 — with software running on standard computing gear replacing specialized hardware. “AT&T hopes to run every call through its OpenStack infrastructure by 2020,” said the Goldman Sachs report. “The company believes it can take out  billions of dollars in capital spending and operating expenses from moving to private cloud as they can use commodity pizza boxes instead of proprietary Cisco boxes. The entire infrastructure will be automated, helping AT&T operate at a faster pace and bring in new services, which is easier to do when they are software-based.” AT&T is using OpenStack software provided by startup Mirantis, says Goldman Sachs. It says Verizon is also a Mirantis customer. Privately held Mirantis, based in Sunnyvale, Calif., says its investors include the venture capital arms of Intel, Ericsson ( ERIC ), Dell and Goldman Sachs ( GS ). Goldman Sachs says Red Hat and VMware are the leading providers of OpenStack software for private clouds. Image provided by Shutterstock .

NetEase Dragged Under By Sinking Profit Margin For Online Games

NetEase ( NTES ) stock plunged by double digits Thursday after the China-based gaming and Internet company saw its gross margin shrink in Q4, even as its revenue and earnings beat analyst expectations. After falling after hours Wednesday following the company’s earnings release, NetEase stock was down 16% in midday trading in the stock market today , near 134. Still, NetEase stock is up 31% over the past 12 months and is ranked No. 3 in Wednesday’s midweek update of the IBD 50 list of top-performing stocks. This is despite a tough time for many Asian stocks. Amid ongoing worries about slowing growth in China, the Shanghai composite fell more than 6% Thursday, its biggest drop in more than a month. NetEase posted a gross profit margin for its online games business of 67.2% in Q4, down from 67.9% in Q3 and 76% in Q4 2014, with the declines mainly due to increased revenue contributions from lower-margin mobile games. The company said revenue from online games, its biggest segment, more than doubled, thanks to growth in its original mobile games. The company’s “Westward Journey Online” and “Fantasy Westward Journey” came in as the top two games in the Apple ( AAPL ) iOS China app store in the fourth quarter, NetEase said. NetEase Now Has 80-Plus Mobile Games NetEase has been keeping up “a very good momentum of rolling out the games, especially the mobile games, to the market. And if you look back in the past quarter, which is the fourth quarter of 2015, we have come up to 80-plus mobile games in the market. That’s compared to about 50-plus in the third quarter of 2015,” NetEase acting CFO Onward Choi told analysts during an earnings call late Wednesday. “We saw year-over-year net revenue increases in the fourth quarter of 103.2% from online games, 68.1% from advertising services and 355.5% from email, e-commerce and others,” NetEase CEO William Ding said in a statement. Fourth-quarter revenue jumped 128% in local currency to RMB 7.90 billion ($1.22 billion), above the RMB 7.69 billion analysts polled by Thomson Reuters had forecast. The company said earnings per American Depositary Receipt were RMB 16.34 ($2.52), up 69% in local currency. Analysts had expected RMB 14.79. NetEase did not provide Q1 guidance. Analysts polled by Thomson Reuters expect net revenue to rise 126% in local currency to RMB 8.27 billion ($1.26 billion). Analysts expect adjusted earnings per share to rise 45% to RMB 13.97 ($2.14). NetEase is best known for its desktop PC games and has had a lucrative exclusive license for Activision Blizzard ’s ( ATVI ) “World of Warcraft” in mainland China since 2009. The company also develops its own games, mostly the multiplayer variety played on desktop PCs and mobile devices. NetEase is a home-field favorite on China’s gaming scene, ranking a close second to Internet titan Tencent Holdings ( TCEHY ). Looking to bring its most popular titles to more English speakers, Beijing-based NetEase opened its first U.S. office, in the San Francisco suburb of Redwood Shores, Calif., early last year. Among other Chinese names, online-discount retailer Vipshop Holdings ( VIPS ) was down 12% in midday trading Thursday after reporting better-than-expected fourth-quarter earnings but weaker first-quarter revenue guidance. Vipshop is facing more competition in the flash discount sales category from Alibaba Group ( BABA ) and JD.com ( JD ). Alibaba’s U.S. stock was down 1.5% midday Thursday, while JD.com was down 3.5%.