Tuesday, August 28, 2007

XFML gets whipped for no good reason

It must be perplexing for the people at Xinhua Finance to see perceptions of themselves having shifted from exemplar of how to take advantage of China's challenging media opportunities to whipping boys. This may be linked to the current fashion in the US for assuming that all things Chinese are tainted, rotten and generally painted in lead. Over-reaction is one of the US's more endearing weaknesses.

This time, it relates to the news that the company has spent $5 million to acquire 70% of a business called Small World Television. Hopefully, this has nothing to do with that most sickeningly cloying of all Disneyland rides. Xinhua's Fredy Bush says "Small World's knowledge of the entertainment industry, strengths in TV production, in combination with our understanding of the audiences in China and our own production resources within the XFMedia platform, will enable us to develop and produce more and better programs with broad appeal to our target demographic. We expect that this acquisition will generate new revenue streams through program syndication and advertising sales."

But there's no pleasing some people. Seeking Alpha publishes a dyspeptic rant by George Gutowski who accuses Xinhua Finance of inadequate financial information in its press release which he says "gushes about the transaction and how it will strengthen and enhance everything. It’s almost like extra vitamins in my cereal."

By the last paragraph, he's getting quite fired up. The bold text is his: "These guys are more than capable of providing substantive financial information. It’s supposed to be a core competency. The omission, which was clearly intended, has too much smokescreen in it. Investors will find it hard to come to grips with".

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