Surprise at E-World's UK deal

E-World, a profitable electronic and system technology design company and a major developer of a Chinese laser disc standard, surprised the industry by selling an almost 70 per cent stake to a British counterpart, while the Enhanced Versatile Disk (EVD) struggles to become accepted as an international standard.

China's traditional DVD player industry has been witnessing fierce competition. It is suffering because it is forced to pay foreign patent magnates billions in patent fees and as a result is striving to develop replacement high definition video disk technology.

EVD is China's standardization effort to substitute the costly DVD player industry. China hopes that EVD will eventually move into the upstream laser storage industrial chain.

This development challenge has been taken on by the Beijing-based E-World.

London-headquartered British investor New Media Enterprise said it had reached an agreement with E-World Technology to buy a 69.09 per cent stake in the latter for US$8.5 million and 40 per cent of its shares.

E-World, in its push to standardize EVD, faces competition from two international disk storage standard candidates Blue Ray and High density DVD. New Media Enterprise is a listed company on the Over the Counter Bulletin Board (OTCBB) of the NASDAQ Stock Market in New York.

The British firm also said it planned to return to the national market of the NASDAQ early next year after the E-World deal.

E-World and its President Hao Jie were not immediately available for comment on the deal.

Zhang Baoquan, a Beijing real estate tycoon and a supporter of EVD currently building EVD cinemas and disk shops, said the deal had taken place but expressed his surprise at it.

E-World, the owner of EVD's key technologies and the EVD trademark, has been strongly supported by the government; it received a grant of US$1.235 million for scientific research from the State Economic and Trade Commission.

The EVD standard was officially announced as China's National Standard for High Definition Versatile Disc by the Ministry of Information Industries in February and E-World has since been granted 9 patents for its system technology.

If E-World becomes part of a British company, it is perhaps a move the government did not expect when providing support at the beginning.

However, Eagle Zhang, president of research firm Analysys International, said the Chinese should not form opinions on the deal from a nationalistic point of view.

"What we lack most is international co-operation and that's why many of our standardization proposals like EVD, AVS (Audio Video Standard), and wireless security standard WAPI cannot really become accepted as international standard," he said.

But he did express concern that working with a small company with limited capital resources and industrial influence may not be a good choice for co-operation.

New Media Enterprise said in its annual report for the period ending on June 30 that it had less than US$200,000 in cash.

Source: China Daily