Digital China sees interim turnover surge

Digital China Holdings Ltd, China's largest provider of integrated IT services by sales revenue, reported that turnover surged 23.87 percent year-on-year between April 1 and Sept 30, hitting a record high of HK$34.14 billion ($4.4 billion) on Nov 15. The company also announced that annual sales revenue is expected to reach 100 billion yuan ($15 billion) within the next five years as a result of China's "smart city" strategy, a keystone of the 12th Five-Year Plan (2011-2015). Digital China listed in Hong Kong on June 1 2001, after being spun off from the Legend Holdings Ltd, the parent of Lenovo Group, China's largest PC maker and the second-largest globally by market share. After the spinoff, and in contrast to Lenovo, the company focused mainly on building distribution channels. As a distributor of products for companies such as Apple Inc, and with more than 700 stores, Digital China earned 54 percent of its sales revenue, from distribution activities in the period between April and the end of September. "However, that 54 percent of sales revenue only provided 36 percent of the profit," said Yan Guorong, Digital China's president. "We plan to shift our emphasis to IT solutions for better profits next year," he said. To transform itself from a dealer to a provider of IT solutions, the company formulated a five-year strategy of developing industry application software, IT infrastructure, smart devices and mobile solutions, enterprise application and infrastructure, smart-city operational services and collaborative industries. All of these areas are highlighted in the country's 12th Five-Year Plan. The smart city strategy is a complex technology system that includes the management of digital data in both the government and private sectors. Lin Yang, Digital China's CEO, said the company started the transformation this year by implementing its own smart city strategy. However, Yan emphasized that smart city development is still at an early phase for both the company and the government. According to China's National Bureau of Statistics (NBS), the country's urbanization rate was nearly 50 percent in 2010 and the NBS predicts that it will reach 65 percent by 2030. "Along with the development of urbanization, Chinese cities have faced many problems in the field of information technology. Therefore, we see huge potential in developing platforms to provide IT solutions which can later be extended to operational services," said Yan. During the six months running up to Sept 30, the company reported turnover of HK$3.53 billion for its services business, growth of 33.1 percent year-on-year. That was mainly attributable to the company's change of strategy, including the smart city program that was introduced at the beginning of the company's current financial year. Between April and September, revenues from financial services grew 58.17 percent year-on-year, while those accrued from providing technology services for the government rose 49.04 percent.