The $12 Billion Investment In China Unicom Could Spur The Next Leg Up For Lumentum, Oclaro

Reuters stated in an article Friday that two of China's biggest techland companies, Baidu and, were joining up with other Chinese mega-tech companies including Alibaba and Tencent in investing a collective $12 billion in government-owned China Unicom.

The article stated that Baidu would put in $1.48 billion while would pitch in about half of Baidu's investment.

China Unicom has been struggling along with many other government-owned entities in various sectors in China. The Chinese government is hoping to hive off stakes in these government-owned entities to the private sector in an attempt to turn things around at these companies.

China Unicom is the poorest of the Chinese government-owned telco triplets, with the other two being China Mobile and China Telecom, both of which are not struggling as much as China Unicom reportedly is.

Last month Reuters had repeated the chatter but had, at the time, said that Baidu had backed out of the investment opportunity. I guess, Reuters sources think it's go-time now for Baidu and

From where I sit, investments by these Chinese mega-techs into state owned entities like China Unicom makes perfect sense.

Most government owned organizations, whether in China or in places like India, or even here in the U.S. are more often than not plagued by huge inefficiencies and usually lag far behind in terms of technology when compared to the private sector.

Companies like Alibaba, Baidu would invest in China Unicom which would them more than likely take that money and fast forward their 40G/100G deployments which seem to have been slowed down of late due to lack of funds and/or diversion of those investments by the Chinese government in other higher priority areas.

For the Chinese mega-techs it would mean a rapid increase in their potential customer/user base as more potential customers get internet access throughout the country.

For the Chinese government, the private sector investment in China Unicom would help it make the final push into a completely wired (internet access enabled) country of incredible size.

More importantly, the efficiencies and technological innovation that these mega-tech companies would introduce into the state owned enterprises would also be hugely beneficial and help turn things around at these behemoths from a profitability and modernization point of view as well.

Finally, that is where companies like Lumentum, Oclaro along with the rest of the group, which are the arms-dealers in the fiber-optic component space to the Chinese telcos, could see a tremendous surge in demand for their components and services in that country.

A win-win for all, no?

(Long oclr, bidu, baba, lite, long and short options in all)

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