UPDATE 2-Chinese game firm says in talks with Apple

Fri Aug 6, 2010 2:05pm EDT

Related Topics

* Apple won't comment; analysts skeptical

* Chinese company, Handseeing, designs online games

* Handseeing exec says decision could come by September (Recasts; adds analyst comment, background)

By Kelvin Soh and Gabriel Madway

HONG KONG/SAN FRANCISCO, Aug 6 (Reuters) - Apple Inc (AAPL.O) is in talks to buy Chinese software maker Handseeing, an executive at the Chinese company said on Friday, although analysts expressed skepticism about such a deal.

It would be the iPhone maker's first acquisition in China.

"We should have a decision in about one or two months," Tian Bo, Handseeing's vice-president for operations, told Reuters by phone. "They're still talking about it and it's not quite settled yet right now."

He declined to give details.

An Apple spokeswoman declined to comment.

It is unclear why Apple might be interested in Handseeing, a little-known gaming company headquartered in southwest China's Sichuan province. It designs online games based on popular Chinese folklore.

Handseeing is not a familiar name to analysts in the United States, and some were unconvinced that a deal was actually in the works.

ThinkEquity analyst Atul Bagga said he was not sure why Apple would want to enter the game design market.

"Apple is not in the content business, they're in the platform business. If they do that, they anger all the game developers. So I just can't see it," he said.

Apple is launching a social gaming network that runs on the iPhone and iPad but has not indicated it wants to make its own games.

It is almost unheard of for an Apple acquisition target to make public the negotiations, as Handseeing has.

Apple, renowned for its obsession with secrecy, occasionally makes small-scale acquisitions to acquire technology or talent, but it rarely announces such deals.

BGC Partners analyst Colin Gillis said Google Inc's (GOOG.O) reported effort to push into social games is fueling the rumor mill.

"Google is on a gaming tear, their hand is pretty obvious. Whenever that happens, you'll get speculation about a response," he said.

Handseeing, founded in 2005, got an investment of 50 million RMB (roughly $7 million) from venture capital firm Green Pine Capital Partners in 2009.

The company has also worked as a technology partner with Sun Microsystems.

Apple is trying to grow its presence in China. The company operates two retail stores there, in Beijing and Shanghai, and has said it is on track to have 25 such outlets in China by the end of next year. It also sells its iconic iPhone through mobile operator China Unicom Ltd (0762.HK).

Apple has nearly $46 billion in cash, the biggest cash hoard among U.S. technology companies and roughly equivalent to a fifth of its total market capitalization. [ID:nN29226784]

Unlike tech rivals such as Hewlett-Packard Co (HPQ.N) and Oracle Corp ORCL.O, Apple has made few major acquisitions in the past, primarily because most of its products have been developed internally. (Reporting by Kelvin Soh and Gabriel Madway; Editing by Doug Young, Chris Lewis and John Wallace)

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