Rapid Expansion in IT Services and Software Outsourcing Drives Explosive

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HONG KONG, Aug. 29 /Xinhua-PRNewswire-FirstCall/ -- Inspur International Limited ("Inspur International" or the "Company") and its subsidiaries (the "Group") (Hong Kong: 596.HK, former GEM Board Stock Code: 8141), principally engaged in the provision of IT services, software and hardware in the PRC and overseas markets, today announced its migration from the GEM Board of the Stock Exchange of Hong Kong Limited ("HKSE") to the Main Board of the HKSE ("Main Board Migration"), the Main Board Stock Code is 596.

The management of Inspur International considers that the Group has, in recent years, not only achieved a stable financial position but also an explosive profitability growth through efforts placed on business integration and transformation. Therefore, the migration of the Company's shares to the Main Board reflects the Group's outstanding operation and financial performance. The management of the Group believes that the Main Board Migration would enhance the Group's corporate image, provide access to the huge international capital market and drive the Group's future growth. In addition, Inspur International will have better flexibility in fund raising to facilitate its further business expansion.

Mr. Sun Pishu, Chairman of Inspur International said, "I am very delighted to announce the Group's Main Board Migration. We believe this will unveil a new era for the Group. Inspur Group is one of the earliest enterprises engaged in the IT industry. With our long-term commitment and devotion to the IT services industry, Inspur International has achieved remarkable growth in the past four years since its listing on the GEM Board of HKSE. In the first half of 2008, the Group's turnover was doubled as compared to same period in 2007. We expect the newly-acquired IT software outsourcing business will prove to be a significant growth driver for the second half of 2008. Inspur International, a subsidiary of Inspur Group, has become a bridge between Inspur Group and the international capital market. Upon the successful migration to the Main Board of the HKSE and having a foothold in the large-scale international capital market, the Group will strive to further capitalize on its strong research and development capability and its leading market position. Hence, to further expand the Group's market share in the IT service sector in different industries. The Group will put forth its greatest efforts, as it has always done, to become one of China's top three IT services provider and maximize shareholder value."

Business Review and Outlook

Inspur International was listed on the GEM Board of the HKSE on 29 April 2004. In September 2005, Microsoft strategically invested $25US million in Inspur International. Both of the companies had a comprehensive cooperation in the IT services and software outsourcing businesses. The cooperation has promoted Inspur's transformation from IT trading to IT services. Followed by the strategic alliance with Microsoft, Inspur International continuously invested in ERP, taxation, communications, government, finance, software outsourcing and other IT services. The Group has become a leading IT services provider in China.

In the first half of 2008, the Group recorded a turnover of HKD748,916,000 (2007: HKD221,752,000), representing a robust growth of 237.7% as compared to the first half of 2007. The Group's gross profit amounted to HKD199,610,000 (2007: HKD11,481,000), representing an explosive increase of 1,638.6% as compared to the first half of 2007. The Group's net profit reached HKD130,567,000 (2007: loss HKD4,683,000).

The management of the Group foresees that with surging market demand and the Group's established leading market position in China's IT industry, the Group's newly-acquired businesses, such as the tax-control business and ERP business will continue to grow rapidly in the coming years. Moreover, the newly-acquired software outsourcing business has started to contribute revenue to the Group from July of this year. Furthermore, the international IT services segment mainly serving the South African market will bring sound revenue contribution to the Group.

Inspur International is an innovative high-technology company, and constantly devotes to the concept of independent innovation. It adopts the Capability Maturity Model Integration Level 3 System, implements the R&D Oriented Principle, and jointly set up several laboratories with Microsoft and IBM. The Group employed over 300 outstanding foreign technicians from all over the world. Since 2008, Inspur International applied on average one patent per day, of which over 70 percent were invention patents. The Multi-layered Technological Innovation System ensures the Group has the most advanced technology in the IT industry.

Looking ahead, leveraging on the strong support from Inspur Group and Microsoft, the Group will further increase investments in the IT service business and further expand into domestic and international markets. Inspur International will strive to achieve rapid growth within a short period of time.

Business Segment Information

The Group is mainly engaged in the IT service, International IT trading and IT products trading businesses. Its clients cover different sectors, including taxation, finance, ERP, telecommunication and e-government.

(1) IT services

The Group's IT services are positioned towards the taxation, finance, ERP, telecommunication and e-government sectors. Services provided by the Group include IT consultation, hardware procurement, application software, system integration, operation maintenance and IT outsourcing services.

Enterprise IT services -- ERP

Inspur International is one of the top three ERP software providers in China. It has become the fastest growth Chinese ERP software enterprise in five continuous years. Inspur ERP is the most advanced product in China's high-tech market. 20% of China's listing companies, 35% of securities companies and 38% of enterprises controlled by the State-owned Assets Supervision and Administration Commission of the State Council implemented Inspur's ERP management software. The Group has a leading market position in the medium to large enterprises high-end ERP software market in China. Its client base includes over 500 large enterprises, such as China Petroleum & Chemical Corporation, China Railway Engineering Corporation and China Grain Reserves Corporation.

Taxation IT services

Inspur International is a leading player in China's IT service industry. It provides IT services to government, taxation, telecommunications, finance and other sectors. The Group has been the No. 1 player in terms of market share for five continuous years. For the first half of 2008, revenue from the taxation IT services segment increased by 814% as compared to the first half of 2007. The first tax-control proprietary SOC chip in the Asia-Pacific region invented by the Group has significantly lowered the Group's product costs. Market size for tax-control machines in the coming 3-5 years is estimated at around RMB30 billion to RMB100 billion in China. This will drive a rapid growth in the Group's tax-control business.

Government IT services -- E-government

Benefited from the technical cooperation with Microsoft, the Group launched e-government software. Inspur International has become the No. 1 player in China in terms of market share. The Group has secured e-government approval projects with 40 (out of a total of 400) cities in the PRC. The Group plans to increase the market share to 100 cities, accounted for 25% market share, in three years' time.

Telecommunication

China's big four telecommunication operators are the Group's clients. Meanwhile, Inspur International is China Mobile's largest OSS providers. Currently, the Group has expanded its telecommunication business into more than 10 countries in East Asia and Africa. It has gained telecommunication network enhancement contracts from Bangladesh, Burundi, Sudan and other countries. Due to the launch of 3G in China in 2008, there will be an investment hike in the OSS system. Market size of OSS systems is estimated to reach RMB4 billion.

IT software outsourcing business

Inspur International is the fastest growing software outsourcing enterprise in China. In 2007, revenue from the software outsourcing business achieved a CAGR of 200% for three continuous years. In 2008, the Group was ranked No. 38 among the "Global Outsourcing 100" as compared to No. 60 in 2007; it was also ranked the top 5 IT software outsourcing enterprises in the Mainland China. The Group's outsourcing business in Europe, America, Japan has a continuous increasing trend. It maintained long-term and stable business relationships with Microsoft, IBM, EDS, Hitachi, Oracles, Furukawa Electric, Toshiba, Sanyo and other renowned enterprises.

(2) International IT services

The Group set up the South American production base in Venezuela, providing IT products and services to the Latin American region. The Group's business has expanded into Venezuela, Cuba, Ecuador, Uruguay and other countries. This will drive an annual growth rate of over 50% for Inspur's International IT service business. In the first half of 2008, the turnover of this segment increased by 635% as compared to the first half of 2007.

(3) Trading of IT products

The Group's trading business mainly includes the provision of computer chips and components to computer and computer server manufacturers in the Mainland China. Since the Group transformed from a computer trading enterprise to an integrated IT services provider, turnover from the trading of IT products segment accounted for about 25% of the Group's total revenue in the first half of 2008.
 
 
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