Founder (Hong Kong) is engaged in software development and systems integration for banks, publishers and retailers. Merrill Lynch recently upgraded the stock to an intermediate-term buy from reduce, with a 12-month price target of $4.30. The upgrade is due to the company's strategy for developing electronic media software, with operating results expected to improve as the restructuring programme has been completed. Merrill Lynch believes the company's advantages lie with its strong research and development team of 400 people focusing on media applications in the mainland. The company also has a first-mover advantage, with a dominant share of mainland press and publishing industries. It has tailored its products for the mainland market, making it more difficult for potential new entrants. Founder has benefited from the agreement on the mainland's entry to the World Trade Organisation. Foreign companies will be allowed to own a 49 per cent stake in mainland Internet firms within two years, which will facilitate two joint ventures with Yahoo!. One joint venture is to set up a portal for a mainland audience. The second is a company providing Internet-enabling technology. Merrill Lynch believes staff morale has improved under new management. Stephen Seawright
