QQ Tech and various other sources have reported that Shanda Interactive Entertainment Ltd.((ADR) NASDAQ: SNDA) is about to launch a private beta of its e-book reader product, Bambook.

The product site has already gone live and the private beta will start on August 12. The beta testers will be limited to 3,500 users, who will enjoy a special price of RMB 998 (US$145). Any registered Shanda users can apply to participate in the beta.

Bambook has Wifi built-in and supports all three of the Chinese 3G networks through external expresscards which will have to be purchased separately.

According to QQ Tech the OS will be based on Google Inc.’s (NASDAQ: GOOG) Android, but it also says it’s based on the Palm WebOS — now part of Hewlett-Packard Company (NYSE: HPQ) — which sounds confusing to say the least. When looking through the product specs on the Bambook website, no mention is made of the OS.

Probably the most novel feature is an optional solar charging accessory, which makes the product always available on-the-go. Of course we’ll have to see more details of this accessory to see if it is practical in actual use.

If you clicked on the product site link, you’ll probably notice some subtle similarities in design to Apple’s website. I think the bookstore section reveals the Apple influence even more, as it looks iTunes inspired. The actual content offerings are based on Shanda’s strong online literature presence, which boasts “more than 3 million titles, and more than a million online writers adding 100 million words of original content daily”.

While Shanda is obviously comparing Bambook to Amazon.com, Inc.’s (NASDAQ: AMZN) Kindle in hardware design and features, the offerings are really quite different. Shanda’s online literature properties own rights to some big name authors, but my understanding is they are by and large driven by user-generated content, such as fan-fiction. A casual look at the bookstore suggests majority of the books are such works, which would be updated daily / weekly, so it’s very much a subscription type of consumption.

While there are some classics and some contemporary books by professional writers, the offering seems quite limited. For instance, I did a search for the 14 novels of Jin Yong, arguably the best-selling Chinese author ever, and I only found tons of fan-fiction (maybe they need a better search function). Kindle, on the other hand, is very much about New York Times bestsellers. I do think there’s a fundamental difference in the business model.

Which brings me to the issue of price. While QQ Tech contends the RMB 998 price-tag is much lower than competitors’ offerings, which easily go as high as RMB 4000 (US$ 580), I still think it’s too high. It’s about the same price as the Kindle and Barnes & Noble, Inc.’s (NYSE: BKS) Nook, which means if you look at it in purchasing-power-parity terms, it’s significantly more expensive than the Kindle. Fundamentally, I don’t see people spending RMB 998 to get a single function device with a black and white screen, and which is really only good for reading fan-fiction. Of course, pirated books would be a big use case – but even then, physical pirated books sell for RMB 10 (US$1.4) on the street, so the price gap is pretty substantial – a Kindle is about 15 times the cost of a paperback, while the Bambook would easily be in the 50-100x range. Which is why Shanda is probably doing such a small beta.

This is one of the most entertaining Internet stories to come out of China in a while, and it is really full of Chinese characteristics – all the bad ones, unfortunately. Tang Jun, who was once heralded as the “emperor of professional managers” for his high profile roles – former president of Microsoft China (NASDAQ: MSFT) and ex-CEO of Shanda Interactive Entertainment Ltd. ((ADR) NASDAQ: SNDA) – is currently at the center of a massive controversy over his diploma.

QQ has a short summary (link in Chinese) of the event’s development – on July 1st, Fang Zhouzi, a biology PhD who is famous for exposing plagiarism and fabrications in Chinese academia, commented in a series of posts on his Sina Weibo (microblog) that Tang Jun had lied about his education and his patents in his autobiography, “My Success Can Be Replicated” (book name my translation). In the book, Tang had said he held a PhD from Caltech.

Tang initially refused to respond to Fang’s allegations, but on July 6 he stated in public that he has never claimed to hold a PhD from Caltech; instead, his doctor’s degree is from Pacific Western University. Unfortunately, that only fueled the flame, as Fang quickly pointed out that Pacific Western University is a “fake” university with a controversial history and was shut down by the State of Hawaii (check out the wikipedia link) – essentially, this is an institution engaged in the business of selling diplomas and wasn’t accredited. Tang then responded that he went to the other Pacific Western University, the one in California, not in Hawaii; but Fang quickly responded that the two shared the same ownership prior to 2006 (as the wikipedia articles show).

Then Chinese netizens jumped in and started digging out other dirt around Pacific Western University, and in the past week netizens have been circulating “manifests” of notable Chinese businessmen who are rumored to be Tang’s alumni at that institution.

Perhaps also very damaging evidence is Tang’s own LinkedIn profile. Currently the education section lists “Pacific Western University, PhD”, with no timeline attached; but just a few days ago the education section looked like this:

(image courtesy of Dongxi.net – this is an edited version of the screenshot that has basically been cropped to highlight the education section of the profile)

Notice how on the education section it still clearly stated a PhD from California Institute of Technology. A search on Baidu Inc. ((ADR) NASDAQ: BIDU) for the keywords “Tang Jun linkedin” (the name in Chinese) also reveals a whole range of blog posts and discussions which expose Tang’s LinkedIn profile change.

Fang also raises the interesting issue of the legal repercussions of Tang’s controversy – he points out in Shanda’s F-1 filing with the SEC before its IPO, it states,

JUN TANG has served as our president since February 2004. Prior to joining us, Mr. Tang served as the president of Microsoft China Co., Ltd. from March 2002 to January 2004 and the general manager of Microsoft Asia product support and service and Microsoft Global Technical Engineering Center from January 1998 to March 2002. Mr. Tang holds a doctorate degree in electrical engineering from University of Pacific Western, a doctorate degree in electronics from Nagoya University, Japan, a master’s degree in electronics from Nagoya University and a bachelor’s degree in physics from Beijing University of Posts and Telecommunications.

Obviously, this is another version of his education – the part where it states that he has a PhD from Nagoya University. It doesn’t indicate that in either the current or earlier version of his LinkedIn profile. Fang therefore raises the interesting question of whether Tang is liable for lying to the SEC.

Questions about Tang’s fake diploma and personal integrity aside, what I find to be really interesting is the surprisingly divided reaction of Chinese netizens. Indeed, there’s one camp of people who are vociferously defending Tang, saying “don’t ask about a hero’s roots”, or “you shouldn’t judge a manager by his education background”. As the other camp rightfully points out, we’re not attacking Tang because of his (relatively) poor education achievements; we’re attacking him because he lied about it.

But the drama doesn’t end there. In the past few days, discussions have intensified around the mystery of Tang’s education history in Japan – he went there to pursue a PhD, but according to most versions of his education background, he did not finish the PhD and went to the US instead in 1990. There were immediately speculations that he went to the US to get what Chinese netizens call a “blood card” – a green card issued by the US to Chinese students abroad who sought political asylum from the Tiananmen incident of 1989.

On this last point, I don’t think there is enough data to support the claim, and even if it were true, I don’t see it as a breach of integrity (I think a lot of Chinese people look at such cases as profiting from the bloodshed). But a consequence of such discussions is that there has been a crackdown on Chinese microblogs, for the obvious reason that the June of 1989 is a banned topic. So right now all the major microblogs are running with a big “beta” sign on the front page, and trending topics of Tang Jun are being harmonized (they have resurfaced on Sina).

Interestingly, netizens are now speculating that Tang has used his influence to get the authorities to censor the topic – another conspiracy theory thrown into the mix. I think the censorship is still more to do with discussions of 1989, rather than Tang’s powerful connections. But such are the dramatic twists of everyday Chinese Internet soap opera.

And before I end – the most recent rumor is Tang’s current employer, Newhuadu Industrial, has fired him. Totally unsubstantiated, but I won’t be surprised if Tang does lose his job because of this.

Late last week a press release announced that Hurray! Holding (NASDAQ: HRAY), which was acquired by Shanda Interactive Entertainment Ltd.(NASDAQ: SNDA) earlier this year, will acquire Ku6.com (in Chinese), the third largest video site in China. The deal is an all-stock transaction, and Ku6 will retain its brand as a subsidiary of Hurray!

Chinese media ifeng has provided updates on details of the deal, which is estimated to be $36.98MM in value (calculated using HRAY’s $5.11 stock price and the 723MM ADS shares it will issue to finance the deal). This is notably lower thanearlier reported figures, but it’s probably a good exit regardless for Ku6, which has really fallen behind its two bigger Chinese competitors, Tudou (in Chinese) and Youku (in Chinese). According to industry estimates, Youku and Tudou command 29.5% and 29% viewership market share respectively, while Ku6 has only 5.3%.

Ku6 has announced that it will ramp up its operations, aggressively increase its headcount and also move into a new office building in 2010. In addition, current employees can convert their options into HRAY shares, a portion of which can be cashed out immediately, “which was a pleasant surprise to the employees of a 3-year old firm that is yet to make a profit”, reports ifeng.