Beijing-based SinoCom, which derived 89 percent of its turnover of HK$250.7 million last year from Japanese customers including NEC and Toshiba, said the aggressive acquisition drive will help its plans to float shares in Japan within three years.

"We could apply for a second listing in Japan, or it could be a spin- off of parts of our business," said SinoCom chairman Wang Zhiqiang. "However, we want to increase the size of the business before our Japan listing."

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"We wish to increase the size of the company to over 10,000 employees by 2010, from 1,770 at the end of last year," Wang said. "The quickest way for us to achieve that is through acquisitions," he added.

SinoCom was forced to turn away some Japanese customers earlier this year because of a shortage in skilled software development staff, chief financial officer Pirie Siu said.

"Our orders on hand at the end of January were already 30 percent more than our total business volume last year," Siu said. "We have already reached our limit based on current staffing levels."

Last year, SinoCom paid 13 million yuan (HK$12.58 million) to acquire a 55 percent stake in Shensoft, a Shanghai-based software outsourcing firm, and 1.5 million yuan to acquire a 60 percent stake in Hanyang.

The two acquisitions helped it increase staff by 400.

"The current interest in software firms by international investors has driven up their valuations, especially larger ones with over 500 people," Wang said.

"To avoid paying an exorbitant price, our acquisition targets tend to be smaller software companies."

Wang said SinoCom will continue to focus on providing outsourcing services to the Japan market, which generates higher profit than mainland- based clients.

"The total software outsourcing market in Japan was worth US$79 billion [HK$616.2 billion] last year, of which only US$570 million went to Chinese firms," Wang said.

"For Chinese firms wishing to get a larger slice of the Japanese market, the challenge is to find enough skilled personnel.

"Japanese firms want to outsource more to China as the costs are at least one-third cheaper."

The promise of increased future business has helped SinoCom shares, which jumped 9.6 percent Monday to HK$7.45, an increase of almost three- fold from its listing price of HK$1.77 in 2004.