Digital China Holdings, an IT vendor, said it was looking at acquiring targets in China's IT service sector and AsiaInfo-Linkage Inc. (NASDAQ:ASIA), hiSoft Technology International (NYSE:HSFT) or VanceInfo Technologies (NYSE:VIT) could be the beneficiaries of this development.

While no specific details are available, Digital China's Chairman did talk about acquisition criteria, which includes:

* IT service vendors

* Consideration of cash flow position and profitability

* Ability to generate considerable revenue

We believe VIT, HSFT or ASIA may fit their profile, Susquehanna financial analyst, James Friedman, wrote in a note to clients.

The analyst said, among his covered companies, only VIT, HSFT and ASIA were cash flow positive and met the above threshold revenue criteria. The analyst expects Digital China's revenue criteria as $350 million.

We would note that DC, ASIA and VIT have the same large customer, China Mobile (22 percent of Services revs for DC, 55 percent for ASIA, top 10 for VIT), Friedman said.

The analyst also said Digital China's headquarters in the Haidian District of Beijing were roughly a mile from VanceInfo and hiSoft in the Zhongguancun Science Park.

Shares of AsiaInfo Linkage and hiSoft closed Friday's regular trading session at $8.54 and $12.14, respectively on Nasdaq. Shares of VanceInfo Technologies ended Friday's trading at $12.52 on NYSE.