The onset of the Chinese “killer Apple” chokes
The President LeEco addressed an email to employees in which he said about the lack of funds in the company and promised to moderate the pace of its development. The cause of the problem — the acquisition of a television provider LeEco automotive and smartphone businesses at the same time.
The rapid development in several areas depleted of funds Chinese brand LeEco, writes Cnews. This was stated in a letter to employees of the company by its Chairman Jia Watin. Jia apologized to shareholders and promised to slow the rate of growth of the business. In addition, the millionaire has pledged to reduce its own income up to 1 yuan (about us $0.15).
In his letter, Jia admits that LeEco “blindly rushed forward” and “overly inflated global strategy”, while its “capital and resources were limited.”
Jia also notes that “no other company has the experience of being in the ice and flames at the same time,” which, apparently, must describe the diversification of the business, which has consistently pursued a brand. The company was initially known as a television operator Leshi Internet Information & Technology (LeEco), but subsequently began to rapidly expand the range of activities. This is evidenced by the construction of a plant for the production of electric vehicles in Nevada in the United States, which LeEco plans to invest about $1 billion over 10 years. Jia has repeatedly stated that the plant would become a successful competitor of the company Tesla Motors.
The development of electric cars deals California company Faraday Future, which is also part of the holding. This company Jia has invested nearly $300 million in personal funds. The company staffed by former employees of BMW, Ferrari, Chevrolet, Lamborghini and Land Rover. The first electric car LeEco needs to be on the market in 2017.
In addition to the automotive industry, the brand seeks to explore other unfamiliar areas. In 2015, LeEco has entered the market of mobile technology, and in July 2016, announced the purchase for $2 billion manufacturer of Vizio televisions from California, USA. In August of the same year the company took a total of 28.9% of the shares of the smartphone manufacturer Coolpad, which are bought in small portions.
Stock various departments LeEco dropped in price immediately after the publication of the letter Jia. Paper television service Leshi Internet Information & Technology trade 7% cheaper. Shares of smartphone maker Coolpad has fallen by 25%, reaching the lowest level since February 2014.
According to Jia, now the company expects the spending cuts and the focus on core business instead of purchasing new. LeEco accused of pursuing expansion in other areas on a risky business model. The only consistently profitable company of the holding company remains Leshi, said the financial Director of the brand Winston Chang (Winston Cheng). In other areas of Jia to invest against the interests of the unit.
Problems of expansion Xiaomi
Simultaneously with LeEco great difficulties faced by Xiaomi company, another smartphone manufacturer from China, which in Russia began in 2014, the Sales of Xiaomi smartphones fell in the second quarter of 2016 by 40% compared to last year. It is noteworthy that in October 2016 LeEco and at the same time Xiaomi has opened its first flagship stores in Moscow, which is evidence of attempts at rapid expansion in foreign markets.
At the beginning of its existence, the brand Xiaomi has quickly gained popularity by offering users a device with premium specifications at affordable prices. Soon, however, this tactic was adopted by companies like Vivo, Oppo, OnePlus and Huawei, then the advantage was lost, according to the resource the International Business Times.
Another mistake Xiaomi — excessive concentration on budget models. For example, the company moved to a later date the production of premium Mi Note 2 to focus on the budget Redmi Note 3. And this happened when the Chinese consumer was ready to “pay more”. The low level of commitment to Chinese buyers of the same brand also contributed to a decline in sales.
To enter the European and American markets Xiaomi is stopping the use of the achievements of other companies, not backed by licenses. Even in India the company faced a patent suit from Ericsson, and in Europe and the United States “Chinese Apple” expects more such lawsuits.