INTERNET: LeEco Treads on Yahoo’s Silicon Valley Turf

Bottom line: LeEco’s plan to develop a major Silicon Valley office on land purchased from Yahoo reflects the rapid rise and global ambitions of the former, and the accelerating decline of the latter. 

LeEco eyes new Silicon Valley home

A new report involving a Silicon Valley land deal is shining a spotlight on Chinese Internet giant LeEco (Shenzhen: 300104) and US counterpart Yahoo (Nasdaq: YHOO), illustrating the rapid rise of the former and accelerating descent of the latter. The deal itself is rather mundane, involving a 48.6 acre plot of undeveloped land that Yahoo bought a decade ago for $100 million near its Silicon Valley headquarters. LeEco is reportedly eyeing the land for development of a new campus, some 2 years after it set up its original dual US headquarters in Silicon Valley and Los Angeles.

LeEco, formerly known as LeTV, is one of China’s fastest rising online entertainment companies that is increasingly moving into a wide array of new product areas. Two of those are e-commerce and smart cars, and I suspect the Silicon Valley expansion would house both of those initiatives. LeEco is also moving into film production, though that element of its US efforts is probably based out of its Los Angeles office.

It would be fun to speculate that this kind of land purchase could presage a potentially much bigger deal that might see the ambitious LeEco gobble up Yahoo completely. After all, Yahoo is a company in turmoil and this land sale reflects its current downsizing and also potentially a need for cash. But frankly speaking I doubt that LeEco would be interested in Yahoo, and more likely Chinese suitors could include e-commerce giant Alibaba (NYSE: BABA) or search leader Baidu (Nasdaq: BIDU).

All that said, let’s circle back to the latest headlines and try to figure out what they mean for Yahoo, LeEco and any possible future tie-ups between the pair. The original report behind the stories came from the Silicon Valley Business Journal, and contains a detailed map of the site for sale and adds no deal has closed yet. (English article; Chinese article) Back when Yahoo was still a strong company, it had created plans and received permission to develop the site as a subsidiary campus for more than 12,000 workers.

Much has happened to Yahoo since that time, but the main story is that the company has steadily lost share for its original search business to Internet titan Google (Nasdaq: GOOG). That decline has seen Yahoo bring in a steady stream of new chief executives, each trying unsuccessfully to reverse the company’s slide. Shares of the current Yahoo have become a plaything for stock speculators and activist investors, as the company shops itself around to potential buyers.

Meantime, LeEco has expanded aggressively over the last 2 years beyond its roots as one of China’s oldest providers of an online video service similar to YouTube. But unlike its US counterpart, LeEco has always included hardware as part of its business model, starting out by selling Internet-ready TVs as part of the pitch for its online video services. More recently it has added smartphones and even Internet-equipped cars to its product line, and has also invested aggressively in content production.

E-Commerce and Cars

Two of LeEco’s biggest recent initiatives have been the launch of an online shop, called LeMall, which now has full functioning stores in China, the US, Hong Kong and a beta store India. The US shop started off with just a couple of products with its launch last fall (previous post), and now contains 5 products that are all accessories costing $40 or less. But the site also contains a smart TV model “coming soon” that will sell for $799, implying that LeEco is planning to offer a US version of its online TV service.

At the same, LeEco has been moving aggressively into smart cars since announcing its intent to develop that area more than a year ago. That drive has seen the company display concept cars at China’s largest annual auto show over the last 2 years. Earlier this year it also launched a tie-up to make green cars with British luxury car maker Aston Martin, and it also signed agreements with 6 Chinese car makers who will install its smart car entertainment system in their vehicles. (previous post)

I’ve previously said that LeEco may be expanding too fast, and this latest move to build a major Silicon Valley campus seems like an extension of its hyperactive growth. I expect the company will aim to house its global e-commerce and car initiatives in the office, if and when it buys and develops the land. But such development would probably take at least a couple of years, and it’s quite possible LeEco will suffer big headaches from its overzealous expansion before it can actually finish developing a new campus on the Yahoo site.

Related posts:


(Visited 165 times, 1 visits today)