INTERNET: Tech Firms Welcome Lunar New Year With Realism, Sex Toys

Bottom line: A subdued mood at Chinese high-tech firms’ New Years parties reflects a growing realism that the days of breakneck growth may be over for many, due to stiff competition and a slowing domestic economy.

Subdued mood at Year of the Monkey parties

The Year of the Monkey is still more than a week away, but already online gaming giant NetEase (NYSE: NTES) is taking the prize for most unusual New Year’s party for including sex toys among its cache of prizes during the lottery at its annual bash. Meantime, stumbling smartphone sensation Xiaomi ushered in the New Year with an unusual dose of new realism from chief Lei Jun, who also added a bit of historical revisionism in a bid to cheer up staff at his annual party.

Theses yearly parties are a good indicator of how companies feel about their performance in the previous year, and also offer some insight into their mood going into the year ahead. A media report sums up highlights from some of this year’s biggest parties, which typically bring together hundreds and sometimes thousands of employees at a single event to celebrate the New Year as a corporate “family”.

I’ve attended a number of these parties over the years, and remember the excess and lavish spending at one particular party by PC giant Lenovo (HKEx: 992) that was quite typical in the first decade of the 21st century when Chinese tech firms were rising fast. While the mood is still upbeat at most of these parties, as one would expect, an element of realism is also creeping in as growth slows sharply for many companies.

Xiaomi probably best reflects that new realism, having experienced explosive growth in the first 2 years of its life, only to see the halcyon days come to an abrupt end last year. Xiaomi’s talkative chief Lei Jun was upbeat at his company’s annual party this year, though he was also quite realistic in acknowledging its slowing growth. (Chinese article)

The company sold 70 million smartphones in 2015, up just 15 percent from the previous year and abruptly ending its rapid but brief rise characterized by 2 years of triple-digit growth. Lei used this year’s New Year’s bash to encourage his employees to be happy in the moment, and not fixate too much on targets and numbers. In keeping with that theme, we have yet to see any mention of new sales targets for Xiaomi in 2016.

Lei also engaged in a bit of historical revisionism, saying his company had failed to meet its target set early in 2015 for selling 80 million smartphones last year. Xiaomi had actually set an original target of 100 million smartphones at the start of the year, but later lowered that to 80 million after it became increasingly clear that its sales were slowing sharply. But no one seemed to notice that slight tinkering with the past.

Sexy Prizes

Next there was NetEase, which surprised its employees by including an inflatable doll for men, and a vibrator for women, among the prizes in the lucky draw lottery that is a staple feature of every New Year’s party. Media are saying the prizes represent the “homebody” nature of NetEase founder Ding Lei, though I suspect they were just an offbeat effort to inject some fun into an otherwise formal event.

Among the other parties profiled in the report, another notable moment occurred at the festivities staged by software specialist Qihoo 360 (NYSE: QIHU). In that instance, founder Zhou Hongyi personally offered to reward innovators with his personal shares amounting to 10 percent of the company, worth $1 billion. (English article) The move certainly looks generous, but also reflects the intense competition in almost every aspect of China’s Internet that is forcing companies to look for advantages wherever they can find them.

While many companies are becoming more realistic, one of the few that still has reason to celebrate was Tencent’s (HKEx: 700) hugely popular WeChat instant messaging app, which gave an iPhone 6s to all of its employees. WeChat put its generosity on display by stacking up boxes of new iPhones throughout the hall where its party took place. Such largess is certainly a dying breed in the current climate, but does show that at least some companies have reason to be bullish in the upcoming Year of the Monkey.

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