Bottom line: Xiaomi’s stock is probably oversold at current levels due to selling at the end of a lockup period, but will remain an underpeformer for at least the next 1-2 years until it can prove its strategy of moving up-market has legs.
Xiaomi’s stock takes a bath
It’s been a rocky week so far for smartphone wannabe Xiaomi(HKEx: 1810), which is desperately trying to show investors it’s more than just a maker of cheap, low-margin products. The company is getting set to unveil a new strategy to show it plans to wean itself from the low-end phones that are its bread-and-butter, with an upcoming announcement that it will spin off its popular Redmi line of cheaper models. (English article)
But that hasn’t stopped investors from dumping Xiaomi shares en masse over the last two days, in a major no-confidence vote over whether the company can actually execute that strategy. We should be fair here and note that the share dumping that has seen Xiaomi’s stock tank by more than 10 percent is at least partly due to the expiry of a lockup period following its blockbuster IPO last year. Read Full Post…
Bottom line: Xiaomi’s stock is likely to be volatile over the next year and could move broadly downward as investors wait to see if the company’s comeback has legs and it can move into higher-end products.
Xiaomi fizzles in trading debut
Smartphone maker Xiaomi(HKEx: 1810) seems to have become the proverbial lead zepplyn sinking further and further into the mire as it finally made its trading debut in Hong Kong. The company has been dogged by skepticism almost since the get-go of its blockbuster IPO, which ended this morning here in Asia with the stock’s official trading debut. The question from here now becomes: how far will the stock sink before it finds a bottom, and what are its real prospects over the mid- to longer-term?
Let’s jump right in with the news, which had Xiaomi shares dipping 2.3 percent when their long awaited trading began here in Hong Kong on Monday morning. The shares opened at HK$16.60, versus an IPO price of HK$17. Things didn’t get much better after that, and the stock was down to HK$16.36 the last time I checked midway through the morning session. Read Full Post…
Bottom line: Xiaomi’s adoption of Costco as its new role model and abandonment of Apple looks like a realistic move, and could better position the company to survive over the next 5 years amid a looming market shakeup.
Xiaomi eyes chic cheap image
Smartphone maker Xiaomi appears to be a company with an identity crisis, with reports that charismatic CEO Lei Jun has dumped former role model Apple (Nasdaq: AAPL) in favor a new model in US bulk-item supermarket operator Cosctco (Nasdaq: CSCO). Many will probably smile at this not-so-subtle shift at Xiaomi, which was one of China’s hottest companies just two years ago when Lei liked to think of himself as China’s Steve Jobs.
But the adoption of a new role model in Costco probably speaks volumes about how Lei sees his company going forward, as he tries to salvage its core smartphone business following a difficult last two years. That fall from grace includes a 40 percent drop in sales in its home China market in last year’s fourth quarter, causing its market share to slip to 7.4 percent, or about half of what it commanded just a year earlier, according to IDC. Read Full Post…
Bottom line: Xiaomi stands a better than 50 percent chance of stabilizing this year and reversing its 2-year-old decline, based on its push into brick-and-mortar retailing and positive reviews for its newest higher-end model.
Xiaomi builds up brick-and-mortar presence
Blame it on the Internet. That seems to be the message coming from Xiaomi, the smartphone maker that’s in a bit of an identity crisis, trying to explain its rapid descent over the last 2 years following a meteoric rise in 2014. A couple of other reports are also saying the company is preparing to roll out its own processor later this year, and have charismatic chief Lei Jun criticizing rival Huawei for lacking the “internet sensibility” needed to succeed in the online era. Read Full Post…
Bottom line: Xiaomi could return to growth mode in China this year on the strength of stronger models, while Huawei’s local market share will contract as it focuses on profitable sales and backs away from money-losing businesses.
Huawei meets reduced smartphone target
Two of China’s former smartphone leaders are in the headlines going into the weekend, casting a spotlight on the difficulties these past high-flyers face after becoming king of the world’s biggest market. In one story the faded Xiaomi is saying the worst is behind it, and the company is aiming for a relatively ambitious 100 billion yuan ($14.5 billion) in sales this year.
In the other, the still-buoyant Huawei is announcing its smartphone sales rose an impressive 29 percent last year. But that figure is still below its earlier target, and also is being revealed just a week after the company said it was abandoning its older model of growth at any cost. Accordingly, I expect we’ll see sharply slower growth this year for Huawei in China, as it looks for profitable gains over simply getting more market share. Read Full Post…
Bottom line: Lenovo’s big job cuts at Motorola could auger a write-off of the brand in the next half year, while Xiaomi’s huge offline expansion looks necessary but will further undermine its trendy high-tech image.
Lenovo slashes jobs at Moto
Two former smartphone high-flyers are in the headlines today, with PC giant Lenovo (HKEx: 992) and Xiaomi both taking steps to try and regain their former glory. Lenovo’s move looks like a major retreat for its struggling Motorola brand, which has just slashed more than half of its staff. Meantime, Xiaomi has just rolled out two higher-end models in a bid to go upscale. But what caught my attention were details of the company’s plans to sharply boost its offline presence in the latest reports.
Both stories reflect companies in transition, after each tumbled from the ranks of China’s top smartphone brands due to failure to build a loyal customer base. Lenovo bought Motorola for $2.9 billion 2 years ago and was hoping to position the faded brand as its premium product line. Meantime, Xiaomi skyrocketed to fame 3 years ago partly on an online-only sales model that helped it control costs and position itself as a trendy, cutting-edge brand. Read Full Post…
Bottom line: Lei Jun’s resignation as YY chairman to focus on his struggling Xiaomi reflects his own fading star power, while Huawei is unlikely to reach its goal of taking 10 percent of the India smartphone market by the end of next year.
Lei Jun steps down as YY chairman
A couple of smartphone stories are in the headlines on this final day of the work week, capping a flurry of industry news that reflects the turmoil in China’s overheated market. Both items are relatively second-tier news, led by the resignation of Lei Jun from his position as chairman of social networking site YY (Nasdaq: YY) to focus on reviving his ailing Xiaomi smartphone empire. The other item has market leader Huawei hyping India, where it is getting set to launch a manufacturing facility and has ambitious plans for taking 10 percent of the market. Read Full Post…
The following press releases and news reports about China companies were carried on August 19. To view a full article or story, click on the link next to the headline.
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Momo (Nasdaq: MOMO) Announces Withdrawal of Privatization Offer (GlobeNewswire)
Lei Jun Resigns as YY (Nasdaq: YY) Chairman to Focus on Xiaomi Revival (Chinese article)
Bottom line: Xiaomi’s new campaign that includes the hiring of 3 celebrity spokespeople and an aim of moving upscale looks like a move of desperation and is unlikely to produce strong results due to difficulty of making such a transition.
Xiaomi tries star power to revive fortunes
Struggling smartphone maker Xiaomi is having a bit of an identity crisis these days, as it tries to reposition itself in a bid to jump start its growth by becoming more mainstream. At the same time, the company also wants a more upscale image as part of its new look, in a nod to the intense competition that has thrust many makers of lower-end models into the red. To make the transition, the company is embarking on a major new campaign that includes the hiring of 3 big celebrities to promote the new image. Read Full Post…
Bottom line: 21Vianet could get a new privatization offer from Tsinghua Unigroup by year end, following withdrawal of a previous bid; while Xiaomi chief Lei Jun may start selling non-core assets to raise money for his struggling company.
Buyout group scraps 21Vianet bid
Data center operator 21Vianet (Nasdaq: VNET) has finally done the inevitable and formally scrapped its de-listing plan, becoming the second company to do so among some 40 US-listed Chinese firms trying to privatize from New York. This particular move has been coming for a while now, and signs appeared as early as May that 21Vianet was abandoning its privatization plans. But new Chinese media reports are casting some light on why this particular bid collapsed, and it appears the reasons are linked to struggling smartphone maker Xiaomi, whose chief and co-founder Lei Jun was helping to finance the deal. Read Full Post…
Bottom line: Smartisan is likely to close or get sold by the end of this year, possibly to Meizu, while Xiaomi’s valuation is likely to fall by up to half when it returns to private investors for new funding with a year.
No near-term IPO for Xiaomi
A couple of fund-raising stories involving smartphone makers Smartisan and Xiaomi are in the headlines, reflecting in different ways the intense pressure each is feeling due to stiff competition that could soon claim a major victim. One headline has everyone buzzing over a recent share sale to raise cash by the founder of Smartisan, a highbrow niche brand set up by China’s most famous English teacher Luo Yonghao. The other has Xiaomi chief Lei Jun saying that his company may make an IPO in 2025, in what looks like a sarcastic response to a reporter’s question. Read Full Post…
