Business Essentials for Professionals


Xiaomi Won’t be Hit by Shrinking Smartphone Slaes, says the Company

Xiaomi Won’t be Hit by Shrinking Smartphone Slaes, says the Company
Since for the fact that the profit growth of China’s Xiaomi will be driven by sales from smart home devices as well as revenue from its software eco-system, therefore the sharp drop in smartphone sales for the Chinese company will not have a major impact on the company, reported the media quoting a senior executive said.
At a time when Xiaomi was China's best-selling smartphone maker and looked set to make a splash worldwide, the company had been valued at $46 billion in its last fund-raising in 2014 - making it briefly the world's most valuable start-up.
According to research firm IDC, doubts were raised about the valuation of the company after its third-quarter China smartphone sales tumbled 45 percent and after it missed its global smartphone targets by 12 percent last year.
Xiaomi was not in any desperate need to raise more funds or see any point in doing so at a valuation of less than $46 billion as the company’s business model was not based only on money made from handset sales per se, said the global vice-president of the company, Hugo Barra.
"Basically we're giving [handsets] to you without making any money… we care about the recurring revenue streams over many years," he told Reuters in an interview.
"We could sell 10 billion smartphones and we wouldn't make a single dime in profits," he added.
The key earning driver for the company is its wide range of home that range from appliances such as air and water purifiers, to rice cookers, Xiaomi has been repeatedly emphasizing even though the Chinese company discloses very little of its profit and revenue figures.
This year, the firm expects sales of smart home devices to double to 10 billion yuan ($1.5 billion), Xiaomi Vice President Liu De said in April.
The company is already making a foray into the U.S. market through the launch of its  first device capable of roaming on the country's 4G networks next month even as the company has invested heavily in India and Southeast Asia.
While laying the groundwork for direct sales to U.S. consumers, Barra said they are first targeting Chinese users traveling in the U.S.
He said that through the launching of a new product during the event, Xiaomi will also make its debut at the Consumer Electronics Show in Las Vegas in January.
LeEco, Xiaomi’s rival, is cash strapped. Months after the company launched its first flagship phones in the United States, a public letter from the CEO of the company Jia Yueting revealed that LeEco was facing a crippling shortage of funds and this is the exact time that Xiaomi is taking its tentative first steps in the U.S. smartphone market.
"There's no pressing need to do an IPO or even a private round," said Barra brushing off concerns that Xiaomi could face a similar funding shortage. "We are not a flash in someone's PR pan."

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc