Fitbit – Boredom bites.

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User indifference likely to drive further estimate cuts in 2017.

  • Fitbit issued a horrible profit warning as users appear to be becoming bored with fitness tracking despite Fitbit’s efforts to drive engagement through the ecosystem.
  • Q4 16A revenues / Adj.EPS will be $572m – $580m / LOSS$0.51 – LOSS$0.56 compared to previous guidance of $725m – $750m / $0.14 – $0.18.
  • The new revenue estimate is 22% below where the company thought demand would be in Q4 16 and 27% below the consensus estimate of $736m.
  • The company also took the knife to its 2017 estimates with revenues / Adj-EPS of $1.5bn – $1.7bn / LOSS$0.22 – LOSS$0.44 compared with consensus at $2.38bn / $0.43.
  • The company blamed market softness for the shortfall and promised a recovery in H2 2017 but only because the year over year comparisons are much easier given the awful H2 2016 the company has had.
  • I think that Fitbit has three major problems:
    • First: It’s sensors are not accurate enough to be of any use beyond recreational health.
    • I believe that all health trackers suffer from this problem and until these devices are far more accurate, they will all have difficulty in expanding into the huge opportunity represented by health monitoring.
    • Phillips makes some bold claims in this area but I have yet to see hard evidence that its products are meaningfully more accurate than anyone else’s.
    • Second: The issue with wearables being a solution looking for a problem (see here) appears to be getting worse.
    • This is because the health tracking that these devices offer is simply not good enough and hence many devices end up gathering dust in a drawer after a couple of months.
    • Fitbit does far better than most but with only 23.2m active users of its devices, there are still a large number of devices out there that are no longer on the wrists of users.
    • Furthermore, from an ecosystem perspective, Fitbit is still miles adrift of the 100m active users that RFM estimates are needed for an ecosystem to hit critical mass.
    • Third: Fitbit is being eroded from both ends with Apple Watch at the top of the market and cheap Chinese health trackers at the bottom.
    • This issue is exacerbated by the fact that Fitbit has offered no real innovation in health tracking for some considerable time which has meant that the cheaper Chinese versions are just as good in terms of generating raw data.
    • If Fitbit was able to reliably track calorie consumption, blood pressure or blood sugar, then this would give it something with which to fight back against commoditisation, but of this there is no sign.
  • On top of the warning, Fitbit has also pledged to cut $200m of OPEX in 2017 with way less than 10% of this coming from headcount.
  • This means that certain aspects of sales and marketing and some research and development projects are also going to be cut.
  • This will make it even harder for Fitbit to come up with a winning innovation with which to restore its gross margins.
  • Consequently, the outlook for Fitbit in 2017 looks very difficult and I suspect that it may be taking the knife to its estimates yet again in 2017.
  • Just like GoPro, Fitbit remains one to be assiduously avoided in 2017 as both have further to fall leaving them open for acquisition (see here).

Google Enterprise – No G man.

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G Suite and Chromebook upgrades are too little too late.

  • Functionality upgrades to the mobile version of G Suite (Office-like apps) and enhancements the Chromebook proposition are not likely to alter the downward trajectory that I see for Google in the enterprise.
  • Google has announced upgrades to the iOS and Android versions of Docs and Sheets that include more advanced editing and formatting.
  • It has also moved forward with its intention to enable Android apps on Chromebooks by stating that all Chromebooks launched in 2017 will be able to run Android apps (although not all of them will be able to do so right away).
  • In theory both of these moves could help to enhance the appeal of using Google for Digital Work as well as Digital Life but I see a number of problems.
    • First: Ever since Microsoft released free Office 365 apps for iOS and Android, I feel that Google has been losing the Digital Work game.
    • I think that this is because Office 365 with basic editing being free on iOS and Android obviates the reason to use G Suite at all.
    • I think that the same goes for the other Office alternatives such as Libra Office and so on.
    • Office is by far the leader when it comes to functionality and compatibility and now that it is free in simple user cases, it makes very little sense to use anything else.
    • Second: I do not think that adding Android apps to Chromebooks will do very much to enhance their appeal.
    • This is because the vast majority of Android apps are designed to be used with a device that uses touch as its input mechanism rather than a keyboard and mouse.
    • It is also worth noting that enabling Android apps on Chromebooks will have the side effect of bringing Office 365 onto the platform.
    • Consequently, I think that the user experience of Android apps on Chromebooks will be substandard, pushing users back to their smartphones and tablets to use them.
    • Furthermore, I think that the keyboard and mouse input system is increasingly the domain of the content creator with content consumers overwhelmingly finding touch based devices cheaper and easier to fulfil their requirements.
  • Consequently, I do not see either of these actions improving the appeal of Chromebooks nor increasing the use of Google Docs by content creator users.
  • I see content creators preferring Windows or Mac OSX with a keyboard and mouse and content consumers sticking to iOS and Android on a touch based device.
  • I think that the combination of Office 365’s superior functionality and the free basic functions have obviated the reason to use anything else which will lead to a long-term decline in G Suite.
  • One area where Google has a chance with the enterprise is in the cloud, but there it is already very far behind both Amazon and Microsoft and will also have to contend with Alibaba’s clear intention to take AliCloud international.
  • The net result is that I continue to see almost all of Google’s growth remaining in consumer where mobile and YouTube are still growing very nicely.
  • Finally, I think that this growth is already fully priced into the shares leaving me still preferring Microsoft, Baidu or Tencent over Alphabet.

GOOG, MSFT & INTC – Cloud party.

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Cloud and mobile drive 3 for 3.

 Alphabet Q4 16.

  • Alphabet reported excellent results driven once again by mobile advertising but was somewhat marred by a one-off tax payment.
  • Q4 16A revenue-ex TAC / Adj-EPS was $21.2bn / $9.36 compared to consensus at $20.6bn / $9.63.
  • If the one off tax payment is removed, Q4 16 Adj-EPS was $10.13, comfortably ahead of expectations.
  • Alphabet stressed on the call that it was focusing on cloud and the enterprise but I think that this strategy will not work.
  • This is because both Amazon and Microsoft are already far ahead and with a simple version of Office 365 now being free on phones and tablets, there is very little incentive to use Google’s office apps.
  • Furthermore, Alibaba is aggressively expanding its AliCloud offering and has a very strong base in China upon which to base its international investments.
  • Hence, I see Alphabet being driven by its consumer offerings which I do expect to slow somewhat in 2017.
  • I continue to see all the growth as being already priced into Alphabet’s share price.

Microsoft FQ2 17.

  • Microsoft reported good results as the legacy PC-based businesses held steady allowing very rapid cloud growth to show through in the numbers.
  • FQ2 17 revenues / Adj-EPS were $25.8bn / $0.84 compared to consensus at $25.3bn and $0.79.
  • Azure was once again the star of the show with revenues more than doubling YoY together with the prospect of much better gross margins as Azure begins to hit real scale.
  • While Microsoft is going from strength to strength with regard to offering services for enterprise customers and prosumers, its consumer ecosystem continues to whither on the vine.
  • As these businesses continue to be neglected, I can see a growing case for divesting Xbox, Mojang and even Internet Explorer as they could be worth more to someone prepared to really make something of them rather than just let them chug along.
  • I still like Microsoft as these results show that there is still upside to be had from the perspective of offering services to enterprises and prosumers.

Intel Q4 16

  • Intel reported reasonable results as the PC market declined by less than expected allowing chip sales in the data centre to boost revenues.
  • Q4 16 revenues / EPS were $16.4bn / $0.73 compared to consensus at $15.8bn / $0.75.
  • Lower profitability was largely driven by gross margins which have declines to 63.1% from 64.8% a year ago.
  • Intel is under assault on all fronts as chip makers who are willing to accept much lower gross margins are working on creating data centre processors as well having another go at running Windows.
  • Furthermore, almost everybody that is working on Artificial Intelligence is using NVIDIA processors to train their algorithms rather than Intel.
  • In the data centre I still think that Intel is safe as using other processors requires all legacy software to be rewritten but I see risk in both AI and PCs.
  • I think Intel has some time to address those threats but the time to step up is now.

Qualcomm – Tooth and nail.

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This time around, Qualcomm should fight.

  • I think Qualcomm will best serve its shareholders by fighting tooth and nail to halt the fall of royalty rates that has been going on for the last 9 years.
  • The fight between Apple and Qualcomm is a sure indicator that life in the smartphone market is getting tougher which came to light in Qualcomm’s latest earnings release.
  • FQ1 17A revenues / Adj-EPS were $6.0bn / $1.19 compared to consensus estimates of $6.11bn / $1.18.
  • Guidance was very slightly weak with FQ2 17E revenues / Adj-EPS of $5.5bn – $6.3bn / $1.15 – $1.25 compared to consensus of $5.9bn / $1.19.
  • Apple’s dispute with Qualcomm is nothing new and in fact from a brief examination of Apple’s complaint and Qualcomm’s response, it is clear that while times have changed, the arguments remain broadly the same.
  • Between 2006 and 2008, Qualcomm was embroiled in a bloody and bitter fight with Nokia which at the time was in the same position that Apple finds itself today.
  • At that time, Nokia made almost all of the mobile phone industry’s profits and so it was the largest payer of royalties to Qualcomm.
  • When its contract expired, it sought to lower the rate it was paying to Qualcomm and when negotiation did not work it resorted to the courts.
  • At the time, I believed that Qualcomm had the advantage and would eventually win but Qualcomm decided to settle with Nokia in 2008.
  • Although the real details were not disclosed, I calculated at the time that this resulted in a new royalty rate of around 2.3% down from the old rate of 4.1% (of the wholesale price of the device).
  • The problem with this is that everyone else was paying 4.1% and then went on to demand the same deal as Nokia.
  • More recently, Qualcomm has done a deal with China where the effective rate appears to be around 1% which could very well a further decline in the overall global royalty rate that Qualcomm receives for its IP.
  • This is the heart of the problem with patents as there is no real way to determine what should be paid to for them.
  • I have long believed that patents are worth either:
    • First: what an entity is prepared to pay for them or
    • Second: the present value of the cash flows that the patent generates.
  • This is why historical precedent is so important when it comes to patent licencing and here Qualcomm has a huge advantage.
  • Qualcomm has hundreds of agreements and more than 20 years of history as evidence that its agreements have not damaged the mobile industry, in fact quite the reverse.
  • The issue of course is that Apple simply wants a lower royalty rate and even the terms of the deal in China appear not to be low enough.
  • Qualcomm claims Apple has rejected terms that are consistent with the deal it did in China and upon which it has struck most of its Chinese licences.
  • The problem as I see it is that if Qualcomm gives Apple a discount then the rate paid by everyone will go down yet again and where it will end is impossible to tell.
  • By fighting against Apple, it has a chance to arrest the general fall of royalty rates across the industry and stabilise them at what I would estimate will end up at around 1%.
  • This is why Qualcomm must fight as I think that the future of its IP licensing business depends on it winning the second time around.
  • It will be painful and expensive but I can’t see how Qualcomm has much choice.

LINE Q4 16 – Game off.

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Gaming could save LINE but the focus appears to be elsewhere. 

  • LINE reported a difficult set of results which laid bare how difficult it will be to return to growth without expanding either its coverage of Digital Life or its user base.
  • With the shares trading on 5.7x 2016A EV / Sales, I think that a return to rapid growth is required just for the shares to stand still.
  • Q4 16A revenues / EBIT were JPY37.5bn ($332m) / JPY1.6bn ($14m) substantially missing consensus estimates of JPY38.7bn / JPY5.3bn.
  • Even with a one-off charge against EBIT removed from the figures, LINE still missed consensus EBIT by 50%
  • The lower profitability was primarily caused by marketing expenses, general and admin expenses all of which grew substantially more than sales.
  • The main issue is that LINE is trying to change its business model from one based on stickers and games sold through its IM platform to one based on advertising.
  • This is because revenues from stickers and games is beginning to decline in the face of competing services (like Facebook Messenger and WhatsApp) which offer similar content for free.
  • Furthermore, RFM calculates that LINE’s current offering is not broad enough to return the company to real growth.
  • However, it should be able to replace existing revenues should they decline to zero.
  • When I look at LINE, I think it is capable of driving monetisation through the Digital Life services of Instant Messaging, Shopping and Telephony giving it total Digital Life coverage of 18%.
  • I do not think that its Smart Portal is mature enough to give it credit for Social Networking or any other Digital Life segment that it is trying to address.
  • Furthermore, its user base is pretty stagnant at 217m leading RFM to calculate that LINE could generate around $1.5bn in advertising revenues on an annual basis or $373m per quarter.
  • During Q4 16 LINE generated $139m in advertising with content generating $193m giving $332m in total.
  • This clearly shows that replacing content with advertising will only allow revenues to expand to $373m per quarter, some 12% above where the company is now.
  • To return to growth LINE will have to successfully expand its coverage of Digital Life or start growing its user base once again.
  • Growing the user base will be a major challenge as LINE has consolidated its focus onto the four countries of Japan, Thailand, Taiwan and Indonesia which considerably limits its scope.
  • Hence, I think it will have to improve its Digital Life coverage which will be difficult given that the other segments of Digital Life are pretty well covered already.
  • The one exception I see is Gaming and here there is an opportunity for LINE given its heritage in selling games through its platform.
  • This is a big segment and if LINE can generate a thriving multiplayer gaming community, then I can see its revenues expanding once again.
  • Unfortunately, of this there is no sign with much of the effort being places on other areas which to date have resulted in increased investments but no real revenues.
  • To justify its valuation, LINE must start to grow again as 5.7x EV / Sales is way to high for a company with low growth and heavy investments hitting profits.
  • I can see the valuation making a major adjustment downward from here.

Alibaba FQ3 17 – Crossed swords.

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Where Alibaba crosses swords with its peers, life is much tougher. 

  • Alibaba reported excellent FQ3 17 results as growth in the other areas of its business augmented the Chinese retail juggernaut.
  • FQ3 16 revenues / Adj-EPS was RMB53.2bn (US$7.7bn) / RMB9.02 compared to consensus estimates of RMB50.1bn / RMB7.70.
  • Alibaba also raised its revenue forecast for FY17E from 48% YoY growth to 53% YoY as wholsale and international e-commerce, AliCloud, Digital Media and its ecosystem businesses are all growing much faster than the corporate average.
  • Where Alibaba is effectively, unopposed things are going extremely well with both revenue and margin growth.
  • This was the source of the better than expected profitability during the quarter just ended.
  • However, where there is competition, Alibaba is having to fight hard to establish its position.
  • This is particularly the case in Digital Media where it is fighting tooth and nail with both Baidu and Tencent.
  • In FQ3 17, Digital Media revenues grew by 14% QoQ (273% YoY) but losses increased to 60% of sales from 39% in FQ2 17.
  • This indicates that where Alibaba crosses swords with the other two BATmen (see here) things get tough.
  • At the moment, everything is good as the areas where Alibaba is dominant are still growing nicely but when these slow it will have to begin competing much more aggressively with its Chinese peers.
  • Consequently, the medium term outlook is for slower revenue growth and much stiffer competition.
  • I see Alibaba as the most advanced of the three BATmen when it comes to expanding overseas but this is a long term strategy and unlikely to produce real revenues before things get tougher at home.
  • When it comes to the ecosystem, I see Alibaba as the weakest player as:
    • First: Tencent is by far the strongest when it comes to Digital Life coverage and dominance.
    • Second: Baidu has by far the best understanding of what it takes to create a thriving ecosystem and is also streets ahead when it comes to artificial intelligence.
  • This, and valuation is why I continue to prefer both Baidu and Tencent over Alibaba in the medium term from an investment perspective.

Snap Inc. – Valuation snaps.

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Snapchat looks more like Twitter than Facebook. 

  • Snapchat appears to be intending to focus on engagement metrics to justify its $20bn-$25bn valuation in the coming IPO.
  • I see this as a sure sign that real metrics such as revenue and profit will fall far short of that which a regular company would need to justify that valuation.
  • Snapchat is essentially an instant messaging platform with the ability to send video and pictures as well as some cool and fun video annotation features.
  • Although video is a big part of the appeal of Snapchat, I do not consider this to be a Media Consumption platform meaning that Snap Inc.’s coverage of the Digital Life pie is actually pretty low.
  • Given its current offering, I would be prepared to give it Instant Messaging and Telephony giving it total coverage of 14%.
  • I do not think that its offering is yet broad enough to allow it to monetise either Social Networking or Media Consumption.
  • RFM estimates that this would give it the ability to grow revenues to around $2.5bn per year in the best instance at which point it would then grow around 7-8%.
  • I suspect that the long-term promises being made will be far higher than this as I see no way in which this scenario could underpin a valuation of $20bn – $25bn.
  • Furthermore, I remain concerned that Snapchat’s core user base of 12-24 year olds is not as interesting to advertisers as the older demographic groups.
  • This is because this age group does not have a lot of money to spend on products and therefore is of less value to advertise to.
  • The net result is that Snap Inc. looks more like Twitter than Facebook and also has a user base less capable of generating revenues.
  • This means that Snap Inc. will need to innovate and develop its strategy beyond its core offering to have any chance of justifying the IPO valuation.
  • Snap Spectacles are an interesting move in this direction and are unique as the only product that has made wearing technology on one’s face cool.
  • However, they are not going to do anything to revenues and so will not directly alleviate the situation in which Snap Inc. will find itself.
  • The net result is that I see the following scenario without a major innovation on the part of Snap Inc:
    • First: An IPO at $20bn-$25bn which goes reasonably on the back of promises that don’t have to be met for a little while.
    • Second: A big miss on a set of quarterly results as revenues don’t come though as promised causing a collapse in the valuation.
    • Third: Recovery will only come with a major innovation from Snap Inc. or the company will be acquired by one of the much larger ecosystems.
  • On the basis of what I can see at the moment, I think a rosy future is already being paid for at $20bn – $25bn and so I would stay away from this one.

Alphabet – Magic half

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Half a million is good but not enough. 

  • Latest data from Wave 7 is implying that Google devices have done better than my retail survey implied, but I don’t think that it has come close to capitalising on the open goal that Samsung and Amazon left for it in Q4 16.
  • It looks like Google managed to ship around 0.6m units of Pixel and 0.5m units of Google Home during Q4 16.
  • In the USA, Pixel is exclusive with Verizon and made up around 12% of its activations but the fact that it is out of stock everywhere implies that it has been unable to ramp up volume to properly capitalise on the Samsung Galaxy Note 7 fiasco.
  • I suspect that if it had been able to get devices to retail, it would have shipped considerably more than it has.
  • I suspect that the problem that Google has had has been related to an inability to source more components than it originally planned for.
  • This is because its much lower overall volume probably meant that it was at the back of the queue when it came to getting its increased demand requests filled.
  • Google Home, on the other hand, looks like a realistic representation of demand as there are mountains of Google Home devices to be found at almost every retail outlet.
  • This is not because the device is not selling but because Google has been able to ramp up demand of this product to ensure good stock in most areas.
  • In contrast, Amazon Echo is out of stock everywhere but there are plenty of the much cheaper ($50) Amazon Echo Dot available.
  • I think that this is a reflection of the fact that the vast majority of purchases of the Amazon Echo are made by users whose primary requirement is a Bluetooth speaker rather than a smart home control hub or a digital assistant.
  • I see 0.5m units as disappointing as Google Home has a much cleverer assistant and the device is $50 cheaper.
  • That being said, I think that Amazon shipped somewhere between 0.75m and 1m Alexa devices during Q4 16 giving Google a good piece of the market.
  • Google has to act quickly as Amazon is on the brink of becoming the industry standard for controlling smart home devices as, at CES, everyone was integrating with Echo with Google Home and Apple HomeKit barely present.
  • Google’s Assistant is much cleverer and much more useful than Amazon’s Alexa but if Amazon wins a big presence in people’s homes this will give it time and the data it needs to close the gap to Google.
  • RFM estimates that only 2% of Amazon’s users who are aware of the Echo have bought one, meaning that Google still has a chance but it will have do even more than it has done as of today.
  • The net result is that Google has done reasonably well with both the Pixel and Google Home but its Google Home where the more effort needs to be made.
  • This is because Google Assistant is going to find its way onto all Android devices anyway whereas Home is a greenfield segment that needs to be fought for.
  • Given the sudden importance of this segment, I am looking for a price cut, more marketing and a huge assault on the developer community to ensure volumes grow and that third party devices begin to work with Google Home.
  • I still prefer Microsoft, Baidu and Tencent to Google s I see all of the good growth left in mobile advertising as priced into the shares.

Twitter – Event horizon

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Sale of Fabric collapses Twitter’s horizons. 

  • With the sale of Fabric to Google, Twitter has essentially given up all hope of becoming an ecosystem and its growth will be totally dependent on its ability to create engagement around media consumption.
  • This means that a blue-sky scenario for Twitter will see it with 28% coverage of the Digital Life pie up from 18% today.
  • In this instance, RFM estimates that the best possible revenue outcome for Twitter would be annualised revenues of around $3.9bn, growing 6-8% in the long-term.
  • Twitter first unveiled Fabric in 2014 as a developer platform by which developers could create other services and then tightly link them to Twitter.
  • The idea was that this would allow Twitter to collect data in other areas of Digital Life and thereby improve its addressable market when it came to monetisation.
  • However, the fact that it has now sold this to Google is a sign that it has given up on trying to develop this avenue of expanding its business and is doubling down on media consumption.
  • When it comes to monetising microblogging, Twitter is best in class but because it is present in such a small niche of Digital Life, growth has ground to a halt causing a major problem for both management and shareholders.
  • This is why Twitter has been trying to develop a media consumption offering and why the live casting of NFL games over its service is such a big deal for the company.
  • The response to the live streaming over Twitter has been quite good with Twitter adding 0.25m to the NFL’s regular audience of 15m or so but there is a very long way to go.
  • However, it is still very far from challenging YouTube or Facebook Video which is why I need to see far more than just NFL streaming in order to become confident that Twitter has a media consumption offering that it can monetise.
  • This is crucial because now that Fabric has gone, this is Twitter’s only real hope of extending beyond Microblogging and Instant Messaging.
  • The narrowing of its horizons means that, while Twitter could increase its revenues to a new level (and hopefully make some profit), revenues of $8bn-$10bn look hopelessly out of reach.
  • The company currently has an enterprise value of $10bn which looks much too high if the blue-sky scenario now returns maximum annualised revenues of around $4bn.
  • Hence, I still think that the shares could test $10 per share at which point it becomes an attractive tuck-in acquisition for any of the big ecosystems to complement their existing offerings.
  • Google, Facebook or maybe Tencent would be at the top of that list.

LeEco – Le life line

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Small war chest means laser sharp strategy and execution needed. 

  • Chinese real estate developer Sunac has pumped $2.2bn into LeEco to get the fledgling Chinese ecsosystem back on track, but I still think it will need to dump autos to have a chance.
  • Sunac is buying a 8.6% stake in Leishi (the parent company) for RMB6.04bn, a 15% stake in Le Vision Pictures (movies) for RMB1.05bn and a 33% stake in Leishi Zhixin (TVs) RMB7.95bn.
  • This all adds up to RMB15.04 or $2.2bn which should help keep the wolf from the door but it looks to me like much of the money is already committed.
  • I suspect that the RMB7.95 going into Leishi Zhixin will help finance the acquisition of Vizio as well as the very reasonably priced TVs that the company launched a few months ago (see here).
  • This leaves RMB6.04 ($872m) to finance the development of everything else of which around $250m will already be tied up in the real estate transaction LeEco has with Yahoo.
  • This leaves $622m to keep the rest of the ecosystem strategy alive until it begins to generate cash.
  • Given Xiaomi’s experience in developing an ecosystem via hardware, this could take a while and even then, a high level of cash return on sales is far from guaranteed.
  • Now that the immediate pressure has been released, LeEco has come out of its corner fighting stating that it will now take on and far surpass Baidu, Alibaba and Tencent (BATmen) in their home market.
  • This will take some doing as these three all already have at least 2 dominant Digital Life services in the Chinese market (see here), far more than 500m users each as well as billions of dollars of organic cash generation every quarter.
  • By comparison, LeEco is starting from almost nothing and has around $622m to invest putting it behind even Xiaomi.
  • This is why the company is seeking a separate line of financing for the automotive offering and I think it is clear that the Faraday Future factory in Nevada, USA will remain on ice until this issue is fixed.
  • This also means that the LeSee electric vehicle will also be delayed for the same reasons.
  • There is still huge scepticism that LeEco can make it given that the investors in Sunac sent its shares down more than 6% in Hong Kong when the deal was announced on Monday 16th
  • I still think that LeEco has to really focus on the areas where it can thinks it can make a difference and even if automotive is separately funded, it is a distraction management can not afford.
  • Strategy and investments have to be laser sharp to make the most of the relatively small war chest that the company now has to see it through to generating cash of its own.
  • What the company does now is likely to determine its eventual fate and I am not beyond thinking that it could make an acquisition target.
  • I see China becoming more vertically integrated and into this LeEco might fit for one of the BATmen (see here).