OnePlus – Learning curve

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OnePlus’ slip serves as a warning.

  • BBK Electronics is fortunate that OnePlus is one of its marginal brands as a gaffe of this size at Oppo or Vivo could have done real damage.
  • OnePlus is a subsidiary of Oppo which in turn is owned by BBK Electronics (like Vivo) and has its own favour of Android (GMS compliant) called OxygenOS.
  • Unfortunately, OnePlus decided to include code in OxygenOS that captured and uploaded: IMEI, serial number, MAC addresses, IMSI and WiFi network data in addition to which apps were being opened and what the user was doing in those apps.
  • This data was being uploaded and analysed by OnePlus without either the knowledge or consent of its users.
  • OnePlus claims that the data was only being used to improve the user experience but that has not earned the company a free pass.
  • However, once the company had been rumbled it was reasonably quick to react explaining how users can turn off usage data collection but for the other data it stopped short of saying that it would cease collecting it.
  • I suspect the real problem here lies in the cultural difference between China and developed markets.
  • RFM research (see here) has concluded that in China, privacy is much less of an issue where almost all services collect and use data without the user’s permission.
  • Critically, the users do not seem to mind.
  • However, in developed markets, a flagrant disregard for the users’ privacy can sink a product or service.
  • I suspect that the code used in China was simply translated into English and launched into developed markets without a second thought.
  • This is not the first time that this has happened nor, I suspect, will it be the last as smaller Chinese brands try and leave the home market.
  • Fortunately, it appears that this lapse has not also occurred at Oppo which ships a third of its volume overseas (10m units Q2 17) which would be at risk of losing a substantial part of its business as a result.
  • OnePlus is too small for anyone to really notice or care but it serves as a warning to other companies.
  • Being aware of the differences between China and the rest of the world may make the difference between success and failure.

Tencent – Tale of two pies.

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Tencent dominates but still has much more to do. 

  • Tencent already dominates Digital Life in China and now it is increasingly turning its attention to the opportunity overseas.
  • This makes sense as China is starting to show signs of maturity meaning that the recent breakneck pace of growth will inevitably slow down forcing the BATmen to look overseas for more growth.
  • RFM has long identified that ecosystems and smartphone usage in China and developed markets are very different (see here).
  • This means that Chinese Digital Life services are not really relevant in developed markets and visa versa.
  • This means that overseas expansion for the BATmen has to be much more than just attempting to offer their Chinese services overseas.
  • While Alibaba is looking to grow overseas using AliPay (see here), Tencent is focused on adding relevant developed market assets to improve its coverage of Digital Life in developed markets.
  • This strategy has begun with the purchase of Supercell giving Tencent coverage of Gaming but it looks as if Tencent is keen on acquiring other segments of the Digital Life Pie also.
  • Most recently, Tencent appears to have made a move on Spotify that would have given Tencent a very strong position in Media Consumption.
  • Combined with Gaming, this would have given Tencent 40% coverage of the Digital Life pie in developed markets along with the 77% that it already has at home.
  • Spotify appears to have spurned Tencent’s advances, but I suspect that Tencent will continue to look for key strategic assets to improve its position in Digital Life in overseas markets.
  • Currently, Tencent has 30% coverage with Supercell but there is far more to creating a vibrant ecosystem than just gathering assets which provide coverage of Digital Life.
  • The trials and tribulations of Yahoo are all the evidence that one needs to conclude that one cannot succeed by coverage alone.
  • In 2014, Yahoo had 73% (more than anyone else at the time) of Digital Life covered but failed to create any meaningful traction on mobile devices.
  • This is because it was unable to take what were essentially fixed services and successfully leverage them into mobile.
  • Tencent does not have this problem as its traction in mobile is already strong but what it is missing is an understanding of the importance of integration.
  • I have long believed that to be really successful, the different services across Digital Life need to be integrated such that usage can be understood as a profile rather than a series of discrete and independent services.
  • This is one of the key ingredients of Google’s success and is something that Baidu and, increasingly Alibaba, are beginning to get to grips with.
  • Tencent on the hand, appears to be quite far behind in terms of grasping the importance of integration as I still see no signs of this happening.
  • In the short-term this is not a big problem but as Tencent’s valuation continues to rise, it will become an increasingly necessary for Tencent to bring its assets together in a cohesive way to justify its share price.
  • This is how Tencent can really begin to monetise its ecosystem beyond the sale of content and games and become a place where users spend their Digital Lives.
  • In China, some of this is coming through the rapid expansion of WeChat from a place to exchange messages to a place where all sorts of transactions can be executed.
  • However, in the long-term Tencent needs to have all of its services integrated and in that regard, there is quite some way to go.
  • I continue to like Tencent as it is the strongest of all the Chinese ecosystems and the share price still does not reflect all of the potential upside.
  • Hence, there is still not much very downside in Tencent if it fails to integrate its assets.
  • At the same time there is the promise of further improvement in the long-term if it begins to develop its ecosystem beyond a series of very successful but discrete services.
  • Tencent, along with Baidu and Microsoft remain my top picks.

Xiaomi and Google – Race to the bottom.

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Android One will only ever benefit Google. 

  • Xiaomi and Google are resurrecting the Android One program but given what Xiaomi has launched, the original aim of Android One has clearly been completely abandoned.
  • The idea behind Android One was to provide a reference implementation of Android optimised for Google’s services that would be used by multiple manufacturers.
  • With multiple manufacturers on board and joint sourcing of components, the cost to make these devices would have been substantially reduced.
  • This is how Google capable devices could have been economically put in the hands of users at much lower prices which in turn would drive usage for Google, highlighting the whole point of the exercise.
  • However, handset makers need differentiation and so they all wanted to tweak the specification meaning that development costs would rise and that any volume discounts on components would be lost.
  • The results were devices that were no cheaper to produce than anything else rendering the program useless.
  • Xiaomi has resurrected the Android One brand but is completely ignoring the point of the program with the launch of the Xiaomi Mi A1: a dual 12mp camera with 5.5” 1080p screen selling for an incredibly reasonable INR14,999 or US$234.
  • The device abandons the MIUI user experience and ecosystem being pushed in China and goes soup to nuts Google.
  • This is almost as much a Google device as the Pixel is.
  • This is where the Xiaomi’s strategy comes unstuck as I have ong believed that the Android One program benefits Google and no one else.
  • While the Mi A1 is a nice-looking device, it is still competing on the basis of hardware only meaning that all Xiaomi is doing is further accelerating the race to the bottom.
  • Xiaomi’s strategy has been to sell hardware at cost and then generate profit through its ecosystem of software, services and connected devices.
  • By going fully Google, this strategy goes completely out of the window as Xiaomi has no way to make money from its ecosystem.
  • Consequently, unless it can outsell its closest rival by more than 2 to 1 (this would require beating Samsung) all it can really hope for is commodity margins at best.
  • This might help Xiaomi to grow market share and revenue in India but I think that it will do nothing for its profitability.
  • Xiaomi has staged a good volume comeback in 2017 but it is very far from a position where it can make good profits or offer a return to the long-suffering investors who put money in at $45bn.
  • I continue to believe that the only winner in Android (outside of Qualcomm, MediaTek and ARM) is Google but I think that this benefit remains fully priced into the shares and prefer to look elsewhere.

 

Amazon & Baidu Q2 17A – Back to basics

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Amazon and Baidu get back to what they do best.

Amazon – Not making money

  • Amazon reported disappointing results and guided weakly as it once again spent everything it could on investing in future revenue growth.
  • Q2 17A revenues / EBIT were $38.0bn / $628m compared to consensus at $37.2bn / $1.0bn.
  • AWS put in another mighty performance with revenues of $4.1bn and margins of 22% but this was gobbled up by the international operation where margins have fallen to -6.3% from -1.4% in Q2 16A.
  • I am pretty sure that is mostly driven by Amazon’s absolute determination not to lose India to Flipkart / Snapdeal the way it lost China to Alibaba.
  • The good news is that Flipkart and Snapdeal are squabbling over their merger and the longer it takes them to get it done, the less chance they have to keep Amazon out of their home market. (see here).
  • This heavy investment looks set to continue with Q3 17E guidance disappointing once again.
  • Q3 17E revenues / EBIT are expected to be $39.25bn – $41.75bn ($40.5bn) / LOSS $400m – $300m (LOSS $50m) compared to consensus at $39.9bn / $1.1bn.
  • There is no sign of this “bumbling around break-even” in sight and consequently the valuation of Amazon looks more stretched than ever.
  • I prefer not to pay now for profitability that very fleetingly materialises.

Baidu – Performing in line with China.

  • Baidu reported good Q2 17A revenues as the regulatory impact on its revenues has past and the company kept a tight lid on expenses.
  • Q2 17A revenues / net income were RMB20.7bn / RMB4.4bn compared to consensus at RMB20.7bn / RMB3.3bn.
  • A large part of this improvement has come from cutting back on investments in its food delivery business but also from a big fall in traffic acquisition cost which fell from 15.9% of sales in Q2 16A to 11.9% in Q2 17A.
  • Despite the cuts, investments in AI and content remain intact and are the two main thrusts for revenue growth beyond search.
  • In AI, I rank Baidu highly, although it is very focused on China, and think that this is its biggest strategic advantage to remain a big player in Chinese Internet.
  • Baidu should be able to make its services more intuitive and useful compared to those of its competitors which should help its services win and keep more users.
  • The outlook for Baidu remains steady, now that the regulatory problem is in the rear-view mirror, and I see an upwards correction as it catches up with its peers.
  • I continue to like Baidu alongside Microsoft and Tencent.

 

Baidu – Talking machines.

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The way in China is wide open for Baidu.

  • Baidu’s strategy around its AI platform and its Duer OS has become clearer and with the support of a large number of chip vendors, it is in pole position to be a major player in smart connected devices in China.
  • DuerOS is not a traditional OS like Android or iOS but instead is a much more focused sub-system that is capable of bringing intelligent voice control and intelligence to any device in which it is implemented.
  • DuerOS’s direct comparisons are the software that runs on Amazon’s family of Echo products, Google Home or JD.com’s DingDong.
  • While Duer still speaks no English at all, I think it is currently by far the leading contender in this category for China for two reasons:
    • First: ecosystem. Baidu has already lined up an impressive list of component and device manufacturers who will be implementing DuerOS in their products.
    • Realtek, Intel, Nvidia, MediaTek, RDA, Conexant and ARM have signed up to support the system, which combined with a series of device makers, should create a pretty healthy ecosystem.
    • There are already around 30 products in the pipeline encompassing pretty much the entire range of domestic electronic devices and appliances.
    • Second: Artificial Intelligence. RFM research (see here) has indicated that Baidu’s AI is second only Google and certainly far better than anything else currently on offer in China.
    • This is a product of years of work as well as having developed by far the leading search function in China.
    • The net result is that DuerOS, like Google Assistant, should be able to provide users with the best experience when it comes to understanding and dealing with voice based requests.
  • Putting these two together put Baidu in pole position when it comes to creating an ecosystem within which a whole series of devices can talk and understand both the user and each other as well as work together.
  • This represents a big threat for Xiaomi which has laso built quite a large ecosystem of smart devices but they really lack the intelligence that DuerOS can offer.
  • The upside for Baidu is that by powering all of these voice-enabled gadgets, it will be able to gather data about its users that it will be able to make its search all the more relevant.
  • One of the big differences between China and Western markets is that no one seems to care very much about privacy (see here) meaning that this strategy could work very well.
  • I don’t expect Baidu powered machines to suddenly start spewing out voice-based advertising but learning what its users like and what their needs are will help it make its search results more accurate and hence more valuable to advertisers.
  • Baidu is still the search leader in China but its recent problems with fake advertising are only just behind it and this could provide a good pillar for long term growth.
  • I think that its real rivals, Alibaba, Xiaomi and Tencent, are miles behind when it comes to AI and voice-based services, leaving the Chinese market wide open for Baidu.
  • This combined with its leadership position in AI and search are the main reasons why I still like Baidu together with Tencent and Microsoft.

China Internet – Home court advantage

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Regulatory enforcement makes life even harder for the foreigners. .

  • China appears to be on a path to plugging the leaks in the Golden Shield Project (aka The Great Firewall of China (GFW)) which is likely diminish to almost zero the small presence that Google, Facebook and so on have managed to establish to date.
  • Regulation in China can be a very grey area but when it comes to The Great Firewall of China, the government appears to be deadly serious about enforcing the rules it announced in January 2017.
  • In January the Ministry of Industry and Information Technology (MIIT) announced that all special cable and VPN services need to obtain government approval to operate.
  • This news past without too much fuss as many services such as ride hailing have continued to operate despite being technically illegal.
  • However, over the last few days the MIIT has clamped down further by adding another 84 categories of content to the blocked list as well as demanding that ISPs prevent users from using VPNs by February 2018.
  • I think that it is the demand that ISPs prevent users from using VPNs that has the scope to have the greatest impact.
  • There are two factors to consider:
    • First: there are many VPN providers that are capable of circumventing the GFW but do not have a physical presence in China.
    • Hence, they will be unaffected by the regulation or its enforcement by MIIT.
    • Second: It is much easier to block the vast majority of VPN traffic than most users think.
    • There are two main protocols in use: L2TP/IPsec and Open VPN.
    • Of the two, L2TP/IPsec is used far more because this protocol has been natively implemented into Windows 10, MacOS, iOS and Android which between them account for almost all internet traffic globally.
    • However, L2TP/IPsec has a problem which is that while the traffic is encrypted using IPsec, it is always transmitted on port 500 making it very easy to identify.
    • Open VPN is much more complicated to set up and use but it can be configured to run over almost any port, making it very difficult to detect.
  • Because most users are not technically literate, they tend to use L2TP/IPsec and any ISP determined to block this simply has to block all encrypted traffic on port 500 to shut it down completely.
  • This will leave Open VPN as the only viable option in China and because of the greater complexity in using it, only the very determined users will put the required effort in to get it working.
  • I think that this will further hamper the efforts of the foreign ecosystems to gain a foothold in the domestic Chinese market.
  • However, the flip side is that it will make the entrenched positions of Baidu, Alibaba and Tencent all the more secure as increasingly, they only have to worry about each other.
  • The net result is that my preference for Tencent increases as its position at home will become more secure even as the international market remains wide open for it to address.
  • This is why, it remains my favourite ecosystem from an investment perspective.

Xiaomi – Back in black

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Xiaomi is back but ecosystem nowhere to be found.

  • A monster quarter has brought Xiaomi back into contention as a major player in the smartphone industry but this recovery needs to be more than just a product cycle for it to stay there.
  • In a letter to employees, CEO Lei Jun has announced that Xiaomi has shipped 23.16m smartphones in Q2, up 70% QoQ.
  • Most importantly, this represents a significant gain in market share from 3.6% in Q1 2017 to as much as 6% in Q2 2017.
  • This looks to have been achieved through a combination of factors:
    • First: new products. The new flagship Mi 6 launched at the beginning of the quarter which was well received and looks to have been the backbone of the recovery.
    • Second: retail channel. I have long been of the opinion that Xiaomi ground to halt because it had fully exhausted the capacity of selling devices over the internet.
    • In order to address a wider slice of the market, Xiaomi has invested heavily in retail with 123 MI stores opened across China and the first results from this push are now being seen in the numbers.
    • Third: India and overseas: Investments in India are beginning to pay off with the Redmi Note 4 becoming the biggest volume smartphone in Q2 17, elevating Xiaomi to No. 2 in India.
    • By far the largest part of Xiaomi’s overseas fan base is to be found in India and this should help the fan base to grow further.
    • However, India can be one of the most fickle markets as it is so price driven and as many Indian brands have found, success can be all too brief.
  • This quarter will mean that its revenue target of RMB100bn in 2017 should be reasonably easy to achieve but the company also set itself the target to ship 100m smartphones in 2018.
  • This is achievable as long as the company can hold onto the share that it has so suddenly won back.
  • For me, this is the big question as if most the volume is coming as a result of its nice new products or very generous pricing (India), then this is unlikely to be sustainable.
  • This will result in a few very strong quarters as its fan base upgrades and then a drift back to baseline.
  • I think Xiaomi has a chance to avoid this with its growth outside of China and its push into retail but it will cost it dearly in profitability.
  • This is because amongst all of this success there is no mention of its ecosystem anywhere.
  • This leads me to believe that Xiaomi is still selling its products pretty much on the basis of good quality hardware at very attractive prices.
  • Only by luring users in and having them identify with Xiaomi software and services can Xiaomi ever really hope to make than a commodity margin in smartphones.
  • Hence, I still think that Xiaomi, like all of its Android brethren (except Samsung) is making 2-4% EBIT margins in the best instance.
  • This means that even hanging onto this level of market share in the long term would see EBIT generation of around $1.5bn per year.
  • This is not nearly enough to justify anything like the $45bn at which it last raised money, but it is enough for Xiaomi to remain independent.
  • The risk of being acquired by Tencent or Alibaba will decrease, should this new level of market share prove to be sustainable.

Mobike vs. Ofo – Blood soaked economics.

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Here comes another bloodbath.

  • Another battle is brewing over ride hailing but the fact that it is bicycles rather than cars will make no difference to the blood-letting that is likely ensue.
  • The big contenders in this space are both Chinese, headquartered in Beijing comprising of Mobike backed by Tencent and Sequioa and Ofo backed by Alibaba and Didi Kuadi.
  • This is coming to head now as Ofo has just raised a massive $700m following on from Mobike which raised an almost-as-massive $600m last month.
  • Both of these companies are going to use the money raised to expand overseas in what is likely to become a brutal battle to become the go to place to rent a bicycle.
  • Mobike and Ofo offer a docking station free rental service making it much more convenient for users as they can leave the bicycle wherever they choose.
  • Mobike is currently the leader with a presence in 100 Chinese cities, 100m registered users and up to 25m trips being taken on busy days.
  • Ofo has a presence in 150 cities with 6.5m bikes in the market but I think it is stretching itself much more thinly than Mobike.
  • This is because to get to same level of usage every Ofo bike would need to be rented nearly 4 times every day.
  • Furthermore, in Singapore, where both services are present, Ofo bikes are much harder to find compared to Mobike indicating a much thinner spread across more locations.
  • This is also because the Ofo app does not tell the user where its bicycles are to be found which is something that needs to be rapidly fixed if Ofo wants to have a chance of competing successfully.
  • Outside of the blood-soaked economics (see below) these schemes have two big problems.
    • First: theft and vandalism. Neither Ofo or Mobike have said how much their bicycles cost to make but it is clear that they are not nearly as robust or as thief-proof as the much more expensive but bomb proof bikes to be found in many Western cities.
    • This means that they are far more prone to vandalism and theft which Ofo has particularly suffered from to date with poor locks and no GPS tracking.
    • Second: capacity management. It is not uncommon for users to all want to go in the same direction at the same time.
    • This causes problems in ensuring that enough bicycles are available at the right place at the right time which becomes infinitely more complicated with no docking stations.
    • Furthermore, Mobike and Ofo bikes have been found in trees, blocking pedestrian paths and clogging up parks when the weather is nice.
    • While one can get away with this to some degree in China, municipalities in the West are unlikely to allow it to happen.
    • For example, Bluegogo (another Chinese bike sharing start-up) was forced to shut down operations in San Francisco for exactly this reason.
  • These are all problems that can be solved, but the biggest problem of all is likely to be how the economics of this business are likely to work.
  • Bicycle renting is a commodity business where the barriers to entry are simply how many bicycles one can buy and make available on the streets.
  • The net result is that now that both companies have a huge treasure trove of cash to invest, they are likely to go on a massive user recruitment drive.
  • This means free rides and discounts in order to encourage loyalty.
  • As long as one company is not more than twice the size of the other in any one location, then neither will make money resulting in substantial cash drains at both players.
  • I suspect that both companies are likely to target the same international cities (like Singapore) which will result in a bloody struggle until one gives up and leaves or is acquired by the other.
  • In the meantime, this is great for users who have access to plenty of cheap transport, but the minute there is only one dominant player left, prices are likely to rise.
  • It is not so great for investors who will be footing the bill for winning as much share as possible, but given that this battle is effectively Tencent vs. Alibaba, is not as if they can’t afford it.

Alibaba – Virgin home

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Another day, another home assistant.

  • Alibaba is moving to launch a home speaker, much like Amazon Echo, that should direct users to its e-commerce services but I suspect that if it teams up with Baidu, it will launch a better product
  • The obvious intention is to make it even easier for users to shop on Alibaba’s sites but given the differences between China and developed markets, I am not convinced that this is necessary.
  • Alibaba’s users are already making over 80% of their purchases on mobile devices which is much higher than Amazon or other e-commerce platforms in developed markets.
  • The reason for this is that China is a mobile first market (see here) because in China, the mobile internet works much better than fixed.
  • In developed markets, the opposite is true which has meant that shopping via a PC or Mac still represents the majority of transactions.
  • Hence, if one can easily order products using voice commands with Amazon Echo, it represents an easier experience than using a PC and a web browser.
  • However, apps on smartphones are so optimised for the task for which they have been designed that it may not end up being much easier to use a speaker from Alibaba than the mobile phone.
  • This will especially be the case if the assistant that Alibaba puts into the speaker is not that smart.
  • RFM research (see here) has not highlighted Alibaba as being a leader in AI meaning that the intelligence of its speaker is likely to be second or even third rate.
  • Hence, if the shopping experience is not much enhanced by having a speaker, it will need to be very good at other functions in order to be appealing.
  • Typically, these have included the ability to play music, answer general inquiries and control smart devices around the home.
  • Offering a decent user experience in these areas is a much more general AI problem and one with which I think Baidu is far more advanced.
  • Hence, I think that if Alibaba comes to some arrangement with Baidu to use its personal assistant Duer for part of the functionality, it will end up with a much better user experience.
  • The good news is that China is almost virgin territory when it comes to this space as I do not believe that either Baidu or JD.com have had any real market impact with their products.
  • Furthermore, the failure of Amazon in China and the blocking of Google services has meant that foreign competition is almost non-existent.
  • This means that even if Alibaba’s speaker is sub-par due to the basic level of AI that Alibaba has to put into its offering, it may still sell reasonably well with the right marketing push behind it.
  • I think that Alibaba is also still well behind when it comes to the smart home and so it would make sense to emulate Amazon’s extremely developer friendly attitude.
  • Xiaomi has also built up a reasonable ecosystem of smart home devices In China that use its API, and so including this at the factory would also seem to be a good idea.
  • I have been quite encouraged by Alibaba’s emerging understanding of the importance of data and how it can benefit by integrating it all together and making as much use of it as possible.
  • This move with a home speaker would represent a further expansion of that understanding.
  • I still struggle with the valuation of Alibaba as there is a lot built into its share price, but fundamentally it is doing all the right things to be one of the big ecosystems at home.

LeEco – Bleeding out

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LeEco could be acquired by one of the BATmen.

  • Despite closing the vast majority of its US operations, LeEco’s troubles are far from over as its cash problems have intensified which I think could lead to its eventual acquisition.
  • Leishi Internet Information & Technology (listed parent of LeEco) held its AGM last week and admitted that the cash crunch that first appeared towards the end of 2016, is now far worse than expected.
  • LeEco raised $2.2bn in January from Sunac (see here) but instead of using the money to fix its financial problems and invest in its fledgling businesses, Leishi used it to pay down debt.
  • Some of the debt was in the founder’s (Yueting Jia) name which may explain why debt was paid down rather than being used to keep its subsidiaries going.
  • The result was that all of the operations (especially USA and Faraday Future (see here)) appear to have received no cash injections at all, leaving them in dire straits.
  • This is why the company has had to exit its acquisition of Vizio, sell the land in Silicon Valley it bought from Yahoo, close most of the US business and the founder has also been forced to sell his stake in electric car company Lucid Motors.
  • Yueting Jia also admitted at the AGM what I have long suspected which is that the real problems have been caused by LeEco’s automotive ambitions, Faraday Future (see here).
  • The company is now seeking funding for this venture but given that many participants in the automotive industry and the state of Nevada (where the factory is being built) have grave doubts with regard to its viability, raising money will be extremely difficult.
  • Consequently, I see two outcomes for LeEco.
    • First: It sells or closes all of its automotive operations and pours everything into its core business as a provider of Chinese media over the Internet.
    • This would mean a return to its more humble origins and not something that I think its founder has seriously considered.
    • Second: It continues trying to create an ecosystem around televisions, mobile phones and cars for which it is very unlikely to see any success.
    • I do not think that Leishi has the capital, management depth or credibility to bring this ambition to fruition meaning that I see an intensification of the cash crunch if this option is chosen.
  • Given management’s commentary at its AGM, I suspect that it is going to go for option 2 which I believe will end in failure.
  • This is likely to cause the real value of the shares (currently suspended since April 2017) to continue their free fall.
  • This would make the Internet media asset a good tuck in acquisition for Baidu, Alibaba or Tencent (BATmen) all of whom are aggressively vying to become the leader in the Digital Life segment of Media Consumption in China.
  • In the absence of real fiscal discipline, I fear that this will be the ignominious fate of a once great ambition.