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INVESTMENT: Xiaomi Plans An IPO
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Xiaomi Plans An IPO
By Morgan Brady

BT 201802 Investment 031月16日,多家外国知名媒体均引述知情人士消息称,小米最早将于2018年下半年进行IPO,目前小米已为其即将到来的上市选定高盛和大摩这两家投行作为主承销商,瑞士信贷、德意志银行和中信证券也被选中参与此次公开募股,挂牌地点或选择香港。根据雷军此前公布的消息,小米在2017年年初制定的7000万台的出货量和1000亿元营收的目标已经实现。若此次小米IPO成功或将成为继2014年阿里巴巴在纽约上市以来科技行业最大的IPO。小米高层声称上市估值或达1000亿美元、小米创始人雷军更是提出了2000亿美元(约合人民币1.3万亿元)估值的想法。如果上述2000亿美元为投前估值,那么持股比例为77.8%的雷军身家将超过1556亿美元成为中国首富。

小米自发家以来就以奇迹般的销售成绩引人注目。2017年小米营收超过千亿元人民币,智能手机出货量达到9000万部,同比增长50%。但与此同时小米也意识到了在手机方面的销售下滑。毕竟情怀和粉丝牌打久了会“审美疲劳”。早在2015年,小米带头人雷军就曾表示,小米会继续聚焦手机、电视和路由器三大核心业务,并利用小米模式布局生态链企业,发展以空气净化器、手环、移动电源、插线板等为代表的生态链企业。目前,小米公司旗下包括多家公司,除了小米科技外,还包括小米通讯、小米电子软件、小米支付、小米移动软件、小米软件技术、小米数码科技等至少7家公司。小米的战略布局对提供同类型产品的三星等公司形成极大的威胁,因为小米产品价格更为低廉。但低价也成为小米公司发展道路上的一大挑战,如何为消费者提供全方位的差异化服务与产品,是这家科技巨头未来需要解决的问题之一。

Xiaomi, the big Chinese consumer electronics company, has opted for an anticipated Initial Public Offering. It has already vetted different international banks to manage this offering that could see the company reach a valuation of $100 billion.
 

Xiaomi selected the American banks Morgan Stanley and Goldman Sachs group, in addition to Citic securities, Credit Suisse Group and Deutsche bank AG to sponsor the IPO. The company will still need to select Chinese underwriters. Location and time of the IPO have not been identified yet, although it is expected to happen sometime in the second half of 2018.
 

The company had reached $45 billion in funding valuation in 2014. If it reaches $100 billion in valuation after the IPO, as some bankers expect, it will become the biggest IPO so far this year for a technology company.
 

Impressive Sales Figures

Xiaomi has been operating in the market for 7 years and stands on solid ground in both China and India. In 2011 alone, following the launch of its Xiaomi 1S, it sold more than 300,000 pieces. In 2014, it sold over 61 million phones and became the 3rd largest smartphone maker in the world.
 

In 2015, it sold over 70 million devices and it was on a very impressive growth trajectory. However, the figures were below the 80 million target by 10 million. Huawei had encroached on the company’s market share and outranked it as the top manufacturer in the Chinese market.
BT 201802 Investment 04
Figure 1: Quarterly Sales figures

Slowing Down After A Period Of Exponential Growth

By 2017, the company had grown so fast that its CEO had to start concealing performance figures and announce a shift of focus.
 

The reason was that the company was in a transition phase, according to its CEO Lei Jung. After explosive growth in earlier years, the company had to switch its focus inward and make improvements in many areas. The company offers affordable mobile devices but the competition in the market is fierce, with rivals quickly mimicking the competitive advantages of other companies. The CEO admitted that its business in manufacturing and selling smartphones is dwindling.

BT 201802 Investment 01Expansion Into Other Markets And Geographic Regions

But other investments by the company are proving to be profitable. The company provides a wide array of products such as smart TVs, fitness trackers, and others. It also provides Internet services, which blossomed well in 2016.
 

Before the company reached its peak and started to decline, it had entered many Asian markets, such as Singapore, Malaysia, Philippines, Indonesia, Hong Kong, Taiwan, as well as India. In India, the company’s revenue surpassed $1 billion as it was able to sell 1 million smartphones there after it partnered with Indian ecommerce giant Flipkart. It also expanded in other continents by making its offerings available in Brazil in 2015, as it launched Redmi2 there. Moreover, it entered African countries such as Kenya, Nigeria, and South Africa.
 

The company plans to expand in other sectors such as artificial intelligence, and intends to provide its own digital banking services in China. The company has already launched its digital payment services as a rival to Apple Pay, Paypal, Wechat and Alipay.

BT 201802 Investment 02Growth Driven By Patents

With such a wide array of markets that the company operates in, the pressure is mounting on it to maintain a competitive edge. Yet, the company is doing well with 3612 patents under its belt so far, out of 16000 patents that it has applied for.
 

The company has begun to leverage its portfolio of patents to help achieve global expansion. This was after a rather challenging period for the company where it faced many lawsuits regarding patent infringement in India and the US. The lawsuits prompted Xiaomi to acquire patents from third parties and expand its intellectual property portfolio, especially as the company fell short when it came to its intellectual assets in comparison with key players such as Huawei and ZTE.
 

In 2016, it bought 1500 patents from Microsoft, and in 2017 it bought patents and signed a deal with Nokia. Other partners include Intel and Guangzhou Feimi Electronic Technology among others. The full extent of Xiaomi’s patent acquisition and filing effort can be seen clearly in the graph below.
 

Patents are not only filed in China but are well geographically distributed. Other than China, Xiaomi has patents filed in the USA, Europe, South Korea, Mexico, India, Russia, United Kingdom, and Australia.
 

Conclusion

Xiaomi has already been successful on many fronts, and with an IPO and a high valuation anticipated soon, it is set to become one of the best performing startups of this decade. The company is proving to be a key player in the industry. It is proving to be a threat to Samsung as it is able to offer products of the same standard but at a much lower cost. It is also making it difficult for Apple to have a bigger market share in China, where Xiaomi has a wide fan base, although the two companies aim to capture different ends of the market – Apple aims at the higher end with high innovation, whereas Xiaomi aims to provide low-cost smartphones.
 

The main challenge for Xiaomi’s expansion in future is that it focuses heavily on offering low prices but has not fully focused on delivering innovative solutions that are differentiated well. A wise strategy for the company would be to leverage its intellectual property portfolio and deliver novel solutions that appeal to consumers worldwide.

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