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 Extending a previously muted push into hardware, Alibaba said on
Monday it will buy an unspecified minority stake in smartphone maker
Meizu Technology Co. Dwarfed by rivals like Xiaomi Inc, privately
owned Meizu's slice of China's smartphone market is estimated by
analysts at below 2 percent.
The deal, unlike U.S. rival Amazon.com Inc's foray into smartphones
with its own-brand Fire Phone, is designed to help Alibaba push its
mobile operating system within China through Meizu's handsets. In
return, Zhuhai, Guangdong-based Meizu will get access to Alibaba's
e-commerce sales channels and other resources, the companies said in
a joint statement.
For China's e-commerce king, with a market value of $213 billion
market value, the $590 million price tag may be a costly entry fee.
Meizu's reach in China, and likely that of the Alibaba operating
system, is severely blunted by domestic leaders Xiaomi, Huawei
Technologies Co Ltd and Lenovo Group, as well as multinational
giants Apple Inc and Samsung Electronics Co Ltd.
"You could say they're spending $590 million to experiment a bit and
see what happens - it's an expensive experiment, right?" said
Michael Clendenin, Managing Director at Shanghai-based RedTech
Advisors.
"My concern is that some internet players are confusing being able
to just spend a couple hundred million dollars to buy a piece of
hardware that looks pretty cool but is essentially a copy of what
Apple has done and what Xiaomi has done," he said.
Together, the leading five brands accounted for nearly 60 percent of
China's smartphone market in the fourth quarter of 2014, said Nicole
Peng, a Shanghai-based analyst with data research firm Canalys.
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Meizu has pumped up shipments from a few hundred thousand in
previous years to under 2 million in the last three months of 2014,
but it still had less than 2 percent of China's smartphone market
share in that quarter, said Peng.
As well as intense competition, Alibaba and Meizu must contend with
flagging sales of smartphones, even though China is the world's
largest market for the devices.
Some 557 million people access the internet via mobile devices,
according to government data. But shipments in China were 389
million phones in 2014, down from 423 million the previous year,
according to China's Ministry of Industry and Information
Technology.
(Editing by Kenneth Maxwell)
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