Xiaomi: Trouble In Unicorn Paradise

Xiaomi: Trouble In Unicorn Paradise

by mikecane

On January 6, I wrote:

Xiaomi seems to be in some trouble.

They’re no longer the “cool” brand.

Lei Jun set a goal of selling eighty million phones in 2015. Xiaomi fell short by ten to fifteen million and never revealed total sales for 2015.

On January 10, the Wall Street Journal let loose with: China’s Xiaomi Under Pressure to Prove Value to Investors

“Mobile services, e-commerce, branded consumer products—these still are largely just a figment rather than a huge and growing source of profits that could validate last year’s sky-high valuation,” [said Peter Fuhrman, chairman of China-focused boutique investment bank China First Capital].

As if that wasn’t bad enough, Apple Insider really rips into Xiaomi: China’s iPhone-clone Xiaomi defending its valuation after missing sales targets

The lethal stabbing is quoted after the break.

The set-up:

Just over a year ago, the Wall Street Journal reported that, based on a “a confidential document” that it had “viewed,” Xiaomi had earned 3.46 billion yuan ($566 million) on revenues of 27 billion yuan.

Journal reporters said this “shows that Xiaomi’s net profit nearly doubled last year, making it a lucrative business in an industry where most players selling cheap handsets struggle to break even.”

The knife to the heart:

It was later reported by Reuters that Xiaomi had actually only earned $56 million, one tenth as much as had been previously reported. While the privately-held Xiaomi does not have to publicly report its earnings, it had included them in a securities filing related to an investment in another company.

AppleInsider reported that the Wall Street Journal had been wrong, although the paper didn’t correct its report and Business Insider didn’t address its alarmist sensationalism based on the incorrect report either.

Boldfaced emphasis added by me.

Ouch!

That is too wide a margin to be ignored.

And what’s even worse for Xiaomi is that they’re beginning to show a loss of confidence on Weibo. This is the kind of Weibo they never sent out about the original MiPad:

Red underline added by me.

Now Xiaomi is bragging about the tablet’s price?

Before they bragged about the original MiPad being a leader tablet.

Also, what does this claim based on price actually mean now? Xiaomi is just about the last tablet maker with an iPad Mini clone. Teclast, Onda, Pipo, and others have discontinued theirs. Full-size iPad clones will probably be dead by the end of this year too. The China tablet industry has moved to mimic the Surface and 2-in-1 notebook/tablets. Hell, even Xiaomi will be doing a notebook!

There’s still no sign of the Windows 10 version of the MiPad 2 yet, either.

Regular readers will know that I’ve been enthusiastic about Xiaomi in the past. But their tablet missteps have been jarring. Perhaps the original MiPad was a sign of overreaching by Lei Jun. Maybe it was just bad timing. Or maybe not being widely available outside of China — where the tablet would have mattered more since its price would have been a crazy bargain at the time — doomed it. I don’t know.

But I do know that the MiPad 2 is half-baked, with too little RAM and the crippling deficit of no microSD card slot. And the delay in getting out the Windows 10 version is only adding to its problem image. The scuttlebutt is Xiaomi did this tablet as part of a deal to get a bigger discount on Intel CPUs for its upcoming notebook. Given how much less it offers over the original MiPad, the rumors ring true.

Xiaomi has a very tough 2016 ahead of it.