Chinese mobile phone company Xiaomi has a bigger valuation than BlackBerry at $9 billion

June 29, 2013 Leave a comment

Chinese mobile phone company Xiaomi has a bigger valuation than BlackBerry

By Gina Chon and Lily Kuo 4 hours ago

Chinese mobile phone company Xiaomi Corp is getting a valuation of at least $9 billion in the private market, Quartz has learned from investors and potential investors who have assessed the company. That figure—more than double the $4 billion valuation it had a year ago in a fundraising round—makes Xiaomi one of the fastest growing Chinese startups and puts it on track to becoming one of the largest Chinese technology companies.Xiaomi doesn’t exactly flaunt its success. It doesn’t have any retail stores and sells its phones exclusively online. It also communicates with customers solely through social media and online forums, and barely spends any money on marketing.

But the strategy has worked. Its valuation, one that exceeds BlackBerry’s market capitalization of $7.5 billion, is a feat considering that the company is only three years old and sold its first smartphone in 2011. Xiaomi sold $2 billion in mobile phones last year and is aiming to double sales this year. The company competes with Apple and Samsung by making high-end phones with sleek designs and pricing them more cheaply than the iPhone and Galaxy models. Xiaomi’s tactics have attracted a loyal following. Fans flock to its live launch events by the thousands, and new models often sell out within minutes.

Xiaomi is hoping to make up for low profit margins on hardware with higher-margin services and software that address the needs of the country’s growing smartphone market, such as online payments and other e-commerce activities.

Xiaomi did not return calls seeking comment.

The company’s founder, Lei Jun, is often called the Steve Jobs of China. Charismatic and flashy, he at times even sports Jobs’s signature outfit: a dark top and jeans. His long career in the technology sector, which began in the late 1990s, took off when he co-founded Joyo.com, a Chinese online retailer of books and music that was sold to Amazon.com in 2004.

Critics of Xiaomi attribute its success to copycatting competitors like Apple, not innovating. But its fans appreciate that Xiaomi’s phones are very customizable, a feature that resonates especially with young Chinese.

Xiaomi’s philosophy is spreading beyond China. The company will soon be selling phones in Hong Kong and Taiwan, and consumer electronics news site Engadget reported that Xiaomi may start selling its phones in Europe later this year. Leaked images on Sina Weibo suggest Xiaomi may also be working on a smart TV.

The key to Xiaomi’s continued success will be offering comparable or better features than Apple and Samsung while cultivating a stronger brand than other cheap phone makers like Huawei and ZTE. Before long, Apple and Samsung may be taking cues from Xiaomo’s loyal following.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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