Why is the “Coolpad + LeTV Mobile Phone” combination facing a survival crisis?

A week ago, Coolpad quietly launched the Cool Play 6 mobile phone, which is the first product released by Coolpad this year. Compared with previous press conferences and competitors, Coolpad's low-key online launch of new products this time is somewhat unusual.

A few days later, it was reported online that Coolpad had terminated the contracts of more than 300 fresh graduates. The reason given by Coolpad was that the group's current operating conditions were not good, and its business strategy was adjusted to focus on overseas markets, so domestic positions would be reduced and it could not support so many "student soldiers".

Behind the storm, Coolpad is facing the dilemma of continuous losses. The latest performance released by Coolpad shows that as of March 31, 2017, the company's operating loss in the first quarter of this year was about HK$460 million. It is expected that the operating loss in the first half of 2017 will expand to HK$800 million, and the operating income will drop by more than 50% compared with the same period last year.

According to an insider who revealed to Tencent Technology, Coolpad will not only terminate the contracts of new graduates due to its poor performance, but will also lay off more than 50% of its employees in the next few months. Coolpad has not commented on this.

Coolpad is facing its most difficult time of survival due to declining performance, staff turnover and lack of competition from new products. Does LeTV Mobile, which is also in a financial crisis, still have a chance to overcome the difficulties together with Coolpad?

Coolpad's ill-fated Liu Jiangfeng feels the pressure

Founded in 1993, Coolpad is a long-established domestic mobile phone brand that was once a shining example. In 2006 and 2007, thanks to its two core technologies, "dual standby" and "3G customization", Coolpad achieved a doubling of growth. In the 3G to 4G era, relying on the operator market, Coolpad's sales exceeded 10 billion in 2012, and its domestic market share ranked among the top three.

Throughout its history, Coolpad has undergone many major changes, from pagers to mobile phones, from Windows Mobile to Android, from offline channels to e-commerce channels, and later the brand was divided into three (Coolpad, ivvi, and Dasheng). Every decision made by Coolpad has helped it find a place in the complex and competitive Chinese market.

However, the good times did not last long. In 2014, Coolpad relied on the operator market in the hope of overtaking in 4G, but operators significantly weakened subsidies, and Coolpad's large-scale early investment went down the drain, causing its performance to decline.

The 2015 financial report shows that Coolpad Group's revenue was HK$14.668 billion, down 41.1% from HK$24.9 billion in 2014; net profit was HK$2.277 billion, a year-on-year plunge of 342.8%.

Behind the huge smartphone market is fierce competition, and reshuffles have become commonplace. That year, Dakele Mobile went bankrupt, Tianyu Mobile couldn't pay wages, IUNI Mobile stopped operating, and mobile phone suppliers of major manufacturers such as Huawei and ZTE went bankrupt one after another. The once popular "China Cool Union" was made by operators and failed by operators, and Coolpad was the most obvious.

As a result, Coolpad began to reflect and adjust its strategy, decisively abandoning the simple pursuit of shipment volume and the strategy of flooding the market with products, and taking the route of "boutique strategy". At that time, Coolpad also proposed to transform to mobile Internet and launched the Internet mobile phone brand "Dashen", but it had missed the Internet boom period when Xiaomi debuted.

That year, Qihoo 360 invested 400 million US dollars to form a strategic alliance with Coolpad, which became the most shocking event in the industry at that time, but it did not bring the expected effect. Not long after, due to a dispute caused by violating the same industry competition agreement, the two parties parted ways unhappily. In the end, Coolpad was merged into LeTV (the previously split Dashen was incorporated into 360, and ivvi developed independently and later became a mobile phone brand under Chaoduowei focusing on 3D technology).

At that time, LeEco made a high-profile appearance, and its mobile phone business became an important part of Jia Yueting's "ecological counterattack". The combination with Coolpad was also favored by the outside world. The two sides integrated platforms, complemented each other's software and hardware, and shared resources to create an ecological Internet company. With Liu Jiangfeng, the former president of Honor, personally taking charge of Coolpad, "LeEco + Coolpad" was full of confidence and even boasted that it would achieve a sales volume of 100 million units in 2017-2018 and strive to be the fourth in the industry.

Dreams are beautiful, but reality is cruel.

After Liu Jiangfeng took charge of Coolpad, he urgently needed to build a team to strongly support himself. Therefore, the running-in between him and Coolpad’s old management team was inevitable, which later evolved into a "major reshuffle."

At first, Liu Jiangfeng said that he would be responsible for overall management, while Coolpad President Li Bin would manage R&D and supply chain. Liu Jiangfeng also emphasized that he "respects Coolpad's history and will work with Coolpad's executives to lead Coolpad's transformation in terms of products, R&D, sales, marketing, supply chain, etc."

The fact is not so. On January 18 this year, the Coolpad Changer S1 Dark Night, which was released at the end of last year, was officially put on sale. And this "changer" is not just the name of the phone, but also indicates the change of the entire Coolpad Group.

According to an insider of Coolpad, after Liu Jiangfeng took over Coolpad, the Zhongsi team he brought with him gradually replaced the old Coolpad employees, and some middle and senior management were gradually sidelined. The Zhongsi team members mainly came from Huawei. Before Liu Jiangfeng joined LeTV, he was the CEO of Zhongsi, which had helped LeTV Mobile undertake the mobile phone ODM business.

Not long after, former Coolpad President Li Bin, Vice President Cao Jingsheng, Vice President Xu Yi Bo and other senior executives resigned from Coolpad one after another.

"Liu Jiangfeng almost completely denied Coolpad's previous positioning and strategy, which also caused differences with Coolpad's old management, and ultimately they had no choice but to separate," the person said.

In fact, since Liu Jiangfeng took office in August last year, Coolpad has had a brand new beginning, which makes Coolpad people both happy and worried. They are happy that they are full of expectations for this CEO who once led Huawei Honor to the peak, but they are worried about whether it is really right to completely deny the previous Coolpad?

At the end of last year, Coolpad launched a new brand Cool targeting young people, and then launched the Changer S1 mobile phone, which is the first real product released after Liu Jiangfeng took over Coolpad. In order to please young users, Changer S1 also specially strengthened the two functions of games and music. The latest Cool Play 6 also focuses on game functions.

In addition, Coolpad also cooperated with the old headphone company AKG to customize headphones to attract more attention from young groups. According to Liu Jiangfeng's idea, he hopes to drive the brand through products and make more young consumers like Coolpad. To a certain extent, this move means that Liu Jiangfeng positioned Coolpad as a light business before abandoning it.

Currently, Coolpad has two main brands, Coolpad Changer and the previous Coolpad brand for operators. Changer will be further divided into S series and C series. The S series will be aimed at young people who like music and games and have certain financial strength, mainly mobile phones priced between 2,000 and 3,000 yuan. The C series is more practical and cost-effective, mainly mobile phones priced between 1,000 and 2,000 yuan.

Industry analysts pointed out that Liu Jiangfeng is copying the Honor model. He hopes to create a new Coolpad targeting young users through resource sharing and capital cooperation with LeTV. However, such an approach requires a large amount of capital investment in products, marketing and R&D, but Coolpad is already losing money and is unable to do so. What Liu Jiangfeng did not expect was that the "big tree" of LeTV was running out of funds.

Coolpad's latest financial report shows that its operating loss in the first half of 2017 is expected to expand to HK$800 million, and its operating income will decline by more than 50% compared with the same period last year.

A former Coolpad employee who left the company said: "Everyone was very optimistic about Liu Jiangfeng at the beginning, because the achievements of Honor under his leadership were obvious to all in the industry. Coolpad needed to change, but not this kind of sharp change, because such a change would be unaffordable for a company in a trough. In addition, the product positioning of Coolpad after the change was not clear enough, the process was loose due to flat management, and the input and output were not proportional, which caused many people to lose confidence in Liu Jiangfeng and left Coolpad one after another."

It is understood that Coolpad has been in a passive state since LeTV encountered a broken capital chain problem. In addition, Coolpad's previous regional joint ventures were asset-heavy operation models. The Chinese region can no longer bear such a heavy cost burden, and layoffs are inevitable.

Currently, Coolpad is clearing out the staff of the joint venture and directly compensating those who intend to leave. The overall plan is to complete it around the end of July. "Coolpad has experienced many transformations in its history and has survived them all. This time it is a bit uncertain," a former Coolpad executive told Tencent Technology.

Liu Jiangfeng's long-term goal was to bring Coolpad back to the top of the domestic brands. He set a goal of "three ones in five years" for Coolpad: Coolpad sales would exceed 100 million within five years, Coolpad would return to the top of the industry, and Coolpad Group's market value would exceed 100 billion.

Coolpad is in a precarious situation with continuous operating losses, increased consumption due to restructuring, and no support from LeEco. The so-called goal is out of the question. As for Liu Jiangfeng, the pressure he is under can be imagined. There are even rumors that Liu Jiangfeng is also leaving the company. However, the rumor has not been confirmed by Liu Jiangfeng himself. He told Tencent Technology: "There is pressure, but where is there not enough pressure?"

For Coolpad, the top priority is to speed up adjustments, clarify positioning, reverse the operating status as soon as possible and increase research and development. In the eyes of the outside world, the positioning of light business cannot be easily abandoned, and cooperation with operator channels still needs to be deepened at this stage. You know, in 2015, Coolpad's "Boton" jointly created by operators still established its influence in the high-end market, and the Fengshang series was unique in the mid-range market.

It is reported that Coolpad is planning to release a flagship product next month to reconstruct the definition of the product. This may be Coolpad's last chance and Liu Jiangfeng's last chance.

LeTV cuts its smartphone sales target by half in self-rescue

The acquisition of Coolpad was a key step for Jia Yueting to complete LeEco's globalization. LeEco expected to use Coolpad's production and research, technology, and supply chain to build its own open and closed-loop ecological model, also known as ecological reaction. However, this model encountered setbacks just two months after becoming a major shareholder of Coolpad.

In August last year, LeEco's mobile phone supply chain began to have funding problems. According to incomplete statistics, there were about dozens of suppliers and agents affected at the time, and the amount of money involved was about several billion yuan, some of which were overdue. In November of that year, Jia Yueting, the founder, chairman and CEO of LeEco Holdings Group, issued an open letter for the first time to acknowledge the funding chain problem.

Although LeEco later resolved some of its debt problems by swapping debt for equity, the problems of funding and rebuilding the production chain facing LeEco mobile phones cannot be underestimated. To this day, the impact of the supply chain on LeEco mobile phones has not been completely eliminated.

According to LeTV insiders, the biggest problem facing LeTV mobile phones at present is still the shortage of funds, which has resulted in the inability to keep up with production capacity, and some suppliers are no longer willing to cooperate with LeTV.

Where should LeEco Mobile go? At an internal meeting in early 2017, Jia Yueting made it clear that the funding problem would be difficult to solve in the short term, and that mobile phones, sports and other businesses needed to "save themselves".

Unlike LeEco's other businesses, LeEco's mobile phone has adopted the strategy of ecosystem subsidies for hardware and negative pricing since its debut, that is, LeEco's hardware itself is loss-making. The reason why it was able to continue operating in the past was that LeEco's ecological reverse model constantly used another ecological business to make up for the funding gap in the mobile phone business.

Adopting the "self-rescue" model means that LeTV will no longer provide funds for the mobile phone business, which is naturally unsuitable for the future development of the mobile phone business under the LeTV model.

In April this year, LeEco announced the appointment of Ablikim Ablikimiti (abbreviated as "Amu") as the CEO of LeEco Mobile, and Feng Xing was transferred to be in charge of LeEco Holdings' government affairs and operator affairs. A month later, on the second anniversary of the launch of LeEco mobile phones, Feng Xing updated his Weibo with a status: Don't forget where you started, don't seek the end.

The outside world speculated that Feng Xing's Weibo post revealed his intention to leave LeEco. LeEco insiders also revealed to Tencent Technology that Feng Xing would soon officially leave LeEco, but the specific date has not been determined. In addition, several vice president-level executives are also preparing to resign, and the overall mobile phone business will lay off at least 50% of its employees.

For Amu, who is good at strategic consulting but does not understand the mobile phone business, the "self-help" measures taken after taking over are to reduce staff and streamline expenses on the one hand, and to find ways to introduce funds on the other hand, but the latter is not going smoothly. Due to the inability to solve the funding problem, LeTV Mobile has to adjust its shipment target this year.

According to the above-mentioned insider, LeTV's sales target for mobile phones this year has been adjusted. It has been reduced from the initial 13 million units to about 9 million now, which is less than half of the sales volume of nearly 20 million units in 2016. The reason is that it is unable to pay the order costs of the supply chain.

According to LeEco's mobile phone plan, there will be no less than two new products released in the second half of the year, but it still needs to face the severe problem of not being able to mass produce them. "At a regional business report meeting, Amu was a little overwhelmed after listening to the problems reported by each business line," the person said.

On May 21, LeTV held a media communication meeting. When asked by the media about the future development of LeTV mobile phones, Jia Yueting summarized the funding problems encountered by the mobile phone business before, but did not give a clear solution.

At the beginning, Jia Yueting said that Coolpad and LeTV will have a dual-brand strategy in the future. After Coolpad is integrated into the LeTV ecosystem, it will achieve full integration of online and offline mobile phone marketing channels and give full play to its O2O competitive advantage. In terms of other resource integration, LeTV and Coolpad will achieve deep synergy in areas such as patents, R&D and supply chain.

The above-mentioned analysts pointed out that, in fact, there are very few opportunities for the two brands to collaborate internally. From the beginning, Coolpad was actually in a state of "self-rescue". After LeTV's funding problem came out, LeTV had no intention of paying attention to Coolpad and was also busy with self-rescue.

Liu Jiangfeng said in an interview with the media: In 2016, Coolpad shipped about 15 million units. In 2017, it is hoped that the shipment volume can reach 20-25 million. Judging from the current progress, the first half of the year is far less than half of the expected value, or even lower.

If LeTV's 9 million units are added, the annual shipment volume of "LeTV + Coolpad" is expected to be around 20-30 million units this year. This is premised on the breakthrough progress of both parties' "self-rescue", which is so difficult that it is almost impossible to accomplish.

Although the scale of China's mobile phone market is huge, the level of competition far exceeds that of any other industry. Only by surviving can there be a chance. It remains unknown how Coolpad and LeTV will survive this time.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.