Smartisan Technology’s dilemma: From LeTV, Xiaomi to Huawei, the merger rumors reflect the current situation of the mobile phone industry

The first source was the exposure of a financial data, and then there was a casual remark made by the current Coolpad CEO Liu Jiangfeng during a media interview. So the rumor began to spread with a "certainty" that Smartisan Technology was going to be sold to Xiaomi.

Smartisan Technology denied the merger rumors, saying they were "completely false." CEO Luo Yonghao said on his personal Weibo account : "Rumors are basically false."

In fact, based on the currently interpreted sources, there is no news of Smartisan Technology being acquired.

Finance does not equal valuation. New products mean that funds are in place.

First of all, there is no direct relationship between financial data and startup valuations. Financial conditions can reflect revenue, but it does not mean a decline in valuation or a reduction in investment.

Chengdu Nibiru Technology's IPO prospectus revealed the financial data of Smartisan Technology. The disclosed data showed that Smartisan Technology suffered a loss of 462 million yuan in 2015 and a loss of 192 million yuan in the first half of 2016 (the 2016 semi-annual report has not yet been audited). At the same time, Smartisan Technology's total assets also shrunk from 825 million yuan at the end of 2015 to 296 million yuan on June 30, 2016.

Since Baotuan Technology, a wholly-owned subsidiary of Nibiru, invested RMB 30 million in Smartisan Technology at a pre-investment valuation of RMB 2.11 billion and obtained a 1.13% stake in Smartisan Technology, the authenticity of this financial data is beyond doubt, but the financial data can only reflect the revenue of Smartisan Technology, or to put it more intuitively: Smartisan Technology burned RMB 529 million in half a year, and as of June 30, there was only RMB 296 million in cash on the books.

However, based on this financial data, it is impossible to conclude that the investment of Hammer Technology's investors has shrunk. In terms of venture capital, real money is invested in equity, which is based on the company's future forecast under the current situation, that is, valuation. Nibiru paid 30 million yuan to acquire 1.13% of Hammer Technology's equity, based on the pre-investment valuation of Hammer Technology of 2.11 billion yuan, rather than the cash on Hammer Technology's books at the time.

Similarly, although the financial data was exposed, the valuation situation was not known. Whether Smartisan has entered the stage of "merger and acquisition to compensate investors" cannot be inferred based on the financial data as of June 30.

However, it can be inferred that if the company wants to launch new mobile phones, 296 million yuan in cash is obviously not enough, and it is indeed time for a new round of financing.

In fact, according to information obtained by Sina Technology from the venture capital circle, Smartisan Technology completed a new round of capital reserves in July this year, and the investor was a domestic Internet giant.

And judging from the recent official Weibo of Smartisan Technology and Luo Yonghao, the new product launch conference has indeed been put on the agenda, and it is very likely that the annual flagship new product Smartisan T3 will be launched in Shanghai. From this perspective, it can also be seen that the financial situation as of June 30 has obviously changed - otherwise how could there be funds to produce Smartisan T3.

What is the value of Hammer, which is frequently involved in mergers and acquisitions?

In addition to the financial data, due to the recent remarks made by Coolpad CEO Liu Jiangfeng in a media interview, coupled with the revelations of "people in the mobile phone industry chain", Smartisan Technology was incorporated into Xiaomi overnight.

Liu Jiangfeng said in an interview: "Many people really want to invest in him, including Alibaba, LeEco, and even Xiaomi, but no one can tell who will win."

Judging from the interview video, this was more of a statement made unintentionally to prove that Hammer's value is still there, but it was quickly spread and interpreted, and even after being combined with the revelations of a "person in the mobile phone industry chain", it was considered to be the news that Hammer was incorporated into Xiaomi.

Recently, Smartisan Technology denied the rumor to the media, saying that the merger rumor was "completely false." After that, Qian Chen, the former CTO of Smartisan Technology, also reposted the relevant merger report on Weibo, saying: Mr. Liu (Liu Jiangfeng) knows more than us. He then further explained: "Most commercial mergers and acquisitions are confidential. How can an outsider know so much and even if he knows, he will not tell anyone."

In fact, judging from Liu Jiangfeng’s original words in the interview, the acquisition was also a misunderstanding by the outside world. The original words of the Coolpad CEO were “many people really want to invest in him” rather than acquisition.

A person close to Smartisan Technology's investors also expressed his views on the M&A rumors. He told Sina Technology: "Every time there is news about Smartisan Technology's investment, it always comes from the so-called 'industry chain' people, and never from Smartisan Technology or investors. However, investment is a strictly confidential process, not to mention such an important matter as M&A. An industry chain person may know who the mobile phone OEM is and how many units have been shipped, but topics about investment and M&A may only be hearsay."

However, whether it was initially associated with Alibaba , then there were rumors of acquisition by LeTV, to now being associated with Xiaomi, behind these rumors, in addition to the outside world's doubts about the independent survival of Smartisan Technology, we can also see recognition of the value of Smartisan Technology.

Although Luo Yonghao and Smartisan Technology have had difficulty in manufacturing phones and have encountered constant unexpected situations since their establishment, and their sales have not met initial expectations, but in terms of UI and products, Smartisan Technology can be regarded as a "clear stream" in the domestic mobile phone industry.

At a time when smartphones are becoming increasingly homogenized, Smartisan's unique UI appearance and the design of its software applications and operating systems have created a highly recognizable style, and it also has a good reputation for user experience. These are exactly what the domestic mobile phone industry lacks, and are the key reasons why Smartisan has been repeatedly involved in industry mergers and acquisitions and why the logic behind this is feasible.

In addition, although the financial data is not good, Smartisan Technology still has a large number of design and engineering talents, which are potential intangible assets and the basis for the continuous increase in the valuation of Smartisan Technology. Otherwise, the first mobile phone Smartisan T1 made by an English teacher who calls himself a product manager would never have won the "IF Design Gold Award" - this honor is still the first and only one in mainland China.

In other words, judging from its frequent involvement in mergers and acquisitions, Smartisan Technology still has value.

Discount on the current situation of domestic mobile phones Market competition is escalating

From another perspective, the reason why Smartisan Technology has been repeatedly involved in mergers and acquisitions is not only due to its own lack of business capabilities, but also closely related to the escalating competition in the current mobile phone market.

Since the beginning of this year, Smartisan Technology has been rumored to be linked to Alibaba, LeTV and Xiaomi, and in each rumor analysis, many commentators can always find the necessary and sufficient conditions and analysis logic.

This logic is often that Smartisan Technology is not developing well, "feelings cannot withstand the reality", and has to bow to reality and seek mergers and sales. On the other hand, the acquirer can make up for the shortcomings, such as Alibaba's acquisition of Smartisan to expand the Alibaba Cloud OS territory, or LeTV's focus on the mid-to-high-end market through Smartisan, or Xiaomi can further raise the price level after acquiring Smartisan... There are even mobile phone analysts who commented on the rumors that Huawei should be the one to acquire Smartisan Technology, because after Huawei acquires Smartisan, it can say goodbye to its own poor experience system.

If we look at the analytical logic, we can actually see the two major difficulties currently facing the domestic mobile phone market.

First, homogeneous competition is intensifying, and differentiation is urgently needed. Since the domestic mobile phone market became increasingly saturated in 2015, domestic mobile phone manufacturers have been looking for new growth points, especially differentiated development. However, given the current overall technological gap, there are not many "highly recognizable" mobile phone manufacturers that can be identified by users at a glance.

The second is consumption upgrade. The idea of ​​smartphones that used to be invincible with cost-effectiveness has encountered difficulties since last year. After the first wave of widespread smartphone adoption in China, users' pursuit of quality has begun to surpass price itself. How to tell a new story to achieve price increase is the key issue that domestic mobile phone manufacturers are currently thinking about. The most typical example is Xiaomi, a mobile phone company that has grown rapidly in the five years since its establishment, and has continuously weakened the concept of "cost-effectiveness" on various occasions.

In other words, Smartisan Technology, which has been focusing on differentiation and price since 2012, happened to be in line with the general trend at this time, which is actually an important reason why the value of Smartisan Technology remains.

Time is running out

However, even if the value is still there, there is not much time left for Smartisan Technology.

If the first product's lack of commercial success was due to a lack of experience in production capacity, and the second product faced foundry problems and inappropriate launch timing, then by the time Smartisan T3 was released, Smartisan Technology had indeed reached a very critical time point.

The key lies in the users. When Smartisan Technology was first established, it quickly attracted a large number of supporters and followers due to Luo Yonghao's IP effect, but the embarrassing situation is that this support and attention were not quickly converted into commercial significance.

As Smartisan Technology enters its fifth year of entrepreneurship, the novelty points of user attention are also declining. If the first wave of core users may be a group of hardcore users, then this user group is being diluted over time.

"The group of people who listened to Luo Yonghao's quotes, followed Luo Yonghao and then paid attention to Smartisan Technology is being diluted, and the voices of defending Luo Yonghao and Smartisan Technology are also getting smaller. Maybe Luo Yonghao's Weibo fans have indeed increased by millions, but more of them don't know who Luo Yonghao was before. They are more just watching the fun." said an early supporter of Luo Yonghao.

This supporter of Luo Yonghao also told Sina Technology that he bought the Smartisan T1 more out of support for Luo Yonghao and the startup Smartisan Technology, but as time goes by, his willingness is now declining. He said that the Smartisan T1 was no longer sustainable until last year, so he switched back to Apple and currently has the latest iPhone.

"How much do you expect from Smartisan T3? Will you buy it?"

"Compared to Smartisan T1, the expectations and willingness are not that strong. Whether to buy it may ultimately depend on the actual product and its functions," said a supporter.

Obviously, Luo Yonghao and the people within Smartisan Technology have already realized the problem of "time is running out". In a written interview with Sina Technology in May this year, Luo Yonghao said that he was planning a big move. He said that with the increasing homogeneity of domestic smartphones, it was time for Smartisan Technology to break out.

Smartisan Technology has also made efforts to ensure this kind of explosion. The most obvious move is Smartisan Technology's move in senior management talent. First, it poached the young and energetic Wu Dezhou and his team from Huawei Honor, and then brought in former Weibo Vice President Miao Ying in marketing. In addition, there is a mysterious executive in the corner of the office who has not been announced to the public - but Sina Technology has learned after many visits that he is from a supply chain manufacturer in Shenzhen and will help Smartisan Technology solve its supply chain problems.

At present, Smartisan Technology's new product launch conference has been put on the agenda, but there is no doubt that the Smartisan T3 and other new products that may be released will have a crucial impact on Smartisan Technology. Whether Smartisan T3, which has a relatively long pace of new product releases, is accumulating power for an explosion or because it has encountered other problems, will also be answered at that time.

Luo Yonghao said on Weibo: Mass production has started in Shenzhen, I am also in Shenzhen, I will return to Beijing to give a keynote once everything is arranged... I have prepared a lot of great things to brag to you. I know you are anxious, but no matter how anxious you are, please believe that I am more anxious than you.

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.