LeEco, The Tech Titan that expanded too big too soon.
It was not a long ago that the Chinese giant LeEco was all over the news, whether it was expanding its services, acquiring Vizio, a competitor to Tesla with their LeSee or their investment in Faraday Future. But now the future for the Chinese tech giant doesn’t look so bright as it once was.
LeEco was a Chinese tech giant, often called as the Netflix of China. It’s a Chinese multinational conglomerate that was founded by Jia Yeuting in 2014. LeEco’s first venture was online streaming in China by the name Le[dot]com. As piracy was rampant at that time in China, it was very easy for Le to acquire licenses for online streaming of movies and TV shows. Due to strict laws in China, foreign companies like Netflix were not able to penetrate the Chinese market. Due to the lack of competition, LeEco had resounding success in China. Till now online streaming is the only profit generating business of LeEco.
The Company’s founder Jia Yeuting wanted to build a formidable tech company in the likes of Apple, Google & Microsoft. He wanted it all or nothing. So the company grew at exponential rates, they wanted to explore as much as business possibilities as possible. They started selling hardware at razor sharp margins. Started manufacturing and selling Mobile phones in China and in the Global markets such as India & US by the name of LeTv and LeEco respectively. In 2015, they wanted to create a competitor to the electric car titan Tesla and announced that they are developing LeSee, an autonomous electric car. They also invested in Faraday Future, a startup from silicon valley that also wanted to compete in the race to build ‘The Fully Autonomous Electric Car’.
LeEco expanded to United States and India with their online streaming services and mobile business. They wanted a pie of the TV market in the United States and announced that they will be acquiring Vizio, an American Television manufacturer for about $2.2 Billion.
Due to the competition from the homegrown companies, such as Huawei and Xiaomi, it was always a struggle for LeEco to capture mobile market in both its home country as well as the global market and the competition is still heating up. Now there has been rumors about the company the company exiting from markets such as India, which the company denied. But most of the company staff in India were laid off. Now the company has been scaling back its operations.
By Late 2016, the company’s founder Jia admitted that the company over-anticipated the market and expanded way too soon. The company was forced to abandon it’s acquisition of Vizio and started selling it’s assets to tackle cash crunch. But by the time it realized the truth, it was already too late. The company had it’s foot on quicksand and it was quickly sinking. The chairman slashed his salary to $0.15 dollars and started selling his shares in order to keep the company afloat.
"We blindly sped ahead, and our cash demand ballooned," he said in the lengthy letter sent to workers, Bloomberg reported. "At the same time, our capital and resources were in fact limited."
The company is now trying to sell the land it acquired for its HQ in Silicon Valley. It purchased the land from Yahoo about an year ago
"This property will be an EcoCity that houses 12,000 employees," Jia said at the time
The company is trying to sell the land for $250 Million to a little known Chinese developer Genzon Group. $10 Million more than what it paid to Yahoo last year. The company held a meeting this Tuesday (May 23, 2017) and laid off 325 staff including employees from the LeSee electric car department. The company stated that it will focus on Chinese speaking customers for now, as a measure to cut costs. Expansion plans were eventually put on hold, employees noticed delayed paychecks and earlier this week, CEO YT Jia stepped down from his position.
The company is now a in series of fundraising activities for staying afloat as the future looks dull. We have to wait and see what the future holds for LeEco in it’s store.