Thu, Aug 23, 2018 - Page 12 News List

Phone giant Xiaomi delivers growth in first earnings report

Bloomberg

Xiaomi Corp (小米) delivered a 68 percent revenue jump and quarterly profit in its maiden earnings report, as the Chinese smartphone giant made strides overseas while fending off a challenge from local rivals, such as Oppo Mobile Telecommunications Corp (歐珀).

The results — its first since raising US$5.4 billion in an initial public offering (IPO) — could help Xiaomi get past an anti-climactic trading debut last month.

Net income came to 14.7 billion yuan (US$2.1 billion) in the three months ended June, versus a 12 billion yuan loss a year earlier.

Revenue climbed to 45.2 billion yuan, but its pace decelerated from the first quarter.

The dramatic reversal in the bottom line came about because Xiaomi booked a one-time gain of 22.5 billion yuan by revaluing a swath of preferred stock in the aftermath of its debut.

Without that windfall, its operating loss came to 7.6 billion yuan — reflecting the company’s philosophy of selling phones at near-cost so it can drive the sale of services from music to video, a la Apple Inc.

Xiaomi is trying to couch itself as a high-growth Internet company — a narrative consistently touted by billionaire cofounder Lei Jun (雷軍).

The Internet services business remains small, accounting for just 9 percent of revenue in the quarter, but that segment’s potential is one reason Xiaomi managed to price its IPO at multiples far higher than celebrated tech names such as Tencent Holdings Ltd (騰訊) and Facebook Inc.

Revenue from that division rose 64 percent to 4 billion yuan in the June quarter, thanks mostly to ad sales.

“Xiaomi posted somewhat encouraging results today, [but it] may not have done much to assuage concerns about its business model,” Kaiyuan Capital Ltd (開源) managing director Brock Silvers said.

“Xiaomi has billed itself as an Internet company deserving a tech growth multiple, and the market continues to expect evidence of a transformation,” Silvers said.

The stock yesterday closed up about 1.6 percent in Hong Kong trading, just above its IPO price of HK$17.

In the short run, Xiaomi faces no shortage of challenges, particularly in the smartphone business that yields two-thirds of its revenue.

Global demand is on the wane, threatening the device sales it depends on to grow its user base.

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