What is behind Meizu’s 6 billion dollar valuation？

　As you all know,MeizuFully studiedmilletBusiness model. And now, Meizu even intends to keep up with Xiaomi’s valuation.

In a recent interview, Li Nan, vice president of Meizu, suggested that if the price-to-earnings ratio of Xiaomi is calculated, Meizu will be valued at about $6 billion. But he also mentioned that Meizu has plans to precede Xiaomi’s IPO.

This valuation compared with millet’s 40 billion dollars, there is naturally a big gap, but you know, millet in the field of Internet and intelligent hardware ecosystem extensive layout, can be said to do enough concept, coupled with millet’s low-endSmartphoneSales in China have also reached a certain scale, so that a few days ago IDC and other research institutions ranked Xiaomi’s mobile phone shipments in the third quarter of this year as the third largest in the world. Therefore, it is understandable that some investors think that Xiaomi has a lot of commercial imagination, although Toutiao brother does not agree.

Meizu’s situation cannot be compared with Xiaomi, regardless of whether Xiaomi’s current valuation is worth 40 billion US dollars, and whether Meizu’s valuation is reasonable based on Xiaomi. Only Meizu’s valuation is close toLenovoHalf of the market value (measured by Lenovo’s current market value of about 15.60 billion US dollars) is enough to raise the question of Toutiao: a hardware company that sells smartphones as its main profit model, as long as it starts to learn the gameplay of Xiaomi’s "triathlon" and claims to be "table riding", can it get a valuation far higher than the company’s own strength?

Revenue is only 1/33 of Lenovo’s.

In Toutiao’s opinion, no matter how rich the business concept is or how vast the business imagination is, if a company makes an estimate of its capital value, it should first look at the company’s revenue level and net profit margin.

In terms of revenue scale, according to relevant reports, Xiaomi more than doubled in 2013, reaching RMB 27 billion yuan, and is expected to exceed 80 billion yuan in 2014. According to Li Nan, vice president of Meizu, Meizu shipped about 2 million units in 2013, with revenue of 5 billion yuan. In 2014, it is expected to ship 400-5 million units, and the revenue target will exceed 7 billion yuan. Only from the comparison of Meizu and Xiaomi’s revenue, Meizu and Xiaomi are nearly 10 times behind.

According to relevant reports, 94% of Xiaomi’s current profits come from mobile phone sales. Although Meizu has not released official data on profits, it has only two core businesses: Flyme system UI and Meizu mobile phone. If Meizu has profits, then most of its profits should also come from mobile phone sales. That is to say, only in terms of revenue and profitability, Meizu and Xiaomi are ten times different.

And if compared with Lenovo, Lenovo’s revenue in just one quarter of this year reached $10.395 billion, while last year’s revenue was $38.70 billion. Even if Meizu’s revenue this year can reach 7 billion yuan (note not US dollars), at best it is only about 1/33 of Lenovo’s, of course, this is still excluding Lenovo’s mergers and acquisitionsIBM　In the case of X86 server business and Motorola Mobile Market (both acquisitions have been announced) revenue. As for profits, we can’t make a valid comparison because Meizu has not announced it, but we know that Lenovo’s net profit last year was $817 million, and the net profit in the latest quarter of this year was $214 million. It can be said that the profit model is still relatively single Meizu, and its valuation is close to half of Lenovo, which can be said to violate the most basic laws and rules of business and capital.

The annual sales volume is less than 1/3 of Xiaomi’s first quarter.

Secondly, the business scale, millet smartphone shipments in the third quarter of this year was 18.40 million units, except for a few overseas emerging markets, most of which were domestic sales. And how about Meizu’s smartphone sales? As mentioned above, the estimated shipments in 2014 are 400-5 million units, that is to say, Meizu’s annual mobile phone sales are about 1/3 of Xiaomi’s quarterly sales. Therefore, in the opinion of Toutiao brother, it is not too late to catch up with Xiaomi in sales, and Meizu will talk about valuation and listing.

And if compared with Lenovo… Brother Toutiao can’t bear to compare like this, let’s just talk about one thing: in addition to firmly occupying the leading position in the traditional PC industry, Lenovo is also in the top position (at least in the top five) in the mobile Internet industry represented by smartphones and tablet computers. In contrast, Meizu only has the main business of smartphones, and the gap with Lenovo’s business scale may not be described as "very far", but Brother Toutiao has run out of words.

Expanding scale and revenue is the top priority

In addition to the above-mentioned gap in revenue capacity and main business scale (volume), let’s take a look at Meizu’s valuation from the perspective of competition in the mobile phone industry. This time, Brother Toutiao will not pull Lenovo in… The picture is so tragic that even Brother Toutiao dare not look at it…

Meizu, like Xiaomi, the smartphone industry is the core of its current business, but looking at the development trend of the entire smartphone industry, the slowdown in growth and low-cost machines have become the driving force for development, coupled with the "Xiaomi model" competing to be defeatedhand modelThe competition between Xiaomi and its imitators (such as Meizu) in this industry will only become more and more intense, and its future will face a choice between scale and profit: either high profit margins or scale for profit.

At least for now, apart from Apple, few hardware device companies can survive and develop on high profit margins. The most practical way is to increase total profits through scale. Therefore, since Xiaomi released the low-priced Redmi series of mobile phones to replace Xiaomi mobile phones as the main shipment force, Xiaomi has actually embarked on a large-scale business model. That is to say, for Xiaomi and Meizu, the sales of low-end mobile phones will be crucial in the future.

Because of this, Xiaomi has begun to lay out overseas markets with Redmi series mobile phones in a high-profile manner this year. In the face of the huge market of overseas 1 billion replacement volume, it is logical for Xiaomi to focus on volume to enter the strategic layout of emerging countries such as India and Brazil. But the problem is that domestic hardware manufacturers such as Lenovo and Huawei, which also covet overseas markets, have great advantages in supply chain and channels. In areas such as overall scale, globalization, channel operator relationships, and intellectual property accumulation that may be crucial to future smartphone competition, Xiaomi is currently at a disadvantage, and these shortcomings cannot be made up overnight.

Similarly, the above problems Meizu is more lacking than Xiaomi. For now, Meizu not only relies on the MX4 Pro to seek the possibility of breaking through the 2000 price point, but also urgently needs to make efforts in the low-end market below 1,000 yuan, and achieve the purpose of reducing costs by taking the volume to form a scale to create a certain supply chain advantage. According to Li Nan, Meizu wants to make a thousand yuan machine that is better than Redmi and Honor experience, and is expected to be released in early 2015. Obviously, how to expand shipments and revenue, which is a matter of life and death for a hardware equipment company, is much more important than valuation and listing. Survival is still Meizu’s first priority.

Is "table riding pie" really reliable?

Finally, let’s talk about the essence of the Xiaomi model, and whether the valuations of Xiaomi and Meizu are reliable from the perspective of the commercial value of "table riding"?

What is the inherent business logic of the Xiaomi model? Brother Toutiao believes that if Xiaomi is simply compared with hardware companies such as Samsung, Lenovo, and Huawei, it is difficult to see Xiaomi’s "ambition" clearly. Because although Xiaomi "rides on the table" focuses on the combination of soft and hard business cards, from the perspective of Lei Jun’s series of layouts and plans, Xiaomi hopes to establish certain competitive advantages or barriers at the end of internet services, that is to say, Xiaomi hopes to make articles around users to obtain monopolistic profits in the form of traffic entry. In this regard, Xiaomi not only wants to be Tencent, providing users with Internet value-added services such as information, application distribution, games, audio-visual, and reading, but also wants to be Ali, providing related services around users’ needs in life, entertainment, and shopping. That is to say, if Xiaomi wants to achieve true success, it needs to win three major battles: the battle of Internet entrance, the battle of mobile payment, and the battle of virtual content. The opponent can be the three giants of BAT, or the international giants such as Apple, Google, and Microsoft… In short, Brother Toutiao just wants to wish Xiaomi good luck.

　

Therefore, for Meizu and Xiaomi, the ideal is very "plump", and the reality is very "skinny". Before completing the above ecological layout and forming competitive barriers, Xiaomi, which combines software and hardware, must first survive as a mobile phone company like Apple.

More importantly, software and internet services should have a good experience and function on every device and system platform as much as possible, and it is almost a completely open ecosystem. This is precisely the opposite of the business model that focuses on hardware device services. A company that sells hardware devices as its main profit model must provide services in a closed ecosystem. This kind of contradiction and conflict at the business model level will be the common destiny that every "table rider" must face.