Le Holdings Co. Ltd. (LeEco), a Chinese company with unusual multi-business aspirations, announced this week that they had acquired Vizio, a U.S. manufacturer of affordable televisions, in a deal worth $2 billion. The deal will serve as LeEco’s entry into the U.S. market with its unusual mix of products.
See more on this deal which will bring a whole new line of technology to the U.S…
Founded in 2002 in Irvine, CA, Vizio has grown to become one of the largest manufacturers of affordable TVs, soundbars, and LCD monitors in the U.S. The deal transfers rights to all of Vizio’s hardware and software operations, technology and intellectual property to LeEco.
LeEco, a Chinese company with what Bloomberg News calls “sprawling ambitions,” considers itself the Netflix/Apple/Tesla of China. The company has cloud-based online services (including streaming media services) – but it also makes smartphones, TVs, virtual reality headsets…and electric vehicles.
A Little of This, A Little of That
“LeEco is the world’s only company that goes across four different smart devices including TV, phone, car, and VR,” said Jin Yueting, the billionaire Chairman and Founder of LeEco. “Through this acquisition, LeEco has a solid foundation for its globalization strategy. We will add more global users to get to know the brand and our product experience.”
Moving forward, the company will have a dual headquarter strategy, according to Winston Cheng, Senior Vice President of LeEco who spoke to Bloomberg TV. This is all part of their globalization strategy with dual core markets: China, and the U.S.
Ultimately, Cheng told Bloomberg, the company plans on a U.S. initial public offering (I.P.O.) of stock in “three or four years.”
Did LeEco Get Vizio Cheap?
However, to our eyes, the price that LeEco paid for Vizio seems unusually low. According to Reuters, in documents filed by Vizio for an initial public offering last year, the company reported revenues of $1.3 billion for the first six months of the year. To our reckoning, that straight-lines out to an annual revenue of at least $2.6 billion (which in reality would likely be higher than that, given the typically higher revenues in the back half of the year).
If our estimate is accurate, then that means that LeEco paid less than one times revenues (1 x revenues). Perhaps this price is based on Vizio’s profitability, which given the fact that they tend to pursue the mainstream marketplace, could be low.
Do You Know the Way to San Jose?
LeEco’s U.S. headquarters has already been established in San Jose, CA, where the company has built an 80,000 sq.ft. building. Furthermore, the company is seeking to line up financing for a $1 billion electric vehicle manufacturing plant in North Las Vegas.
Vizio will stay in its existing headquarter and operate as a wholly owned subsidiary of LeEco. Vizio CEO William Wang will become Chairman and CEO of Inscape Data Services – Vizio’s data business – which is being spun off as a separate privately owned company.
One thing we found vaguely disturbing, on LeEco’s website there are several videos introducing their business. These videos keep describing their business by using the term “disruptive.” That term, as applied to technologies, or markets, can be a positive in today’s fast-paced tech world. But LeEco kept referring to “disruptive pricing.” If by that they mean predatory pricing, that could spell trouble down the road for the overall TV market here in the U.S.
See more on LeEco by visiting their website at: www.leeco.com.
For more on Vizio’s line-up, visit: www.vizio.com.