What started as a roar appears to be ending as a whimper, as Asian wannabe-giant LeEco announced this week plans to lay-off nearly 70% of their entire U.S. workforce. This significant retrenchment occurs just weeks after its proposed $2 billion acquisition of Vizio fell apart just before closing, and suggests the company, which is in multiple businesses, may have gotten ahead of itself…and ahead of its funding.
See more on this dramatic announcement from LeEco…
Just last month, LeEco and Vizio announced they were calling off their acquisition plans “due to regulatory headwinds.” The statement went on to suggest that the parties were exploring other opportunities to work together.
But only one week before this statement, LeEco was unable to make its payroll, suggesting major problems at the company. We noted our skepticism then that the Vizio deal had any chance of closing.
On the Verge
In in our post on April 12th, we continued to question LeEco’s viability, telling Strata-gee readers that LeEco’s sales last year were planned to be around $100 million…but actually only came in at around $15 million…a big miss. We added this comment:
However, media reports suggest the situation is much more dire – at least on the LeEco side – than this rosy statement suggests. LeEco, it seems has nowhere near the traction they expected and are on the verge of major staff cutbacks as a result.
That’s right, once again, we appear to have predicted the future – with those staff cutbacks being announced now. In a series of town hall type meetings with its staff, the company said it will lay off 325 employees, which media reports place at anywhere between 65%-75% of their total U.S. based staffing level.
Dashed Plans to Hire 12,000
It is a dramatic reversal for a company that just last year purchased a 49 acre property in Santa Clara, CA from Yahoo in order to build a “global innovation hub” that would employ 12,000. Put those daydreams on hold.
Such a hub makes sense considering that LeEco was selling everything from Ultra HD TVs to electric cars to smartphones to streaming services. In their home of China, LeEco is said to be extremely successful with a Netflix type streaming service – less so here in the U.S.
A Significant Restructuring
Of course their funding issues put all of that in jeopardy. LeEco told Variety that it is undergoing “a significant restructuring and streamlining of our business, operations and workforce.”
Significant restructuring indeed. LeEco told Variety that it will only focus on Chinese-language customers in the United States. This is a far cry from the days when its CEO boldly targeted competitors such as Tesla, Apple and Samsung. It takes a lot of money to fight those big boys.
Layoffs Around the World
In a statement released on Tuesday, LeEco said that any further U.S. expansion will be halted until its financial issues are resolved. “The breadth of our business model is capital-intensive, and our leadership has been working to secure the appropriate level of funding for the U.S.,” according to the Variety report.
In February, although not widely reported in the U.S., LeEco cut fully 80% of their staff in India. The company insists, however, that it has no plans to exit that market.
Even the CEO
And finally, last Sunday, LeEco announced that the CEO of its publicly traded unit Leshi, Jia Yueting, would be stepping down.