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Alibaba Bets $590 Million On Becoming Smartphone Player

Posted by samzenpus on from the piece-of-the-pie dept.

An anonymous reader was one of many to note that Alibaba has bought a $590 million minority stake in Chinese smartphone manufacturer Meizu. "China's Alibaba Group Holding Ltd is taking a $590 million stake in an obscure domestic smartphone maker as the e-commerce giant tests ways to expand its mobile operating system in a shrinking, cut-throat handset market. Extending a previously muted push into hardware, Alibaba said on Monday it will buy an unspecified minority stake in smartphone maker Meizu Technology Co. Dwarfed by rivals like Xiaomi Inc, privately owned Meizu's slice of China's smartphone market is estimated by analysts at below 2 percent. The deal, unlike U.S. rival Amazon.com Inc's foray into smartphones with its own-brand Fire Phone, is designed to help Alibaba push its mobile operating system within China through Meizu's handsets. In return, Zhuhai, Guangdong-based Meizu will get access to Alibaba's e-commerce sales channels and other resources, the companies said in a joint statement."

50 comments

  1. Shazam! by turkeydance · · Score: 0

    Surprise, surprise, surprise!

    1. Re:Shazam! by Anonymous Coward · · Score: 0

      PYLE! You just gave the china the codes to our phone system!

    2. Re:Shazam! by gtall · · Score: 1

      Well gollllllly, Sargent, I didn't mean to, but they asked real nice.

  2. Yeah! by Greyfox · · Score: 2, Funny

    You can already get the highest quality iPlones on alibaba. They look like an iPhone, but they're not. They're probably made by the same guys and the same high-quality tears of Chinese children, though!

    --

    I'm trying to teach myself to set people on fire with my mind... Is it hot in here?

  3. Meizu isn't obscure by Anonymous Coward · · Score: 1

    Meizu isn't considered an "obscure domestic smartphone maker" neither in China nor by anyone buying chinese android phones.

    1. Re: Meizu isn't obscure by Anonymous Coward · · Score: 0

      Meizu is one of the oldest Chinese brands, but it has no "cool factor" of Americanness of Xiaomi. Most rich Chinese hate their own kind, and are pretending to be Americons.

  4. Alibaba by Anonymous Coward · · Score: 2, Interesting

    What is interesting about Alibaba is the opportunities to buy directly from the manufacturers by the common man. If you look on their website you see shirts that normally retail for $70-$80 selling for $8 with FREE shipping. Sure, you can call them "fakes", but they are made in the same factory by the same workers as the "real ones". Who do you think is manufacturing the "real" goods? Santas' Elves?

    Now we know how much we are getting screwed paying 1000% markups.

    1. Re:Alibaba by Wootery · · Score: 1

      you can call them "fakes", but they are made in the same factory by the same workers as the "real ones"

      But are they the same device?

      A single factory and workforce might produce any number of different products.

    2. Re:Alibaba by Anonymous Coward · · Score: 0

      They are shirts in my example. LaCoste, Polo, Armani, etc. They are the SAME shirts that you buy in Paris. Made on the SAME factory line by the SAME workers in China, Thailand, Vietnam, etc.

      People call them "fakes" but they are as "real" as the ones you buy in your department store for $80.

    3. Re:Alibaba by ArcadeMan · · Score: 2

      Look at this on eBay.

      Those are sold listings with free shipping.

      In Canada I couldn't even get a stamp for a postcard or letter at that price.

      --
      Get free satoshi (Bitcoin) and Dogecoins
    4. Re:Alibaba by Lumpy · · Score: 1

      As well as the opportunities to scam the hell out of people. I have more problems on AliBaba than ebay with scammers.

      They dont have any system in place to filter out the criminals, so it's a giant freaking mess.

      --
      Do not look at laser with remaining good eye.
    5. Re:Alibaba by Anonymous Coward · · Score: 0

      Yes they do. They have a rating system and a user feedback system. They also have an escrow and a method to dispute orders for up to 90 days. I've never had an issue myself.

    6. Re:Alibaba by Anonymous Coward · · Score: 0

      who cares who it was made it?

      for all i care, it may be made by a robot, but the materials are what counts.

      cheap materials tend to break apart faster. expensive materials made by the same robots, in the same factory might tend to last longer, IF quality control checks are in place.

    7. Re:Alibaba by gtall · · Score: 1

      Yes, but this is Chinese manufacturing we're talking about with no American company worried about their image and quality control. I very much doubt any Chinese knockoff is going to be as good, they'll cut corners anyway they can.

    8. Re:Alibaba by Anonymous Coward · · Score: 0

      The materials are the same. The FACTORY is the same, the FACTORY LINES are the same. They simply run them a couple of hours longer and don't tell the manufacturer.

      And lots of people care "who it was made it".

    9. Re:Alibaba by Anonymous Coward · · Score: 0

      Sure, you can call them "fakes", but they are made in the same factory by the same workers as the "real ones". Who do you think is manufacturing the "real" goods? Santas' Elves?

      What do you think they do with the ones that fail QC? Give them to Santa's Elves?

    10. Re:Alibaba by Anonymous Coward · · Score: 0

      Let me reiterate: the stuff they are selling are THE SAME QUALITY as the "real" ones. They are the "real" ones. If you don't believe me, go order some yourself.

      There is no difference between the $80 version and the $8 version (except for $72 out of your pocket).

      You guys have been conned into thinking paying a huge markup means better quality control. It doesn't. This stuff is being made as fast as possible to the same standard and shipped out of China for a pittance.

      If you don't believe me, go order some yourself.

    11. Re:Alibaba by Anonymous Coward · · Score: 0

      The materials are the same? So the manufacturer doesn't notice a few missing pallets of material that they paid for? Or are these factories buying their own materials and moving them into the factories? No one notices this or the fact that the factory runs "after hours?" You know this information but the manufacturers don't? Will you fuck off please? Talking out of your ass.

    12. Re:Alibaba by Anonymous Coward · · Score: 0

      Yes the materials are the same. This is China. This is how they do business. If you don't believe me go read the NY Times article that goes into detail. Who is going to "notice" that the factory is running extra hours. The FACTORY is owned by the people manufacturing these clothes. You don't think that LaCoste/Nike/etc owns factories do you??? They use Chinese factories, owned by Chinese people and subcontract it.

      Sorry you don't like the truth. Enjoy your $80 shirt.

    13. Re:Alibaba by Anonymous Coward · · Score: 0

      The point you are missing is there is a small percentage of the overruns you are talking about around. The much much larger percentage of bootleg products from China are not knockoffs, they are poorly executed clones or attempted copies not made on the same lines with the same materials by the same people. Search Google for Walbro fuel pump fake for an example. They look like real Walbro pumps, same model numbers, claim to have the same specs, some say they are compatible and some Chinese companies will even offer the trademarked Walbro symbol for a few extra bucks. Take any of them apart and you will see a totally different design and parts inside. They are not real Walbro pumps made on the same line with the same parts, they are cheaper imitations.

    14. Re:Alibaba by Anonymous Coward · · Score: 0

      Reply to myself.

      There is a reason the US government has a 78 page document to describe the specs for a hammer. If not, some company would bid for an win a contract for hammers and provide a hollow cast pig iron thing possibly shaped like a traditional hammer and an old piece of a car tire taped on as a cushioned handle. For the same reasons, if a US company wants to use the relatively cheap labor and resources in China, they too HAVE to engineer and specify very detailed exact requirements and verify those requirements are being met continuously with spot checks. If they want a metal hammer, they will get one. If they want a metal hammer that meets a very specific hardness, toughness, durability, balance, and weight. That has to be specified and tested. Another route a US company can take. Find a company in China that makes something already and offers it in bulk, say a hammer. A US company and buy that generic hammer and fine tune it and customize it and make it their own but they again, HAVE to periodically check them and make sure they are still good quality or risk giving themselves a bad rep.

      An example of that. Companies in China make performance cylinder heads that are based on the US company Edlebrock performer series. Many people import these heads from China, some people simply sell them as is on Ebay. Some companies do some spot checks on them and sell them on Ebay. Some companies do extensive testing on them and clean them up, replace the valve guides, and sell them on ebay or their own website. If the company in China that fabricates these changes the design or switches to a cheaper metal or their furnace is broke and only goes to 1500F instead of the normal 2000F, now what? The fly by noght seller on Ebay is not going to help you and know very little about them, he just puts them in a box and ships them to you.

    15. Re:Alibaba by tlhIngan · · Score: 1

      What is interesting about Alibaba is the opportunities to buy directly from the manufacturers by the common man. If you look on their website you see shirts that normally retail for $70-$80 selling for $8 with FREE shipping. Sure, you can call them "fakes", but they are made in the same factory by the same workers as the "real ones". Who do you think is manufacturing the "real" goods? Santas' Elves?

      Now we know how much we are getting screwed paying 1000% markups.

      Only if you don't know how Chinese manufacturing REALLY works. You know, stuff like third shift manufacturing, clones, and fakes.

      Third shift - the same manufacturing line makes more product than requested. So if the company asks to make 10,000 widgets, the factory will make 12,000. Of course, the company would notice needing 20% more parts and supplies, so the extra 2,000 are Chinese-sourced "substitutes". The company get 10,000, and the 2,000 are lower quality parts - using cheaper caps, underspec'd parts, leftover wire and thinner materials. The packaging will usually be identical since running 12,000 copies off the same press is easy. Inner packaging will often be missing since who wants to spend $20 for the 2,000 extra pieces of packaging? $10 worth of bubble wrap ought to be sufficient.

      These are then sold at cheap prices, where unsuspecting buyers don't realize they're not only getting shoddily-made stuff. I mean, that power bar rated at 15A doesn't need to use 14ga wire, right? We have plenty of 24ga hookup wire lying around as scrap, so let's use that! (And I'm being generous, I've seen ones using 30ga or thinner "rated" at 13-15A - if you remember how thin the wires were in a ribbon PATA cable, think using that for a power bar).

      Then there are the fakes where they use whatever parts they can find and wire them together. Then stamp the manufacturer's mark on them. Sort of like what happened to those fake FTDI and Prolific USB-serial chips that entered general distribution. Or those "8GB" flash cards that only have 1GB of actual storage on them.

      Then there's the group of people who take rejected parts and wire them up and hope no one notices - like perhaps a chip failed thermal testing - it still works, but only if you keep it under 40C or something. Those rejects usually get discarded, but smart ones will recycle them and use them elsewhere, maybe even a third shift product. Imagine powering up your server only to have it die under load because the part (which was rejected) failed and you have a copycat item.

      Of course, for stuff like T-Shirts and stuff, or clothing in general, it should be obvious what the markup is. I mean, go into any expensive shop district and look at the stores there - almost all are clothing stores. Very few stores can afford to pay those high prices. So that $100 shirt really does cost $1 to make - that $99 is used to pay the $20,000 monthly leases on those high end district stores.

      About the only other kind of store is Apple, who earn anywhere from $2000-4000/square feet (approximately twice that of Tiffany's). And only through that could Apple even afford to make those kinds of locations profitable.

  5. Not a hype by hooiberg · · Score: 0

    It is now safe to say that the smartphone is more than just a hype, now. As they become bigger, the legal duet between Samsung and Apple will become a threesome. I wonder how they will keep up there.

    1. Re: Not a hype by Anonymous Coward · · Score: 0

      They can happily show US prosecutors middle finger, divest from local companies and delist their stock any time they want. It will be their US shareholders who will have to suck prosecutors dix in order to let Alibaba stay in US, not the other way around.

  6. Obscure... by frinkster · · Score: 1

    taking a $590 million stake in an obscure

    I wouldn't mind being an "obscure" company if $590 million didn't buy the whole thing.

    1. Re: Obscure... by Anonymous Coward · · Score: 0

      In one of my past projects (2009), I had to make a website for 38 billions dollars a year Chinese company that never had any web presence at all besides a single alibaba page serviced by an agent.

      At that time I understood how insignificant all US dotcom enterprises are.

      If a Chinese company whose only channel to the market is a loosy random trade agent can gross $38 bln, imagine how much a well run company can make in a Chinese market!

  7. well... by Mirar · · Score: 1

    ...it will have 500,000Ah battery, 19200x10800 resolution with 20,000 lumen screen brightness, 64TB RAM and gold plated.

    As everything else on Alibaba.

    1. Re:well... by Lumpy · · Score: 2

      And it will have happy fun. Always with the happy fun good!

      --
      Do not look at laser with remaining good eye.
    2. Re:well... by Racemaniac · · Score: 1

      and most importantly: free shipping.

  8. hmm... by Anonymous Coward · · Score: 0

    Alibaba's biggest foreign market is Russia. USA tails sixths despite the amount of spin it makes here. It is unlikely that you will ever see any Meizu device here.

    1. Re: hmm... by Anonymous Coward · · Score: 0

      In other words America is not a significant market for them. It is not important for them to expand here.

  9. It looks more like a scam by Anonymous Coward · · Score: 0

    That Meizu phone is junk

    I have used many Chinese branded phones. Some of them are actually good, but not Meizu

    Even the most well known Chinese branded smartphone maker, the Xiaomi, an investment of over half a *billion* dollars is still a big deal

    And to have Alibaba investing more than half a *billion* dollars to obtain a minority stake in a crappy phone manufacturer smells to many like a goddamn scam

    1. Re: It looks more like a scam by Anonymous Coward · · Score: 0

      Xiaomi is a small, obscure company run by people who were branded loosers in US and dumped back to China, the returnees.

      They also employ a big selection of trophy White Anglosaxon boardroom entertainment managers who had their equivalently big flops in US.

    2. Re:It looks more like a scam by Anonymous Coward · · Score: 0

      ...and?

      alibaba itself is pretty much a scam. Well, I guess they're not a scam in of themselves, but most of their sellers are, which IME is typical of China as you found out with trying out various china phones.

      Sure, there MAY be a SINGLE diamond in the rough, but most of it is just trash.

  10. Lots of left over by Anonymous Coward · · Score: 0

    Lots of left over amazon phones they could use.

  11. Meizu MX4 by hsa · · Score: 1

    One of the first Ubuntu phones. It did make it to the front page of slashdot, but apparently the editors have hard time remembering what they wrote..

  12. Meizu is junk by Anonymous Coward · · Score: 0

    It may be one of the oldest Chinese branded smartphone but it is still junk

    Lenovo, Oppo, Vivo and Xiaomi make better quality smartphones than Meizu

    1. Re: Meizu is junk by Anonymous Coward · · Score: 0

      I can agree about Oppo, but certainly not about Xiaomi, a phone brand whose phones are made by 5 or more different ODMs and each production batch is different from another. We have 3 Xiaomi phone owners in the office. If they line their phones on a desk, it is visible that all three phones differ in dimensions.

    2. Re: Meizu is junk by Anonymous Coward · · Score: 0

      That's because they're different models.

    3. Re: Meizu is junk by HornWumpus · · Score: 1

      Is Dell suing them for stealing their business model?

      --
      John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
  13. How to absolutely corner the handset market by Anonymous Coward · · Score: 0

    do the one thing no other handset maker has ever been able to do in the history of cell phones.

    Test your code & make sure all the features of the phone work as intended.

  14. One Chinese-government-owned company buys another. by Anonymous Coward · · Score: 0

    So all these companies which are partly or wholly owned by the Chinese government are buying stakes in OTHER companies that are at least partly owned by the Chinese government.

    Why? So they can give the appearance of competition with still OTHER companies that are either partly or wholly owned by the Chinese government and give a false appearance of diversity and competition?

    Oh boy! Faux capitalist circle jerk!

  15. The next Radio Shack? by Gim+Tom · · Score: 1

    Guess they didn't notice what happened to Radio Shack after they morphed into a cell phone store.

  16. Re: One Chinese-government-owned company buys anot by Anonymous Coward · · Score: 0

    Communism has won. Comerade Brin lines up for a close rectal encounter with a boss of Chinese Communist gigacorporation.

  17. pfft by Anonymous Coward · · Score: 0

    only 590 mil? that's chump change these days.

  18. They used to make mp3 players by quantaman · · Score: 2

    A few years back I needed a compact Linux compatible mp3/ogg player and I bought one of their M3 music cards.

    It was actually a decent little player, I probably would have bought a second after it died but they discontinued them so I switched to a SanDisk clip.

    Still they were definitely trying to emulate the Apple aesthetic even back then, I was kinda surprised they weren't bigger.

    --
    I stole this Sig
  19. Alibaba has ALWAYS sold cell phones by voss · · Score: 1

    Just not their own brand.

  20. Yeah precisely by aliquis · · Score: 1

    Yeah, maybe comparing them to Rio is exaggerating but back in the late mp3-/media player days they was up there with Cowon/iAudio, iRiver and Sansa Clip as one of the finest you could get.

    And then they decided to make an iPhone clone next.

    I assume we're many outside of China who know who they are (and that there phones haven't been as successful, but I assume money and volumes can help with that.)