Gerry Shih | Vox

Alibaba Cloud Unit Sets Sights on Amazon in $1 Billion Global Push

2019-03-06T05:36:26-05:00

China’s Alibaba Group said on Wednesday it would invest $1 billion in its Aliyun cloud computing arm to challenge Amazon’s lucrative Web Services division, opening a global front in the battle between the two e-commerce giants.

With the global cloud computing market estimated by analysts to be worth about $20 billion, Alibaba said in a statement the investment would go toward setting up new Aliyun data centers in the Middle East, Singapore, Japan and Europe. The firm also plans to strike business partnerships with telecom and enterprise technology providers in those regions.

Although Alibaba and Amazon have so far avoided competing directly in their core business of e-commerce outside China, Aliyun’s international expansion takes aim squarely at Amazon Web Services (AWS), an increasingly central and profitable division of the Seattle-based company.

Amazon shares soared last week after the company reported, among other items, an 81 percent revenue increase for AWS, which hosts Web customers like Netflix and Airbnb.

Simon Hu, the president of Aliyun and former head of Alibaba’s microfinance arm, said in an interview that Aliyun had focused on the Chinese market in its first six years but has now attained the technological maturity to challenge U.S. cloud players like AWS, Microsoft and IBM.

“Our goal is to overtake Amazon in four years, whether that’s in customers, technology or worldwide scale,” Hu said. “Amazon, Microsoft and others have already laid the groundwork for us by educating the markets about cloud in the U.S. and Europe, so we have an even better opportunity to join in the competition.”

As it expands, Aliyun will face stiff competition from some of the biggest names in technology. Amazon led the global cloud infrastructure market with a 28 percent share in 2014, trailed by Microsoft, IBM and Google at 10, 7 and 5 percent, respectively, according to Synergy Research Group.

After Amazon made a limited “beta” entry into China last year, where cloud adoption rates by businesses are far lower than in the rest of the world, Aliyun opened a data center in Silicon Valley in March to serve U.S. customers.

Although Amazon counts some of the largest companies on the Internet among its one million customers, Aliyun says it has amassed 1.4 million customers — amounting to over 20 percent market share in China — largely thanks to the many Chinese sellers who host their online storefronts with Alibaba.

Aliyun also said Wednesday it had teamed up with Chinese enterprise software provider Yonyou to offer cloud infrastructure services to Yonyou’s customers.

Hu said the partnership would help promote cloud adoption in China, which had considerable room for growth as the government continues its campaign to digitize Chinese industry.

(Reporting by Gerry Shih and Paul Carsten; Editing by Kennethh Maxwell)

This article originally appeared on Recode.net.

Beijing Police Shut Down Massive iPhone Counterfeiting Operation

2019-03-06T05:36:20-05:00

Police in Beijing have busted a factory that produced more than 41,000 fake iPhones worth as much as 120 million yuan ($19 million), including some that reached the United States, and have arrested nine suspects in the counterfeiting operation.

Apple is one of the most popular brands in China, where authorities have stepped up efforts in recent years to dispel the country’s reputation for turning out counterfeit goods.

Officials have taken stiffer action to enforce intellectual property rights, pushed firms to apply for trademarks and patents and cracked down on fakes.

Police arrested nine people, including a married couple who led the operation, after a raid in May on the factory, run under the guise of a gadget maintenance shop on the northern outskirts of the Chinese capital.

The details were revealed in a social media posting on Sunday by the public security bureau in Beijing.

The group, headed by a 43-year old man, surnamed Yu, and his 40-year old wife, surnamed Xie, both from the southern hardware manufacturing city of Shenzhen, allegedly set up the Beijing factory with six assembly lines in January, the bureau said.

They hired “hundreds” of workers to repackage second-hand smartphone components as iPhones for export, it added.

Police seized 1,400 handsets and large quantities of accessories during the May 14 raid. In the United States, the newest Apple handsets can fetch $649, or more, depending on the model.

Beijing police said their investigation followed a tip from U.S. authorities who seized some of the fake devices.

The destination of the counterfeit phones, and how many made it there, remains unknown.

Public security representatives declined to comment on Monday, telling Reuters they had no additional information.

Apple also declined to comment, saying the investigation was ongoing.

It is not the first time China has uncovered plots to exploit the popularity of Apple products.

In 2011, bloggers in the southwestern city of Kunming discovered more than a dozen unauthorized brick-and-mortar outlets that carefully replicated the interior decor, and even employee uniforms, used in genuine Apple stores.

The viral pictures embarrassed officials, who vowed to do more to protect trademarks.

(Additional reporting by Beijing newsroom; Editing by Clarence Fernandez)

This article originally appeared on Recode.net.

Xiaomi-Backed Chinese Firm Acquires Iconic Scooter Maker Segway

2019-03-06T04:53:50-05:00

Chinese transportation robotics firm Ninebot said Wednesday it has acquired U.S. rival Segway, the company behind the self-balancing scooter that was a technological marvel when it was launched in the early 2000s but whose hype then faded.

Financial details of the deal were not disclosed, but Ninebot Chief Executive Gao Lufeng said at a press briefing in Beijing that Chinese smartphone maker Xiaomi and venture capital firm Sequoia Capital China, among others, had invested $80 million in Ninebot to help finance the acquisition.

New backers of Ninebot, which began producing scooters two years ago as a crowdfunded project, also include Xiaomi Chief Executive Lei Jun’s personal private equity fund, Shunwei, Gao said.

The acquisition comes about six months after Segway named Ninebot in a patent infringement complaint.

Gao did not address the dispute on Wednesday but told reporters the combined company would hold a significant lead in market share as well as a portfolio of more than 400 critical patents. The companies would operate as separate brands, he said.

Ninebot, which has several self-balancing scooter models, including one without handles called the One, will now have “the most comprehensive lineup of products in the industry,” Gao said.

Ninebot’s high-profile backers, Sequoia Capital China partner Neil Shen and Xiaomi CEO Lei, both struck a nationalistic note in remarks toasting the deal.

“I have long thought Chinese companies should have more courage,” said Shen, one of China’s most prominent tech investors. “This acquisition is a display of Chinese self-confidence.”

The acquisition caps a 14-year independent run for Bedford, N.H.-based Segway, which never lived up to the initial hype in 2001, when inventor Dean Kamen unveiled to the American public a scooter that could be driven simply by shifting one’s weight and turned it into a pop culture icon.

Kamen vowed on television the Segway would revolutionize transportation much like the automobile, but it became widely regarded as a mainstream sales failure despite some law enforcement and industrial uses.

Lei, one of China’s richest men, showed off riding a Ninebot for photographers on Wednesday and explained that he invested in the company because he always found self-balancing vehicles the best “toys for adults.”

Lei added that Xiaomi’s investment in Ninebot made sense for the smartphone company because Xiaomi’s strategy was to support smart hardware companies everywhere and build a device ecosystem around its smartphones.

(Additional reporting by Adam Jourdan; Editing by Clarence Fernandez and Muralikumar Anantharaman)

This article originally appeared on Recode.net.

Huawei’s 2014 Smartphone Sales Rise by a Third

2019-03-06T06:04:23-05:00

Huawei Technology’s smartphone sales rose by almost a third to $11.8 billion in 2014, according to an internal memo seen by Reuters, showing the Chinese telecoms firm’s continued ascent in the global handset wars.

The division shipped about 75 million smartphones in 2014, according to the year-end memo to employees sent by Richard Yu, the head of Huawei’s consumer business. Although that represented a more than 40 percent year-on-year increase, the figure lagged behind Huawei’s previously stated sales target of 80 million units.

Huawei spokeswoman Maggie Qi said the company does not comment on internal memos.

The results, which are due to be publicly announced in the coming weeks, reaffirm Huawei’s place among a small coterie of rising smartphone makers, including Xiaomi and LG Electronics, whose growth rates are eclipsing those of industry leaders.

Pressured by low-cost vendors, top ranked Samsung is likely to see its shipments nearly unchanged this year, while second-ranked Apple may have posted around 20 percent growth after launching the iPhone 6, analysts estimate.

Those growth rates, however, pale in comparison to the expansion of Xiaomi, which sold 26 million handsets during the first half of 2014.

If it reaches its sales target of 60 million for the year, Xiaomi will have more than tripled its 2013 sales of 18.7 million. Private investors believe it will continue to soar: The Beijing-based company announced this week a new round of equity financing at $45 billion valuation, making Xiaomi the most highly valued private technology company in the world.

Meanwhile, close rival LG may have seen its smartphone shipments rise around 26 percent this year, according to analysts.

Trendforce analyst Alan Chen said in a research note this month that Huawei, Xiaomi and Lenovo, which recently purchased Motorola from Google in a $2.91 billion deal, will battle to be the top Chinese smartphone vendor in 2015.

“How Lenovo’s Motorola acquisition plays out and whether Xiaomi can replicate its home market success overseas will be key factors in determining who becomes the top Chinese brand in 2015,” Chen said.

(Reporting by Gerry Shih and Miyoung Kim; Editing by Miral Fahmy and Louise Heavens)

This article originally appeared on Recode.net.

China’s Baidu Calls Mobile Top Priority, as Q3 Revenue Falls Short

2019-03-06T06:01:49-05:00

China’s dominant search engine Baidu said Thursday it would continue to invest significantly to adapt its business to the mobile era, a transition that has tripped up other Internet peers born in the desktop PC era like Google.

Sometimes known as the “Google of China,” Baidu reported lower-than-expected 52 percent increase in third-quarter revenue, and said it expected revenue growth in the fourth quarter to slow down marginally.

The results pushed shares of the U.S.-listed company down 1.6 percent to $221.01 in extended trading, but executives took a longer-term view and reiterated that investing in mobile — which now accounts for the majority of Baidu’s traffic — was the company’s top priority.

“It’s really not a quarters question or a 2015 question,” Chief Financial Officer Jennifer Li told analysts on a post-earnings call in response to a question about when margins might expand. “Investments on the mobile front is an ongoing effort for us.”

For the current quarter, Baidu forecast a 45.4 percent to 49.6 percent rise in revenue, largely in line with Wall Street projections.

Baidu has faced competition from rivals on mobile devices such as smartphones, as all race to invest in apps and content to keep users engaged. It is also grappling with intensified competition on its own search turf from the likes of Qihoo 360 Technology and Sohu.com’s Sogou search engine, which is 36.5 percent owned by Tencent Holdings.

Chief Executive Robin Li said Baidu would continue to refine its mobile search product and invest in new products, including the newly launched Baidu Connect platform to deliver ads to smartphone users.

“In the long run, mobile users will more actively choose to download Baidu apps,” Li said, referring to competition from rivals. “Most of our investment in the future will be in the search quality front, and we think consumers will be able to tell the difference.”

Under a new accounting method that counted tablets as mobile devices rather than personal computers, mobile traffic surpassed PC traffic for the first time, while mobile revenues accounted for 36 percent of total sales.

Under the new accounting, mobile would have made up 33 percent of revenue during the previous quarter.

“It’s a good overall picture for them,” said Yuanta Research analyst Francis Ying. “I think they will see some growth with mobile from next year, but it cannot be seen in the short term.”

Net income jumped 27.2 percent to 3.876 billion yuan ($631.5 million). The company earned 11 yuan ($1.80) per share, beating investor expectations of 9.75 yuan per share, according Thomson Reuters I/B/E/S poll of analysts.

Baidu also said it has been spending more on marketing and content, and on acquiring users. Traffic acquisition costs grew to 12.9 percent of overall revenue, or 1.742 billion yuan in the third quarter. That was up from 11.7 percent a year earlier.

The company is also investing on content for iQiyi, its online video platform. Content costs grew to 3.7 percent of overall revenue, or 498.1 million yuan. That was up from 2.5 percent a year earlier.

(Editing by Chris Reese, David Gregorio and Miral Fahmy)

This article originally appeared on Recode.net.

Lenovo Says $2.1 Billion IBM x86 Server Deal Will Close October 1

2019-03-06T06:00:13-05:00

Lenovo will close its acquisition of IBM’s x86 server division on Oct. 1 for $2.1 billion, giving the Chinese tech firm the firepower to win business clients from U.S. rivals.

The closing purchase price is lower than the $2.3 billion announced in January because of a change in the valuation of inventory and deferred revenue liability, Lenovo said. Roughly $1.8 billion will be paid in cash and the remainder in stock.

The purchase is Lenovo’s latest since overtaking Hewlett-Packard as the world’s top personal computer maker last year, and reflects its quest to diversify away from a steadily shrinking PC market. Earlier this year, Lenovo also said it would pay $2.9 billion for Google’s Motorola smartphone unit.

In an interview, Lenovo Chief Executive Yang Yuanqing said the IBM deal opened a new “growth engine” for his company. He said he expected the x86 unit to bring in $5 billion in its first year and deliver margins higher than the four percent of Lenovo’s PC business.

“In the large and medium enterprise space we can now fully leverage IBM technology to compete with brands like HP and Dell,” Yang said by telephone. “We can combine this good technology with Lenovo’s efficient operations.”

IBM’s x86 server business has trailed those of HP and Dell in market share. But Yang said Lenovo has expertise competing in markets with razor-thin margins, gained during its journey to becoming the world’s largest PC maker.

Lenovo currently sells a line of low-end servers under the ThinkServer brand, but the company pursued IBM’s x86 portfolio because its higher-end machines can perform more complex analytics and database-related functions.

The x86 server team will continue to be led by former IBM executive Adalio Sanchez, who will report to Gerry Smith, president of Lenovo’s enterprise business group, Lenovo said in a statement announcing the deal’s impending closure.

Some observers expected the deal would take longer to close because of uncertainty about how U.S. regulators might respond to a Chinese company buying a server business during a time of cyber-security tensions between the United States and China.

Lenovo previously bought its consumer PC laptop business from IBM in 2005.

In recent years, IBM has been undergoing a strategic shift away from hardware, focusing instead on higher-margin cloud and big data products.

(Editing by Christopher Cushing)

This article originally appeared on Recode.net.

After China Smartphone Success, Lenovo Looks Overseas

2019-03-06T05:51:54-05:00

China’s Lenovo Group said first-quarter profit jumped 23 percent, beating estimates, as a surge in smartphone sales showed how quickly the world’s biggest personal computer maker is transforming itself into a major player in mobile technology.

Beijing-based Lenovo said on Thursday net income climbed to $214 million in the three months through June from $174 million in the same period a year earlier, the opening quarter of its fiscal year. That was ahead of estimates of $202 million, according to a Thomson Reuters SmartEstimate poll of analysts.

This year the ambitious hardware company has accelerated its strategy to diversify away from the crumbling PC market, agreeing to buy IBM’s server unit and the iconic Motorola handset brand in deals worth over $5 billion. Lenovo’s Chief Executive Yang Yuanqing said he sees potential for more smartphone sales growth outside China — though he won’t chase it at the expense of profit margins.

Lenovo reported 39 percent growth in worldwide handset shipments, helped by strong sales in China. The company has displaced South Korean giant Samsung over the past year to become the No. 1 smartphone seller in China, according to recent estimates by IDC.

But it has been closely trailed in its home country by rival handset makers like Xiaomi, the three-year old Beijing-based upstart that has been gobbling up smartphone market share at the cost of razor-thin margins.

On Thursday CEO Yang said Lenovo will prioritize profitable markets overseas rather than jostle with unidentified “unhealthy” rivals in China.

“There are local players who only chase growth so they can attract investors in the capital markets, which is not a healthy model,” Yang said in a telephone interview. “We don’t do business that way. We will balance growth and profitability.”

“China is still one of the most important markets for Lenovo, but actually we have more potential opportunity outside of China,” Yang said. He cited recent sales growth rates of 300 percent and 500 percent in Southeast Asia and Eastern Europe, respectively.

Overall revenue for the quarter rose 18 percent to $10.4 billion, with significant gains coming in Europe.

Lenovo’s core PC business, which still accounts for roughly 82 percent of sales, continued to tighten its grip on the market despite what many view as a long-term decline in the broader industry. Lenovo’s laptop sales rose 12 percent over the year while global laptop shipments fell 3.7 percent, the company said.

Yang said on Thursday both the $2.9 billion deal with Google to acquire Motorola and the proposed $2.3 billion tie-up for IBM’s low-end server unit were “on schedule for closing.”

Although Lenovo already has put employees on the ground working with Motorola and IBM, the two deals hinge on U.S. regulatory approval. The company publicly says it hopes to close the deals before the end of the year, while analysts say they could come as early as this quarter.

Yang anticipated a return to profitability for Motorola within four to six quarters or “maybe earlier,” he said. Yang said he was surprised by how well its newest handset models, including the Moto G, have been received on the market.

Sanford Bernstein analyst Alberto Moel said that time frame for a turnaround may be unrealistic, and “they might have to re-think it.” But Moel said he believed Lenovo has been advising Motorola for several months on its recent products, and so far to good effect.

“The price point, the new markets, ‘Shut that down, cut that out’ — it’s all got Lenovo’s fingerprints on it,” he said. “The deal’s been cooking since November.”

Although the pioneering U.S. telephony brand appeared to struggle almost continuously since it was folded into Google in 2011, Yang said he was confident Motorola’s road map would finally bear fruit.

“They have a good plan to improve,” Yang said. “Since Google acquired Motorola, they have started to develop new products. I think now it’s time for them to harvest that investment.”

(Editing by Kenneth Maxwell)

This article originally appeared on Recode.net.