China's LeEco Buys U.S.-Based Vizio -- WSJ
July 27 2016 - 3:04AM
Dow Jones News
By Georgia Wells
LeEco said Tuesday it has signed a $2 billion deal to buy Vizio
Inc., the last U.S.-based TV brand, giving the Chinese company a
foothold to fuel expansion beyond its home market.
LeEco will pay cash to acquire Vizio, which last year filed
documents to list on the stock market. The move is a part of
LeEco's strategy to deliver both hardware -- smartphones, TVs, even
driverless cars -- as well as content -- from film and online
entertainment to sports. Until now, LeEco has offered that only in
China and India. "I hope we can lead the future of the internet
ecosystem era," LeEco Chief Executive Jia Yeuting said at a press
conference in Los Angeles.
Vizio controls the second-greatest share of the U.S. market for
televisions and smart televisions, behind Samsung Electronics Co.,
according to IHS Markit, a market research firm. In the first
quarter of the year, Vizio sets made up 29.1% of the market for
smart televisions in North America, compared with 37.4% for
Samsung.
Though Vizio is the only remaining TV brand based in the U.S.,
other TV makers assemble their units in the U.S., said Paul Gagnon,
director of TV set research for IHS Markit.
Vizio manufactures its electronics in several countries,
including the U.S., and doesn't make TVs for the Chinese market.
LeEco sold 4.5 million internet TVs in two years, according to its
2015 annual report, and has said before the Vizio deal that it is
confident it can sell 6 million smart TVs this year.
But LeEco needed revenue and a brand to expand its presence in
the U.S., something Vizio could provide, according to a person
close to the deal. LeEco has an online electronics store in the
U.S. that sells televisions, speakers, headphones and other
gadgets. Vizio, which was founded in 2002 in Irvine, Calif., has
annual sales of more than $3 billion, William Wang, chief executive
of Vizio, said Tuesday. Vizio sold 7.8 million TVs in the U.S. last
year, according to IHS Markit.Vizio faced a setback recently in its
failure to go public. It filed for an IPO a year ago, but hasn't
listed.
In addition to its TV sets and sound bars, Vizio also collects
data about viewing habits from its products. That data is the
foundation for Inscape, a business that LeEco plans to spin out as
a separate private company.
LeEco has followed an unconventional path to growth. It started
as a small video website that went public as Leshi internet
Information & Technology Corp. in 2010. In early 2015, it
launched its first smartphones and it became one of the most
valuable tech stocks listed in China after its shares rallied.
LeEco changed its name from LeTV last year.
Vizio will continue to be based in southern California and will
run by current management as a subsidiary, according to a statement
from LeEco.
Mr. Jia's desire to enter the U.S. market counters a wave of
U.S. companies looking to Asia for growth.
"The world moves East, and we move West," said Winston Cheng,
LeEco's global head of corporate finance.
--
Li Yuan
and Maria Armental contributed to this article.
Write to Georgia Wells at Georgia.Wells@wsj.com
(END) Dow Jones Newswires
July 27, 2016 02:49 ET (06:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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