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.
For China's e-commerce king, with a market value of USD 213 billion market value, the USD 590 million price tag may be a costly entry fee. Meizu's reach in China, and likely that of the Alibaba operating system, is severely blunted by domestic leaders Xiaomi, Huawei Technologies Co Ltd and Lenovo Group, as well as multinational giants Apple Inc and Samsung Electronics Co Ltd.
"You could say they're spending USD 590 million to experiment a bit and see what happens - it's an expensive experiment, right?" said Michael Clendenin, Managing Director at Shanghai-based RedTech Advisors.