Chinese phone maker Xiaomi's earnings report shows thin margins
Earnings of 347 million yuan for last year add to speculation whether top handset maker on the mainland can sustain low-price strategy
Xiaomi Technology made a profit of 347.48 million yuan (HK$435.3 million) on revenue of 26.58 billion yuan last year, according to securities filings, showing the razor-thin margins at one of the handset industry's fastest growing companies.
The filings also revealed chairman and chief executive Lei Jun claimed 77.8 per cent ownership of the company he co-founded in 2010, while unnamed shareholders split the remaining shares.
The regulatory document provides for the first time an official snapshot of a company that became the most popular smartphone vendor in China and the third-largest in the world this year, thanks to a line-up of handsets that are considered high-quality yet relatively inexpensive.
Xiaomi has long branded itself an "internet company" that eschews traditional marketing and sells hardware at low prices as a distribution channel for its real money-maker: software and services. But the financial impact of its business model - and whether it can generate sustainable profits demanded by public markets - has been a subject of long-running speculation in the technology industry.
With an operating profit of 485.77 million yuan last year, Xiaomi's operating margins of less than 2 per cent lagged far behind the two market leaders, Apple and Samsung Electronics, the filing showed.
Samsung's mobile division reported an operating profit margin of 18.7 per cent for last year while Apple posted 28.7 per cent for the previous fiscal year to September.