Coolpad forecasts HK$3 billion loss as ‘fierce competition’ hits smartphone sales

PUBLISHED : Sunday, 20 November, 2016, 9:06pm
UPDATED : Sunday, 20 November, 2016, 10:30pm

Chinese smartphone maker Coolpad said it expects to see a loss of HK$3 billion for the full year, a sharp decline from the HK$2.325 billion profit it achieved in 2015.

Coolpad, controlled by technology giant LeEco, said its sales fell by 43 per cent in the 10 months ended October 31, 2016, compared with the corresponding period a year ago, resulting in a loss of about HK$730 million from the principal business.

“The decrease was mainly due to the downturn and fierce competition in the domestic smartphone market,” the company said in a profit warning issued on Friday night.

The group only introduced one new smartphone product to the market in the second half of 2016 and has been focusing on inventory clearance.

It also expect to see a loss of about HK$226 million in the first 10 months of 2016 from its Coolpad E-Commerce business.

Coolpad said it has been adjusting its strategies, restructuring the business and developing an open retail channel. However, it still needs time to achieve a marked improvement in sales performance.

The decrease was mainly due to the downturn and fierce competition in the domestic smartphone market
Coolpad statement

The profit warning came just weeks after its controlling shareholder LeEco said it was running short of cash because it had expanded too aggressively. Shares of LeEco plummeted at the time of that news.

In a letter to LeEco’s staff, the company’s founder and chief executive Jia Yueting said that the company was running out of money as it was unable to raise external funds quickly enough to bankroll its expansion plans.

LeEco has been burning money at a rapid clip over the past year, leaving many scratching their heads and wondering how it planned to finance its expensive ventures.

Its electric car business unit, LeEco See Plan, is widely seen as the root of LeEco’s financing problems. Jia said LeEco had spent 10 billion yuan in the early development phase of the vehicle.

Last week, LeEco said it had raised US$600 million from several of the founder’s classmates in business school, and from a string of Chinese firms. Most of these funds would be directed toward the car business and LeEco Global Holdings, the company said.