According to the China-based Global Times, CEO of LeEco Jia Yueting sent a company-wide memo out on Sunday saying the company's rapid global expansion hasn't gone as well as hoped. In the memo, Jia says that "LeEco's growth pace and organizational capabilities" have been a problem, and that a lack of capital and resources resulted in poorer than expected momentum in the company's various businesses.
Jia specifically calls out "non-listed" LeEco, which are the various ventures of Jia organized through a large number of private subsidiaries not a part of the larger LeEco listed on the Shenzen Stock Exchange. The profitability of these various properties is, predictably, not disclosed. These "private LeEcos" include the divisions responsible for many of LeEco's hardware ventures, such as smartphones and, perhaps more widely known, vehicles.
The memo's timing seems telling. LeEco's flash sale on November 2nd marked the company's launch in the US, and while it does seem some of its flash sale supply did sell out, the immediate re-listing of the same price promotions a week later would also suggest lackluster demand. Within moments of the sale beginning, the $3999 85" TV that made headlines sold out, but LeEco's other offerings didn't follow suit with anything resembling that speed, likely a letdown for the brand hoping to capitalize on the notion that its products were generating large interest in a new market. During its massive press conference a few weeks back, LeEco said its launch on November 2nd in the US would be accompanied by an "industry-disrupting" partnership announcement. That announcement never materialized.
The lack of confidence expressed by Jia in the memo would seem to openly undermine this new market launch. It appears Jia is looking for executives to throw under the proverbial bus, too, as he states in the memo that management should be held responsible for the failures, offering to accept a lifetime salary of 1 yuan per year "forever" as a punishment of sorts. (This, I will note, reeks of a publicity stunt, as Jia has massive holdings publicly and privately in LeEco - he doesn't need a salary, and could be paid just as well in stock, bonuses, and benefits.)
At LeEco's San Francisco launch event, Jia had planned to be driven on stage by a LeSee self-driving electric vehicle, but the car was in a serious accident on the way from Los Angeles, according to the CEO.
LeEco suffering from poor momentum globally wouldn't exactly be a surprise. The company seems remarkably tone-deaf, especially to Western audiences, and its marketing and self-promotion come off as boastful and, frankly, nonsensical. How LeEco intends to disrupt the already heavily saturated US smartphone and content streaming market remains totally unclear, and perhaps this memo just goes to show how badly LeEco miscalculated.
Jia himself is no stranger to detractors - he is a major shareholder in Faraday Future, an electric vehicle startup that has also come under intense scrutiny for its viability in recent months. Faraday plans to unveil its car at CES in January 2017, and that event will almost certainly be a make or break moment for Jia's ambitious ventures.
We reached out to LeEco for comment, and will update this story if we hear anything from them.
In an apparent attempt at damage control, LeEco North America's Chief Revenue Officer (that's a mouthful) spoke to Gizmodo about Jia's memo. He says that the Vizio acquisition is still on track, that the US market is LeEco's "highest priority" (I sincerely doubt that - it's China), and that the company would be seeking additional capital from partners to continue growing its business. That's not exactly confidence-inspiring coming from the company that billed itself as Netflix, Amazon, Apple, Tesla, and Google all in one.
LeEco's CRO did not comment on anything relating to layoffs or downsizing, despite the fact that both were heavily intimated in Jia's memo as likely fallout of circumstances at the company. Specifically, Jia said (translated from Mandarin, I assume) that there were "signs of big company disease" at LeEco, and that he had observed "low individual performance and organizational redundancies," which is all but certain to entail staff downsizing and reorganization.
- Global Times (China)