Xiaomi, the fashionable Chinese smartphone maker, has revealed a $1.1 billion first quarter loss on sales of $5.4 billion as it prepares for an initial public offering (IPO) in Hong Kong. The IPO is intended to raise as much as $10 billion, and could value the company as highly as $100 billion.
That first quarter loss follows on from a net loss of $6.8 billion in 2017 on sales of $17.9 billion, which were up by 68 per cent on 2016.
Founded only eight years ago, the company filed for IPO at the beginning of May. The public share offering will be one of the largest in the world since Chinese ecommerce giant Alibaba floated in 2014.
Funds raised from the IPO will be ear-marked for further overseas expansion, as well as expansion into new areas, such as internet finance sector on mainland China - something the company's own prospectus admits it has little experience of.
The company claims that it is able to offer better smartphones to buyers worldwide because it is more efficiency, a claim that Xiaomi founder, chairman and CEO Lei Jun plays up in the company's prospectus.
However, smartphones make up a declining proportion of the company's revenues, with "Internet of Things (IoT)/lifestyle" devices and internet services, including online advertising, growing fast over the past year or so. Much of this growth has come from investing funds in third-party companies.
In addition to designing and selling smartphones, the company "curate[s] a wide range of additional products by investing in and managing an ecosystem of over 210 companies, among which more than 90 companies were focused on the development of smart hardware and lifestyle products, as of 31 March 2018", it claims in its prospectus.
As such, sales of smart home devices and internet services account for almost one-third of the company's revenues and, while smartphones account for the other two-thirds they are barely profitable.
And the company has also been embroiled in a number of controversies over the years, including alleged violations of the open source GPL licence and privacy concerns over its Mi Cloud, which stores all user data on servers in China.
It has also been accused of sending device-specific information, including IMEI, MAC address, model, and other parameters, back to base with its AnalyticsCore app, pre-installed in all new Xiaomi devices.
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