LeEco acquires VIZIO for $2bn
July 27, 2016
Global technology company LeEco and connected entertainment platform VIZIO have agreed a deal which will see LeEco acquire VIZIO for $2 billion (€1.82bn). The VIZIO hardware and software businesses will be owned and operated as a wholly owned subsidiary of LeEco, while the VIZIO data business, Inscape, will spin out and operate as a separate, privately owned company.
Recently named one of Fast Company’s 2016 ‘Most Innovative Companies’, LeEco is a leading global company that provides breakthrough experiences through an open, integrated ecosystem enabled by its Internet and cloud platform. LeEco develops intelligent hardware that serves as the interface to connect individuals, interact with them and to enrich their lives through premium content and applications.
“LeEco believes in breakthrough technologies, a complete ecosystem and disruptive pricing. Acquiring VIZIO is an important step in our globalisation strategy and building our North American presence,” said YT Jia, Founder, Chairman and Chief Executive Officer, LeEco. “From its inception, VIZIO introduced a disruptive business model that changed the industry and aligns with our vision of breaking boundaries to deliver consumer-focused products, software and services.”
Based in Irvine, CA and founded in 2002, VIZIO is a leading consumer electronics brand in North America, with #1 unit share in Smart TVs and #1 unit share in Sound Bars. The company is focused on delivering the ultimate home entertainment experience through its ecosystem of hardware, software and services. The acquisition benefits both companies with VIZIO offering LeEco a steady install base of users and a brand that is both popular and successfully distributed throughout major North American retail channels. LeEco provides VIZIO immediate global scale to bring its innovations to consumers worldwide. Like LeEco, VIZIO shares a similar vision of creating premium products with the latest innovations and making them accessible for everyone – from budget-minded students to custom home theatre cinephiles – without sacrificing quality or performance.
“Fourteen years ago, I mortgaged my house to start VIZIO and since then, it has grown into one of the most well-known and respected CE brands in North America. As an entrepreneur, I couldn’t be more proud of what has been accomplished,” said William Wang, Founder, Chairman and Chief Executive Officer, VIZIO. “As we enter a new chapter with LeEco, I’m humbled by the hard work and dedication of VIZIO shareholders and employees. Their unwavering faith in the brand and commitment to excellence is what made this venture possible. I’m excited to see how LeEco’s global reach and resources will elevate VIZIO as we continue to bring great technology, innovation and value to our consumers.”
The VIZIO executive management team will remain in place and will continue its operations as an independent subsidiary from its existing headquarters in Irvine, CA. The VIZIO brand and its portfolio of products will continue to be sold through its existing distribution channels and supported by the same North American-based, award-winning customer servi
Wang will transition to Chairman and Chief Executive Officer of Inscape, with focus on the continued expansion and growth of the brand’s data business.
IHS Technology analysts Paul Gagnon, Ken Park, Bing Zhang, and Deborah Yang for IHS Technology, note that by combining TV shipments of VIZIO, the second largest TV brand in North America, and LeEco, the seventh largest in China for 2015, they would surpass Skyworth as the global no. 6 brand on the basis of 2015 shipments.
From 2005 to 2015, VIZIO has been growing rapidly in the TV market, while LeEco, a well-known online video and internet TV content provider in China, started a TV business only in 2013.
After the completion of the VIZIO acquisition, LeEco will effectively shortcut the learning curve for the US TV market via VIZIO’s expertise. The US company has plenty of experience managing the TV business in the US and good relationship with retailer partners and local content providers. The acquisition will also provide a chance for VIZIO, which lacks market exposure outside of the US, to expand more regions with the help from LeEco and partners, including in China.
The biggest challenge for LeEco will be convincing VIZIO’s US retail customers that it will be business as usual during the integration, with no loss of product quality/supply, account service or supply chain discipline.
The acquisition will help LeEco and VIZIO to optimise their supply chain resources. While TV supply chain relationship for both LeEco and VIZIO will likely stay unchanged for the next few years, TV manufacturers that supply products exclusively to VIZIO or LeEco may have more opportunities as long as they are cost competitive.
The acquisition is also likely to impact their competitors, should LeEco decides to apply its current business model in China to North America and other markets. The Chinese company focuses on the growth of the paid content subscription, while it sells TV hardware at below manufacturing cost or even provides it for free during promotional periods.