"Deal by Chinese tech company LeEco for Vizio dies" by Ryan McMorrow New York Times April 11, 2017
BEIJING — An ambitious Chinese technology giant with a French-sounding name burst into the United States last year with dreams of disruption.
Called LeEco, it offered to buy Vizio, one of the biggest names in American big-screen televisions, for $2 billion. Its founder backed an American startup that showed off a sleek electric concept car. An affiliate was gearing up for the release of “The Great Wall,” having helped to finance the $150 million film starring Matt Damon that was intended to show China could make its own Hollywood-style blockbusters.
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Today, LeEco is in retreat. Tuesday, it said the $2 billion Vizio deal would not go through, citing unspecified “regulatory headwinds.” The electric car venture, Faraday Future, faces lawsuits from contractors who say they haven’t been paid. And “The Great Wall” bombed in the United States, though it did well in China.
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China, home of the world’s largest group of Internet users, has become a global technology leader. Its Internet companies are some of the biggest in the world. Silicon Valley studies how Chinese consumers use smartphones for everything from ordering food to taking out loans.
LeEco shows how the Chinese tech world can also get ahead of itself. LeEco’s vision was certainly grand. As a holding company with a stake in the publicly traded Leshi Internet Information & Technology Corp., LeEco was once just one of a number of Chinese video streaming companies. But its founder, Jia Yueting, invested in a dizzying array of new business lines — movie production, smart TVs and phones, sports broadcasting and goods, electric cars and car sharing, cloud computing, and online finance.
The conglomerate embarked on a string of debt-financed acquisitions. LeEco also acquired the car sharing startup Yidao Yongche.
Jia adopted a high profile. He publicly pledged to take on Apple and Tesla and began wearing black hoodies and black long-sleeve shirts like the tech icons of Silicon Valley, adopting just the initials YT in contacts with his employees.
In the United States, Jia made an undisclosed investment in Faraday Future, a Los Angeles-based electric car startup that later announced a $1 billion car plant in North Las Vegas. LeEco acquired Dichotomy, run by the Hollywood insider Adam Goodman, and a LeEco affiliate, Le Vision Pictures, said it would cofinance “The Great Wall.” The acquisition of Vizio, one of the largest sellers of televisions in the United States, was set to give LeEco a solid foothold in the world’s largest consumer market.
Those dreams sent the shares of Leshi Internet soaring in 2015, and made Jia one of China’s richest men on paper, according to the Hurun Report, which tracks wealth.
But the pace of deals began to take a toll. A rising group of Chinese companies, including the longtime telecommunications giant Huawei Technologies, ramped up competition in smartphones, while LeEco faced well-funded rivals in areas like video streaming.
In the first nine months of 2016, the conglomerate’s mobile affiliate alone posted an $820 million loss on $1.6 billion of revenue, according to investor materials seen by The New York Times.
It is not clear whether LeEco’s retreat on Vizio was related to its financial problems. A spokeswoman for LeEco declined to offer details on the deal beyond an e-mailed statement that said LeEco and Vizio would form a collaborative partnership instead.
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