On April 12th, the US sports camera manufacturer GoPro (NASDAQ: GPRO) shares rose 7.2%. Because there are rumors that Xiaomi intends to acquire GoPro.
Previously, the company's share price fell 36% during the year, and the market value shrank from about $12 billion four years ago to around $700 million (as shown below).
Why did Xiaomi throw an olive branch to GoPro?
People familiar with the matter said that based on HP's 2010 acquisition of the troubled handheld brand Palm, the price of GoPro may be around $1 billion. Currently, Xiaomi is considering whether to acquire GoPro, but will not pay too high a price.
In addition, several investment banks contacted the drone company DJI in a few months before the sale of GoPro. However, Dajiang said that it is not interested in GoPro because the company is worthless.
At the same time as the competition for low-cost similar products is intensifying, the continuous upgrade of smartphone cameras has led to the shrinking market size of sports cameras such as GoPro, which has gradually become a niche commodity. The company also faced difficulties in exploiting revenue sources and had to close its drone business in January.
Just last year, companies such as Polaroid, Kodak (NYSE: KODK) and HTC (NASDAQOTH: HTCCY) also launched their own sports cameras. Faced with this pressure, GoPro introduced an entry-level "hero" camera for $129.
At the same time, competitors including the old camera company Contour are also initiating patent infringement lawsuits against GoPro.
GoPro's 2017 revenues fell from $1.6 billion in 2015 to $1.17 billion. GoPro's current corporate value is 0.5 times its 2017 revenue. The company lost $183 million last year and expects losses to narrow this year. Last year's gross profit margin fell to around 30% from 45% in 2014.
02 millet considerationsXiaomi has confirmed to the media the intention to acquire GoPro, but did not disclose the actual progress. Analysts said that this may be because Xiaomi did not want to pay too much attention to the plan, thus keeping the purchase price at a low level.
According to analysts, GoPro's technology is attractive to Xiaomi because GoPro's products complement the smartphone camera; driverless car manufacturers and private equity firms with the ability to help improve new product development may also be potential buyers of GoPro. Family.
Since the launch of the GoPro camera product in 2015, Xiaomi’s “Little Ant†brand camera has become a major competitor. The US market accounts for about 50% of GoPro sales, but the US is not the first market for "small ant" sports cameras. But in the opinion of analysts, "small ants" still poses many obstacles to GoPro's international expansion.
In terms of camera accuracy, video recording, continuous shooting and other performance, the "small ant" motion camera performs better than GoPro's "hero". The "small ant" camera is 16 million pixels, much higher than the "hero" of 5 million pixels.
It can be seen that “small ants†and “heroes†are significantly different in appearance (“heroes†seem to look more professional), which is mainly influenced by cultural differences. If Xiaomi acquires GoPro, the camera design capability of the latter may help Xiaomi expand in some European and American markets.
In the eyes of many market participants, GoPro is still synonymous with high-end sports cameras, while other brands are just GoPro of the “cottage versionâ€.
In just four years, Xiaomi achieved more than $11 billion in revenue, thanks to its focus on low-cost smartphones, which has given the company a strong market share in China and India.
In 2016, Xiaomi's share in the Chinese smartphone market fell sharply. In response to the challenges of competitors such as OPPO and VIVO, Xiaomi has launched laptops, smart devices and Internet services. Xiaomi's low-cost strategy and international business development have successfully helped the company achieve a business recovery.
Indeed, as China's smartphone market slows and becomes saturated, expanding international business becomes urgent.
As can be seen from the above figure, Xiaomi's share in the Indian market continues to climb and is now in line with Samsung (OTC: SSNLF).
Xiaomi plans to open 2,000 new stores by 2019, of which 50% are in the international market and the Chinese market. These new stores are expected to generate more than $10 billion in revenue by 2021.
Previously, Microsoft (NASDAQ: MSFT) also teamed up with Xiaomi to announce a strategic framework agreement on cloud computing, artificial intelligence and hardware cooperation. Xiaomi will use the Microsoft Azure cloud service, and Microsoft will team up with Xiaomi to promote the Xiaomi Windows operating system notebook. The two companies will also collaborate on the development of artificial smart speakers (using the Microsoft Cortana voice assistant).
Xiaomi hopes to consolidate its position in the Western market, and Microsoft can further expand its business in the mobile field.
Analysts said that Xiaomi's interest in GoPro is not only to expand the camera business, but also part of its international strategy.
GoPro is a leading smart camera company in the United States. It has a high brand awareness among Americans. The inclusion of such a company in the bag will greatly promote Xiaomi's international business. In addition, the acquisition of GoPro is equivalent to reducing a major competitor, why not Xiaomi?
Since 2015, only the size of the US market has shrunk in all of GoPro's markets. In 2017, GoPro America's total revenue of US$591 million accounted for US$528 million from the US market. Analysts pointed out that perhaps Xiaomi is taking a fancy to the importance of the US market for GoPro.
One of the advantages of Xiaomi over GoPro and other competitors is that millet products are inexpensive and therefore profitable through small profits but quick turnover. GoPro is currently unable to do this. Therefore, if Xiaomi acquires GoPro, it will be able to copy this model to GoPro products to drive sales.
Xiaomi, chairman of Xiaomi, said at the beginning of this year that Xiaomi has been considering entering the US market. Xiaomi is expected to enter the US market at the end of 2018 or early 2019. At that time, Xiaomi will sell non-smartphone products such as headphones, smart TVs and air purifiers through its online store.
GoPro said that sales in the first half of this year are expected to decline year-on-year, but it is expected to rebound in the second half.
Analysts said that GoPro founder Nick Woodman holds 76.5% of the company's voting rights, so whether or not to sell the company will depend on his own attitude. He also said earlier that he is open to the sale plan.
Finally, the analyst also pointed out that considering the resistance of Chinese companies to acquire US companies, the US government may also use similar excuses (China's consumer electronics products to monitor the US public) to prevent Xiaomi's acquisition of GoPro.
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