Alibaba Is Making $590 Million Investment in Mobile

Chinese E-Commerce Giant Is Buying a Stake in a Smartphone Maker

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Pictured: Meizu's MX4 Phone. Alibaba is targeting more smartphone users as it moves into entertainment and beyond.
Pictured: Meizu's MX4 Phone. Alibaba is targeting more smartphone users as it moves into entertainment and beyond.
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Alibaba has agreed to invest $590 million in Chinese smartphone maker Meizu, boosting the e-commerce company's push to get its mobile operating system on millions of handsets in China.

Asia's largest internet company will hold a minority stake in Meizu and integrate the smartphone's hardware with Alibaba's YunOS software, Alibaba said in a statement Monday. Meizu, which last year released the MX4 and Meizu Blue Charm, didn't rank among China's top five smartphone manufacturers as of the September quarter, according to researcher Canalys.

Alibaba Group Holding is counting on YunOS to help it grow beyond selling clothes and gadgets into the entertainment and health-care fields, as it tries to capture a greater share of China's 557 million smartphone users. With a market value of $211 billion, Alibaba has struggled to expand the software's reach in China, where more than nine out of 10 mobile devices run Google's Android software.

"Alibaba wants to promote its operating system and fight for mobile access points," said Li Yujie, an analyst at RHB Research Institute Sdn in Hong Kong. "Meizu is one of the better homegrown mobile-phone makers in China, so it makes sense for Alibaba to work with them."

Alibaba Vice Chairman Joseph Tsai said in November that the Hangzhou, China-based company's long-term goal was to get YunOS on tens of millions of smartphones. That aim dovetails with the Chinese government's goals of reducing dependence on Android and promoting national technology champions to rival U.S. giants Google and Apple Inc.

Mobile strategy
"The investment in Meizu represents a significant expansion of the Alibaba Group ecosystem and an important step in our overall mobile strategy," Wang Jian, Alibaba's chief technology officer, said in the statement. The size of Alibaba's share of the company wasn't disclosed.

Meizu Technology sold 1.5 million smartphones last month, Chairman Jack Wong said in a blog posting Feb. 5. The company's phones use chips from MediaTek, displays from Sharp and camera sensors from Sony, according to the company's website.

Some smaller manufacturers have adopted YunOS before. Shenzhen Sang Fei Consumer Communications makes phones running the operating system under the Philips brand.

"This isn't too big an investment," said Li, of RHB. "It's possible that Alibaba will make similar investments in other smartphone makers in the future, as well."

--Bloomberg News--