Thursday, August 29, 2013

Google Vice President for Android Joins Chinese Smartphone Maker Xiaomi

Google Inc.'s vice president in charge of Android will join Xiaomi, a little known Chinese smartphone startup, in a sign of the growing influence of China's device makers.

Hugo Barra will help with a new push by Xiaomi - pronounced sheow-mee-to develop its international business and be responsible for its strategic cooperation with Google, the Silicon Valley company said Thursday. Xiaomi, based in Beijing, has grown quickly in the world's largest smartphone market by offering devices with top hardware specs on the cheap. Typically its smartphones cost belowUS$325, though its most recent smartphone sells for $130.

Unlike other Chinese smartphone makers like Huawei Technologies Co. and Yulong Computer Telecommunication Scientific (Shenzhen) Co. - which sells Coolpad branded phones - Xiaomi has made waves with its marketing flare. When it first introduced phones in the summer of 2011, the company offered a limited number online, which led to the phones selling out quickly. Meanwhile co-founder and investor Lei Jun has drummed up interest with hyped product releases.

Though the Xiaomi makes little money off the hardware it sells, its business model revolves around software and service offerings, as well as accessories. The company, which uses its website as its primary sales platform, offers an array of accessories from multi-colored batteries and casings, to hats and even dolls of the company's rabbit mascot. It also now offers a set-top box, which streams licensed Internet content for the television and is integrated with the software it runs on its phones, which are based on Google's Android operating system.

The strategy has helped the company-which was founded just three years ago by well-known Chinese investor Mr. Lei and former Google employee Lin Bin- grow its revenue quickly. In 2012, only its second year selling phones, Xiaomi sold more than 7 million phones and generated revenue of 12.65 billion yuan ($2.05 billion). In the first half of this year the company said it has already sold more than 7 million handsets, and is aiming to sell 20 million in 2013.

The success has drawn the attention of investors. Last week, the company confirmed that Xiaomi's most recent round of fundraising valued it at $10 billion - nearly as much as Chinese computer giant Lenovo Group Ltd.'s $10.1 billion market value. Nonetheless, some analysts have wondered about the valuation, pointing out that the non-existent margins from the company's hardware sales and stiff price competition in the Chinese market could make it difficult to turn big profits in the coming years.

The hiring of Mr. Barra also shows Xiaomi has ambitions to grow beyond China. In April, it made its first foray into markets outside of the Chinese mainland, selling its phones in Taiwan and Hong Kong. In a press release accompanying Mr. Barra's hiring, a Xiaomi spokeswoman wrote, "after Hugo joins the team, it's possible we will take another step in expanding the territory of our international business."

In a statement posted on Google's social networking platform, Mr. Barra wrote, "I'll be joining the Xiaomi team in China to help them expand their incredible product portfolio and business globally I'm really looking forward to this new challenge, and am particularly excited about the opportunity to continue to help drive the Android ecosystem."

On Thursday, a Google spokesman also confirmed Mr. Barra's departure, saying in a statement, "we wish Hugo Barra the best. We'll miss him at Google and we're excited that he is staying within the Android ecosystem."

Mr. Barra's departure comes after Andy Rubin, who was in charge of the Android operating system at Google, also stepped down earlier this year.

In the second quarter, Xiaomi had a 5% share of China's smartphone market according to research firm Canalys, which tracks sales in the country. By comparison, Apple Inc. had a 5% market share, while Lenovo had 12%. Samsung Electronics Co. was the biggest vendor with an 18% share.

Yang Jie contributed to this article.

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