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Alibaba Invests $590 Million In Chinese Smartphone Maker Meizu

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Alibaba is stumping up more than half a billion dollars to kick its lacklustre mobile phone business into gear. The NYSE-listed e-commerce giant today announced a $590 million investment in Chinese phone-maker Meizu.

The deal grants Alibaba an undisclosed “minority” share in the Guangdong-based company, which sold 1.5 million of its Android-based smartphones in January, but it is particularly notable for the strategic alliance between the two.

Meizu, which operates a Xiaomi-like online sales model but is yet to break into China’s top five smartphone companies based on sales, will integrate its hardware with Alibaba’s struggling operating system. Aliyun is the business unit behind Alibaba’s Yun OS, which is based on Android and used for smartphones and smart TV sets.

“Alibaba Group will provide Meizu with resources and support in the fields of e-commerce, mobile Internet, mobile operating system and data analysis with the aim of developing Meizu’s smartphone ecosystem,” the company said in an announcement, which also revealed Meizu’s phone will be sold via Alibaba’s range of online retail sites.

“The investment in Meizu represents a significant expansion of the Alibaba Group ecosystem and an important step in our overall mobile strategy as we strive to bring users a wider array of mobile offerings and experiences,” said Jian Wang, Alibaba’s CTO, in a statement.

While Alibaba is best known for its formidable collection of e-commerce sites — including marketplace Taobao and high-end ‘mall’ T-Mall — the company, like Amazon, has its tentacles in a range of other areas, including smart TVs and mobile devices.

The move is an interesting one when you consider that Xiaomi, the smartphone success story of 2014, is rapidly moving into e-commerce after starting out in mobile hardware and software. Thus, Alibaba is working backwards. Despite an impressive 40 percent of transactions happening from mobile devices, it wants to reach its customers in a more personal and direct way using hardware like smart TVs and smartphones.

But Alibaba’s approach to mobile software is yet to bear fruit. The most notable achievable of Aliyun to date has been a run-in with Google back in 2012, when then head of Android Andy Rubin forced Acer to cancel a planned phone launch because it was an “incomplete” version of Android. Aliyun was spun out from the main Alibaba business months later and, despite powering some minor devices, Alibaba has thus far not scored any real traction with it.

As an investor in Meizu, that is likely to change, although Meizu itself is overshadowed by Apple, Samsung, Lenovo and even newcomers like Xiaomi in China’s market. The bet here for the 11-year-old phone-maker is that a collaboration with Alibaba — which is desperate to make inroads on mobile, having also failed to create a successful chat app — can help raise its profile and popularity in China.

Alibaba’s past mobile investments have included leading a $280 million round for messaging app Tango, a $120 million deal for U.S.-based mobile games startup Kabam, and a recent $10 million investment in Android games console maker Ouya. It makes sense that it is looking to complement that focus on software and services with a hardware partner, although Meizu is also still yet to prove itself in China or on the global stage.

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