LeEco fires 85% staff of Indian unit, may exit India

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Four months after Chinese billionaire Jia Yueting acknowledged his company LeEco was fast running out of cash, the erstwhile high-flying company has fired 85% of its India staff and allowed two leadership exits in what the industry says is a precursor to its eventual withdrawal from the South Asian nation.

Two top executives — Atul Jain , chief operating officer of smart electronics business, and Debashish Ghosh , chief operating officer for Internet applications, services and content — have resigned, according to three top industry sources. The company, which outflanked Xiaomi, Oppo and Vivo with an advertising budget as high as Rs 80 crore a month, had exited sales through offline retail stores in December.

In November, Jia Yueting had written an email to employees saying the firm had burnt cash too quickly as it expanded into businesses ranging from smartphones to driverless cars. The founder had acknowledged its global expansion strategy went too far in the face of limited capital and resources and that it would cut costs and realise efficiencies.

Bloomberg had cited the billionaire chairman’s letter likening the expansion to speeding blindly, causing cash demands to balloon.

Industry executives attributed the likely exit to the financial crisis at the parent firm and its decision to focus on China and the US. Indian sales also nosedived after the November currency swap, hastening the decision, they said. Jobs have been shed at both the Mumbai and Delhi offices that currently have skeletal staff, while the company is now firing people at the research and development centres in Bengaluru, sources said.

When contacted, LeEco India chief operating officer Alex Li confirmed the exit of the two senior executives, but denied any plans to exit the market or liquidate stock. On the layoffs, he said the company has recalibrated and reimagined its business in India since last year and has taken steps to ensure that the scale of operations is in sync with resources.

None of it was triggered by the alleged slump in sales due to demonetisation , he said. “All businesses need to be profitable to be sustainable. That has been the primary objective in taking certain measures, though the numbers (of layoffs) indicated are incorrect,” Li said.

He also said the company has new models in the pipeline. However, a senior executive with aleading ecommerce marketplace that does business with LeEco said the company is preparing to exit India as it has been struggling to find a winning formula, with demonetisation further hurting sales.

“Xiaomi is strong online and Oppo-Vivo offline. So, LeEco found it neither here nor there,” he said, requesting anonymity. Another senior industry executive said LeEco was currently liquidating stock and will exit in the next few months. He said the flagship models will not be launched in India.

“The R&D operation may remain for some more time since it does work for the US operations. But it will be downsized,” he said. LeEco had entered India last February in a partnership with Flipkart and immediately caught consumer attention with an advertising blitz, spending as much as Rs 80 crore every month, offering great deals for smartphones and large-screen LED television sets. The company had said it sells the devices at no profit, since it planned to make money by selling content for the devices.

LeEco: LeEco fires 85% staff of Indian unit, may exit India, Telecom News, ET Telecom
 
LeEco Confirms Layoffs and Departure of Top Executives, Says It Isn't Exiting India

In a recent development, LeEco was reported to have laid off 85 percent of its staff and that it may quit its operations in India. However, the company tells Gadgets 360 that it has no plans to exit the market, though it did confirm layoffs, calling it an "optimisation exercise" . It also confirmed the exit of the COOs of two verticals. The company claims that "India is one of the most strategic markets for LeEco", and that it is only changing its strategy from "fast market expansion to healthy and sustainable growth". LeEco also stated that it will launch its next-generation TV in the coming week.

LeEco says that it plans to introduce several products in the Indian market this year, in the TV to smartphone segement, and that it is even going to invest in marketing initiatives as well. "Contrary to reports in certain sections of the media, LeEco has a healthy product pipeline for India this year. In fact, the company is gearing up for the launch of its next-generation TV scheduled in the coming week. Premium models of smartphones too are to follow. LeEco television and smartphone business continues in India and has gained significant market recognition. All this certainly does not signal a company in wind-up mode," LeEco told Gadgets 360 in a statement.

The company however does acknowledge a shift in business strategy, and an "optimisation" of workforce. LeEco also confirms that two senior management executives from the company have resigned, COO of Smart Electronics Business Atul Jain and COO of Internet Applications Debashish Ghosh. Gadgets 360 has learnt that several other employees have also effectively resigned from the company, but the 85 percent layoff reported cannot be confirmed.

Playing down these resignations, LeEco said that in India it "continues to operate with a very experienced team comprising senior team leaders and business heads." It adds, "The resource head count in India is well aligned to the scale of operations envisioned and in line with industry benchmarks. Moreover, LeEco India has a robust R&D team working for India as well as LeEco globally, as the company values the R&D function, as it is integral to long-term business. "

Talking further about the motivations for the layoffs, LeEco further says in its statement, "The company's recent moves were well thought out and planned as part of a longer-term strategy for the Indian market, and not triggered by the purported slump in sales due to demonetisation."

In December, LeEco had confirmed layoffs and had touched on the revamped strategy as well. "As we transit to a more strategic phase of our operations in India, it is the appropriate time to assess and take steps to ensure the sustainability and profitability of our business," the company told Gadgets 360 then, a statement it reiterated again on Friday for the motivation behind its "optimisation exercise".

The company is seeing a tough phase financially by expanding too fast in various markets, and burning out cash too quickly. Last year LeEco's founder and chairman Jia Yueting had also said that his company was facing financial obstacles due to the rapid pace of growth in various businesses.

However, in January, LeEco managed to secure a new round of investment worth CNY 15.04 billion ($2.2 billion or roughly Rs. 14,856 crores) from property developer Sunac China Holdings giving it some breathing space hopefully.

To recall, LeEco entered the Indian market in in January last year via the online-only route, and entered the offline market in June, before proceeding to further expand its retail partnerships.

LeEco Confirms Layoffs and Departure of Top Executives, Says It Isn't Exiting India | NDTV Gadgets360.com
 
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