92: Chapter 92 An Unpleasant Investment

"But this isn't deceiving consumers. Our phones can indeed be sold without making a profit, or even at a loss. But through the system, applications, services... we can still make money."

As a long-time partner, Lin Bin instantly understood what Lei Jun meant: "Just like Penguin, QQ is free, but games make money."

"Right." Lei Jun nodded, "So I plan to take two steps. The first step is to invest in an existing mobile phone company to quickly enter the market, and the second is to form my own team to build a true internet-based Smartphone."

After all, Lei Jun had never made a mobile phone before, and he wasn't entirely clear about how deep the waters in this industry were or how fast the market changes.

So, he had already picked out a lucky candidate in his mind.

"Who are you investing in?"

"Meizu!"

Mentioning Meizu, this was also a mobile phone enterprise in Guangnan Province, which this year had even released the first domestic Smartphone without any qualifiers.

But the experience was truly average. It had already dropped to 1999, but as for sales, there didn't seem to be any major improvement; instead, funds were a bit tight.

Investing in them might be the right choice.

...

One week later, at the Zhuhai Meizu headquarters.

Huang Zhang, the founder of Meizu, was a rather paranoid product manager, but at this moment, forced by reality, he was taking Lei Jun on a tour of the production line.

At this moment on the assembly line, workers were assembling the M8, which was also Meizu's first product.

"Mr. Lei, look. I designed this home button myself; the tactile feel when you press it..."

Huang Zhang was talking incessantly about the product details, from materials to craftsmanship, from design to interaction logic.

He really had a need for Lei Jun's investment, so he explained every detail very thoroughly.

Lei Jun listened patiently, nodding excitedly from time to time. Indeed, the production line was truly a bit different from his ideal design.

After touring for a while, the group headed to the conference room for tea as usual.

To satisfy them, Huang Zhang specially brought out his good tea, tea that ordinary suppliers wouldn't get to drink when they visited.

Lei Jun took a sip, felt it was average, and set the tea aside.

"Mr. Huang, after seeing this tour, the M8 is indeed well-made. Among domestic phones, the industrial design is first-class, but..."

This wasn't Lei Jun just blowing smoke; the M8's build quality was indeed decent, especially at a time when domestic brands were still focused on Feature phones and fighting price wars... Daring to go all-in on a Smartphone was a bold move.

"But why aren't sales going up? It's only sold over 300,000 units in half a year since launch. Huawei can sell hundreds of thousands in just over a month now, and their cumulative sales are already nearing 3 million."

Hearing Lei Jun compare him to others, Huang Zhang's expression changed instantly: "Our positioning is premium products, not volume products. And..."

"And what?" Lei Jun asked suspiciously.

"Can Huawei really sell that much relying on product strength? Isn't it just relying on the three major carriers? This is where we at Meizu are at a disadvantage." Huang Zhang smiled bitterly.

"We are just a small company and can't compare to Huawei's status with the carriers. And advertisements, although we've run them, most people buying phones now still do so at offline business halls. Being able to sell 300,000 units is already a decent achievement."

"That's why your company needs investment." Lei Jun took the opportunity to continue.

"Our Shunwei Capital can invest 300 million for a 20% stake, meaning we value Meizu at 1.5 billion. That's a 50% premium compared to other venture capital firms. Once the funds arrive, we can expand production, build channels, run advertisements..."

"You also know that I have some connections; perhaps I can even get your company into the offline carrier channels, and at the same time, bundle some excellent service plans to let sales take off rapidly."

A flicker of temptation flashed through Huang Zhang's eyes. Meizu M8's sales revenue for the 5 months since launch was about 500 million, and the total annual sales revenue was expected to be around 800 million, while the actual profit was really only a few tens of millions. This valuation was indeed quite high!

And Lei Jun promised entry into offline carriers. With his connections, maybe it really was possible.

"Really? Mr. Lei, are you serious? Our Meizu M8 can enter offline carrier channels."

"I will do my best. I will utilize every connection, but there are conditions." Lei Jun looked into his eyes, and sure enough, upon hearing about conditions, the other party hesitated.

"I want to participate in product definition. No, to be precise, I want to lead the R&D of the next generation of products."

The conference room immediately fell silent, and the smile on Huang Zhang's face gradually disappeared. In an instant, it turned into a cold attitude.

"Mr. Lei, you might not understand Meizu." He said.

"Meizu's products have always been decided by me alone. From MP3s to the M8, every detail was determined by me. This is the soul of Meizu, and also the key reason why the vast number of Meizu fans choose us."

Huang Zhang was very confident; after all, he really understood design, and many consumers chose the product precisely because of its design. From the MP3s of the past to the Smartphones of today...

"I understand."

Lei Jun gave him a fake smile; he talked a good game, but wasn't it just that he wanted to keep the company's control firmly in his own hands? He just didn't want others to take away control of the company.

If that was the case, then Meizu wouldn't be the best choice. But since he was already here, Lei Jun decided to try to persuade him.

"But times have changed. A Smartphone is not an MP3. It needs software, it needs an ecosystem, it needs internet thinking. Mr. Huang, I admit that you were able to found Meizu, which shows that you are a genius in hardware, but in terms of software and ecosystem..."

He hadn't finished his sentence, but the meaning was clear. Huang Zhang's expression darkened; he was indeed from humble beginnings. He dropped out of high school, even because he was expelled from school, but he came to Shenzhen at 16 to strive, and now he had even founded a technology company valued at 1 billion Chinese Yuan...

He was not a bit worse than those so-called top students, and even those people had to respectfully call him Mr. Huang, but now Lei Jun...

So he curled his lips, wearing a sneer, then used the tea lid to gently skim the tea foam on top, and said: "Mr. Lei means to say that I don't understand software."

"It's not that you don't understand, it's that your energy is limited." Lei Jun tried to phrase it as tactfully as possible. "I can bring in a team specifically responsible for software and system optimization, and you focus on hardware design. We can divide the work and cooperate to make Meizu bigger and..."

"No need." Huang Zhang stood up, "Meizu is my child, and I know how to raise it. I appreciate Mr. Lei's good intentions, but as for the investment... let's just forget it."