Is Chinese smartphone maker Xiaomi worth $100 billion?

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Published: December 22, 2017 12:28:14 PM

Xiaomi Corp. is set to pull in revenue of $17 billion to $18 billion this year, ahead of its own target, Reuters reported Friday, citing the company's comments to bankers.

Xiaomi, Xiaomi mobiles, Xiaomi smartphones, Xiaomi new phones, Xiaomi latest phones, Xiaomi phone price, Xiaomi chinese phone, Xiaomi corporation, Xiaomi 2017 phoneReuters reports that bankers see Xiaomi’s earnings doubling to billion next year. (Reuters)

Xiaomi Corp. is set to pull in revenue of $17 billion to $18 billion this year, ahead of its own target, Reuters reported Friday, citing the company’s comments to bankers. That’s impressive, but believable. Xiaomi has had a great year. Xiaomi 2017 net, estimate: $1 billion Stretching the credibility scale, though, are estimates that net income could hit $1 billion. They’re banker projections, Reuters notes, not necessarily Xiaomi’s. The company later confirmed to Bloomberg News that revenue topped $15 billion within the first 10 months of 2017, without commenting on earnings. If those profit numbers are true, it would mean the smartphone and device maker will deliver a net income margin of as much as 5.9 percent. That’s astounding. An operating margin of 5.9 percent would be pretty incredible, but a net margin that high would have Xiaomi well ahead of almost everyone in the market — up with Samsung Electronics Co. and Huawei Technologies Co. Suffice to say, Xiaomi is no Samsung. But bankers desperately want in on Xiaomi’s expected IPO, and talking up the company is a good way to endear themselves. Remember when that real estate agent told you your rundown two bedder was a treasure and guaranteed to fetch a good price? Yeah, it’s like that.

Reuters reports that bankers see Xiaomi’s earnings doubling to $2 billion next year. To get there, Xiaomi would need to dramatically boost revenue and widen margins. That’s hard to do simultaneously, especially in a weakening devices market. But such lofty estimates are helping these bankers talk up a $100 billion share sale, when just two weeks ago the chatter was around a $50 billion listing.

I was skeptical earlier this month about a $50 billion valuation, and I maintain my doubts about this non-devices business Xiaomi keeps trumpeting. Neither Apple Inc. nor Samsung have managed to make a go of the “connected” market. But if people want to believe the tale, I know a jolly bearded fat man in a red suit I can introduce them to.

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