It could be months before we see what’s next for LeEco. It might even be 2018 by the time we see anything new. With its cash spent and little revenue coming in, the company announced today its expansion in the United States is on hold indefinitely. Hundreds of employees have been laid off while the entire pipeline of products is frozen until financing for the future can be secured.
The speculation is over, and now we’re aware that things at the Chinese company are as bad as expected. LeEco confirmed yesterday’s CNBC report that layoffs were planned. It has decided to release 325 U.S.-based employees. A statement made public by the company says LeEco is experiencing “a significant restructuring and streamlining of our business, operations and workforce.” That’s the polite way of saying layoffs occurred.
LeEco admitted its U.S. expansion happened way too quickly and with a misunderstanding of the market. Rather than entering slowly and building a group of products over time, it released everything at once. Phones, accessories, and televisions were all introduced in Fall 2016. On top of that, the Le Pro 3 and Le S3 weren’t very unique devices in a saturated market.Financial woes become known in a Bloomberg report published just weeks after the big U.S. debut in San Francisco. It became clear everyone within LeEco was aware expansion happened way too fast, leaving the company with no choice but to slash costs in any way possible. A small round of layoffs happened while CEO Jia Yueting cut his own salary.
When phones and televisions weren’t selling well, LeEco began negotiating a $1.4 billion investment deal that ultimately fell through. It was forced to sell a piece of land, which would’ve been its U.S. headquarters in Silicon Valley, for $260 million to keep the business going. And, just last month, the Vizio acquisition was dropped due to “regulatory headwinds.” Many believe LeEco opted to not buy the television maker because it didn’t have the money anymore.
EcoPass, the subscription for exclusive video streaming content, was canceled last month after directing owners of LeEco phones and televisions to DirecTV Now.
All of the struggles we mentioned contributed to today’s announcement from LeEco.
Here’s a part of the statement:
“Our goal is to continue to gain momentum. In the past few months, we have gained a large foothold in Chinese-speaking households in the U.S. by offering tailor-made products and content for this community. We believe this provides us an opportunity to build on our strengths and grow from there.”
Simply put: LeEco ran out of cash. When that happens, you have to cut your workforce and reevaluate the future; therefore, everything at LeEco has been paused indefinitely. In the coming weeks and months, LeEco will shop around for an investment deal to refuel and target Chinese-speaking people in the U.S., a market that will probably still give the company problems.