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China’s Alibaba Group Holding has said it will buy a minority stake in little-known domestic smartphone maker Meizu Technology Co for $590 million. The move is aimed to extends its hardware growth strategy into mobile devices.
The company, now worth $213 billion by market value, didn’t reveal how big its holding will be in a privately owned handset maker that is a distant rival to much bigger smartphone firms like Xiaomi. Meizu, employs more than 1,000 people and is based in Zhuhai, Guangdong,.
Experts say, the deal will be profitable for both the companies. It will help Alibaba to push its mobile operating system within China through Meizu’s handsets, while the latter will have access to Alibaba’s e-commerce sales channels and other resources.
Alibaba has in the past concentrated on software and services, including its core e-commerce business. Now, in a move reminiscent of US rival Amazon.com Inc’s own foray into smartphones with the Fire Phone, the Meizu investment builds on Alibaba’s more recent efforts to develop in hardware, like internet TV via set-top boxes.
The world’s populous country is also world’s largest smartphone market, with 557 million people accessing the internet via mobile devices, according to government data.
But smartphone sales are flagging. Shipments in China were 389 million phones in 2014, down from 423 million the previous year, according to China’s Ministry of Industry and Information Technology.
Meizu also doesn’t feature among China’s top smartphone brands. The top four in the fourth quarter of 2014 were Apple Inc, Xiaomi, Samsung Electronics Co Ltd and Huawei Technologies, according to data research firm Canalys.