TCL Chairman Considers Smart-Technology Purchases to Spur Growth

TCL Corp. (000100), China’s biggest flat-panel television maker, said it may seek acquisitions as it expects earnings growth to accelerate in the second half of the year, Chairman Li Dongsheng said.

TCL is considering buying Internet or so-called smart-technology companies to expand globally, he said in an interview at the IFA consumer electronics show in Berlin today. These won’t be large deals and any acquisition would need to add “significant” synergies, he said.

“It’s possible to make some acquisitions if the companies have some innovative technologies,” Li said. “It’s not about the money. There are not many potential targets in the TV and smartphone industries, so it’s more about finding the right partner.”

TCL, which also makes camcorders and rice cookers, is doing whatever it can to move upmarket, a familiar path taken in previous decades by Japanese and South Korean electronics and car companies. It’s seeking to expand sales and brand credibility by convincing overseas consumers that its smartphones are just as advanced and appealing as those offered by market leaders.

In January, Li said the Huizhou, China-based TV-maker is interested in semiconductors, chipset design and panel-related components deals and has held talks with potential targets. He declined to identify them.

U.S. Ambitions

Second-half earnings will exceed the first six months’ 627 million yuan ($102 million) as TCL expects to continue to expand in markets such as the U.S., where it sees big growth opportunities in the smartphone business, Li said. TCL expects to sell 10 million such devices annually in the U.S. within two or three years, he said.

“Our presence in the U.S. is still small, and we hope we can double our presence by the end of the year,” he said. “Within two or three years, I hope that the U.S. is equivalent to our European market.”

TCL is pushing to expand its US. name-recognition, buying the rights to rename Grauman’s Chinese Theater in Los Angeles as TCL Chinese Theater, the cultural landmark along the Hollywood Walk of Fame, and signing a product placement deal for this year’s third Iron Man movie.

Europe now represents about 15 percent of TCL’s revenue, he said. The U.S. market is much smaller, he said.

TCL also seeks to keep its dividend policy “stable as earnings continue to grow,” with a payout ratio of about 30 percent to 40 percent, he said. Li ruled out starting a share buyback program as TCL prefers to reinvest the cash.

To contact the reporter on this story: Manuel Baigorri in Berlin at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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