Billionaire Milner Sees Xiaomi at $100 Billion

Xiaomi Corp.
A customer looks at a Xiaomi Corp. Mi 4 smartphone at the company's showroom in Beijing, China. In the September quarter, Xiaomi was the world’s third-largest vendor behind Samsung and Apple, according to Strategy Analytics. Photographer: Brent Lewin/Bloomberg

Xiaomi Corp.’s valuation could more than double to $100 billion, spurred by its latest financing round, according to investor Yuri Milner.

China’s largest smartphone vendor has the same potential as Facebook Inc. and Alibaba Group Holding Ltd. to reach that valuation, said the billionaire Milner, an early investor in all three companies. Xiaomi today announced it was valued at $45 billion following a $1.1 billion funding round that included Milner’s DST, Singapore’s GIC Pte and All-Stars Investment Ltd.

“I was attracted by the size of the opportunity ahead of them,” Milner said in a telephone interview today. “I don’t think there’s any company that has reached $1 billion in revenue as fast as Xiaomi. In every conceivable benchmark, it’s almost unprecedented in terms of its speed of growth.”

Xiaomi founder and Chief Executive Officer Lei Jun is expanding overseas and unveiling new products including an air purifier to build on growth in China, where the company overtook Samsung Electronics Co. in smartphone sales. A combination of high-end features and low prices has lured customers and Lei is now expanding into content and services.

In the September quarter, Xiaomi was the world’s third-largest vendor behind Samsung and Apple Inc. It plans to sell 100 million phones next year. Xiaomi also will unveil a new “flagship product” next month, Lei said in a statement today, without supplying further details.

Hardware Focus

“It has significant potential to become China’s first global consumer brand,” Milner said today. In smartphones, “Xiaomi can take significant market share globally, but that doesn’t cover the whole opportunity. There are a number of other interesting categories that Xiaomi can target.”

Xiaomi is the first company that predominantly sells hardware that DST has invested in, according to Milner. The firm led earlier funding rounds at a $4 billion valuation in June 2012 and $10 billion valuation in August 2013. DST has provided more funding to Xiaomi than any other investor.

Other investors in the latest round include Hopu Fund and Yunfeng Capital, Xiaomi said in an e-mailed statement. Jack Ma, the billionaire chairman of Alibaba, is one of the founders of Yunfeng.

DST invested in Alibaba in 2011, about three years before its record initial public offering, and the e-commerce operator now has a market value of $262 billion.

India, Indonesia

Milner’s 2009 investment in Facebook, when it was valued at $10 billion, helped him become a billionaire when the owner of the social network went public in 2012. The company now has a market value of $226 billion. Milner has a net worth of $2.7 billion, according to the Bloomberg Billionaires Index.

Xiaomi’s revenue is set to more than double this year to exceed $12 billion, according to estimates from Neil Shah, Mumbai-based research director for devices at Counterpoint Research.

At $45 billion, Xiaomi would be valued at 3.75 times Shah’s estimate for this year. That is second only to Apple in terms of publicly traded personal-computer or mobile-phone makers, according to data compiled by Bloomberg. Apple trades at 3.8 times sales.

The Beijing-based company this year expanded beyond its home base into India, Singapore, Malaysia, the Philippines and Indonesia. Xiaomi has said it will add markets including Thailand, Russia, Mexico, Brazil and Turkey next year.

Tablets, TVs

Xiaomi, which means millet in Chinese, was founded in 2010 to make software for mobile devices running Google Inc.’s Android system. The company introduced its first smartphone in China the following year and has since begun branching into into other consumer electronics including television set-top boxes.

The company doesn’t make its own devices and relies on contract manufacturers, including FIH Mobile Ltd. and Inventec Corp., to build them.

In May, the company unveiled its first tablet computer, the Mi Pad. The company earlier released the MiBox, a TV set-top box, and televisions that connect to the Web, running the Android operating system.

“It is the expectation that Xiaomi will be able to establish an ecosystem like that of Apple that includes hardware, software and services, an ecosystem that works not only over mobile phones but also other devices,” Sandy Shen, a Shanghai-based analyst at Gartner Inc., said today.

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