In line with its plans of boosting its presence in mobile technology, major e-commerce company Alibaba Group Holding Ltd. will acquire a minority stake in China's smartphone maker Meizu Technology Co. to the amount of $590 million. Both companies declined to state the size of the stake.
Alibaba's plans of improving its mobile presence include the development of its own operating systems for mobile called YunOS, outpacing rivals Baidu Inc. and Tencent Holdings Ltd., who are both prominently positioned in China's Internet business but nevertheless looking to expand to smartphones and tablets.
The deal, however, is also advantageous for Meizu as it battles against bigger rivals including Xiaomi and Lenovo.
The partnership between Alibaba and Meizu began last year to produce smartphones that run on YunOS. Alibaba developed YunOS in a strategy that is supposed to drive users to the company's e-commerce apps, but the company made little progress, as its main competitor is Google Inc.'s Android operating system that is too dominant.
Meizu was originally a manufacturer of MP3 players in southern China but later ventured into smartphones, catering to consumers who want "iPhone-like" devices at a much lower price. With marketing strategies very similar to its major competitor Xiaomi, Meizu sells devices at bargain prices and exhaust social media to boost sales.
Alibaba Chief Technology Officer Jian Wang said in a statement: "The investment in Meizu represents a significant expansion of the Alibaba Group ecosystem and an important step in our overall mobile strategy as we strive to bring users a wider array of mobile offerings and experiences."
The acquisition is considered the biggest move by a Chinese Web company in smartphones, and comparable only to what the western Internet giant Amazon.com did when it launched its banner product Fire Phone last June, with the purpose of making it easier for users to shop on their mobile site.
Google did the same thing when it bought Motorolla Mobility in 2012 to make Android-operated phones, although the company later sold Motorola Mobility to Lenovo in October last year.
In a somewhat smaller scale, Qihoo 360 Technology Co. released a statement last December about the company's plan to invest $409 million in a business venture with Coolpad Group Ltd., a smartphone manufacturer based in Shenzhen.
Meizu said that the company is targeting to sell 20 million smartphones by the end of 2015, while China's biggest smartphone companies Xiaomi, Lenovo and Huwawei each proclaimed targets of 100 million units by end of the same period.
China is considered the largest smartphone market although sales figures are decreasing as the giant market gets increasingly saturated.