Daily Tech Snippet: Tuesday, May 12

• Xiaomi’s rolls out a money market fund to take on Alibaba and Tencent: Like Baidu and Alibaba, Xiaomi is eyeing China’s finance industry and seeing dollar signs. Today the company is officially launching a money-market fund called Huoqibao inside a new standalone app called “Xiaomi Finance.” Like the Alibaba-affiliated Yu’ebao, Xiaomi’s Huoqibao lets consumers save excess cash and earn interest from it. After registering for a Xiaomi Finance account with one’s national ID, users can bind a bank card to the app can store as little as RMB 1 (about US$0.15). The fund is managed by China’s E Fund Management and currently offers an annual return rate of 4.26 percent. This marks Xiaomi’s first foray into serious finance, but it has dabbled in money in the past. Huoqibao was once available in beta for select users of Xiaomi Wallet, another standalone app that was primarily used to manage virtual currency known as Mi coins. Users from inside China could purchase Mi coins through bound bank cards or Alipay accounts, and redeem them for customized launcher themes, or media like e-books. Compared to China’s other internet giants, Xiaomi is slightly late to the money market game. As of late 2014, Yu’ebao had over 185 million users] and and a fund size of RMB 578.93 billion (about US$93 billion). Yu’ebao’s deep integration with Alipay Wallet, which is also tied to Alibaba’s mobile ecommerce properties like Tmall and Taobao, make it tough for new customers to miss. Tencent and Baidu also have mobile money-market funds of their own. Of these three companies, Xiaomi is arguably in the weakest position when it comes to promoting consumer finance products. Alibaba already owns the biggest pool of money online in China thanks to Alipay, and Tencent owns the best mobile real estate thanks to WeChat, China’s most popular messaging app. Messaging apps and ecommerce marketplaces both contain powerful network effects that help ensure longevity. Unlike these companies (and arguably any other company in the world), Xiaomi is extremely well positioned to benefit from the emergence of smart home devices. Since thousands of customers log onto Xiaomi’s website to buy a smartphones every week, it can leverage that focused attention by selling smart lightbulbs and smart cameras and taking a cut in the process. Many of the hardware startups it invests in go on to list their items on the company’s ecommerce platform. Documents discovered last year by the Wall Street Journal indicated that Xiaomi makes the majority of its revenue and profits from hardware sales. But the company continues to invest in “services” – broadly defined as all of the semi-tangibles one buys on the internet. The company claimed to earn more than US$1 billlion in revenues from services in 2014, marking 6 percent of its total revenues.

• Chinese Smartphone Makers Try to Make Inroads in India: The era of fast growth is coming to an end in China, where the research group IDC said on Monday that phone sales fell 4 percent in the first quarter from a year earlier, the first contraction in six years. IDC expects no growth in China’s smartphone market in 2015. India’s smartphone sales are just a fraction of China’s. But as one of the fastest-growing smartphone markets in the world, with hundreds of millions of potential new customers, India may indicate whether a new generation of Chinese hardware companies can grow beyond their country’s borders. It is intensely competitive, with more than 150 brands. Among the best-selling brands are several indigenous companies with an inside track on local phone habits. Another top seller is a multinational, Samsung, which has deep experience selling across different cultures. Xiaomi, the most successful Chinese company in India, owned only 4 percent of the market in the fourth quarter. But India is also the only place that has a scale like China’s. Indians are expected to buy 111 million smartphones this year, and 149 million in 2016. And China’s smartphone makers say Chinese and Indian customers have a lot in common: Both tend to obsess over arcane features and specs, and both are highly sensitive to cost. Many Chinese companies are trying to make their case directly to potential Indian buyers online. It is a technique pioneered by Xiaomi, which used e-commerce to overcome difficult-to-manage and expensive storefronts and distribution deals in China and now India. So-called flash sales, which offer limited batches of phones to drive up demand and build brand cachet, have rattled the current top sellers in India, the local company Micromax and the South Korean giant Samsung, according to analysts. The tactic is cheap and effective, said Mr. Sharma of Coolpad: “We don’t need to spend tens of millions of dollars on marketing or building distribution networks.” One of the most successful Chinese brands in India so far, Xiaomi has gone to great lengths to create products catering to customers there. Its new Mi 4i phone costs more than many rivals at about $200, but supports six Indian languages, with local engineers working to increase that number. The company has also built an online store that focuses on India’s passions of cricket and Bollywood, and has plans to open 100 stores around the country before the end of the year. “We want to become an Indian company,” Xiaomi’s chief executive, Lei Jun, told a local newspaper after the introduction of the Mi 4i.

• SoftBank names Nikesh Arora President and Son's Likely Successor: Japan's SoftBank Corp unveiled a management reshuffle on Monday, appointing investments head Nikesh Arora as president and naming him as a potential successor to CEO Masayoshi Son, as the telecoms conglomerate steps up its overseas expansion. The move comes as Son and SoftBank are battling to make their 2013 acquisition of U.S. carrier Sprint Corp for more than $20 billion profitable. A sluggish Japanese economy, though, has forced the company to increasingly look overseas for growth. Announcing Arora's appointment at SoftBank's earnings conference, billionaire Son, who is relinquishing the president's post, said the former Google Inc executive was a "strong candidate" to lead the company in future. "Yes. He's 10 years younger than me, and he has more abilities than me," Son told reporters, when asked if Arora was a potential candidate to succeed him. "The last nine months I've spent with him have made me sure of that, but I'm not going to retire soon," Son said. SoftBank has been weighed down by the costs of trying to turn around Sprint, which has been in intense competition with larger U.S. rivals AT&T Inc and Verizon Communications Inc. Sprint, in which SoftBank owns 80 percent, has undergone a long-haul revamping of its network, shedding thousands of jobs and triggering a mass exodus of subscribers. SoftBank has made a string of other investments in recent years, including $250 million in privately-held Hollywood movie studio Legendary Entertainment, and $600 million in Travice Inc, the operator of Chinese taxi hailing app Kuaidi Dache. As well as being the largest investor in Chinese e-commerce giant Alibaba Group Holding Ltd, SoftBank has plans to invest $10 billion in India's potentially huge but under-developed online retail market. "We expect more investments and acquisitions, even more so than now," Son said. "Going forward, the overseas market will be the main factor for SoftBank." SoftBank posted a 9 percent fall in operating profit for the year ended March to 982.7 billion yen ($8.2 billion), hurt by the absence of one-time gains enjoyed the year before.

• Rackspace Earnings: Revenue $480M (+14% Y/Y) Net Income $28M; Shares Fall 13% on Outlook: Rackspace Hosting Inc, a web hosting company, forecast revenue for the current quarter below market estimates and said a strong dollar hurt its revenue growth in the first quarter. Shares of the company, which faces tough competition from Amazon.com Inc (AMZN.O), Google Inc (GOOGL.O) and Microsoft Corp (MSFT.O) were down 13 percent in extended trading on Monday. Revenue from a contract with a "large" financial services company will be realized only in the third quarter, hurting revenue growth in the second quarter, Rackspace Chief Executive Taylor Rhodes said in a post-earnings call. Rackspace Hosting will also take a one-time charge in the quarter as a customer moved some of its "production elements" away from a Rackspace data center in the United Kingdom. Rackspace leases online storage space to companies and provides its clients management and support services for their cloud-based operations. It gets about a third of its revenue from outside the United States. The company said foreign currency exchange rates hurt its revenue growth. Revenue increased 14.1 percent to $480.2 million in the first quarter ended March 31. On a constant currency basis, revenue grew 16.6 percent. Analysts had expected revenue of $481.6 million. Net income rose to $28.4 million, or 20 cents per share, from $25.4 million, or 18 cents per share, a year earlier. Analysts expected a profit of 20 cents per share. Rackspace shares closed at $53.13 on the New York Stock Exchange on Monday. They have risen 89 percent in the past 12 months.

• In global first, Uber tests cash payments for cabs in India: Uber is testing cash payments in India as the online taxi-hailing company seeks a stronger foothold in a country where many fewer people have credit cards than internet connections. San Francisco-based Uber has grown rapidly in value to be worth around $40 billion. But in India it has lagged local rival Ola, which has about 80 percent of the organized cab market. Many analysts say that is because Uber has not adapted its business model enough to suit India's needs. Uber said on Tuesday it was piloting cash payments for cabs in the southern Indian city of Hyderabad, in a first for the company globally. Until now, Uber's mobile application around the world has charged customers through credit cards or other electronic payment methods. India has about 20 million credit cards for a population of 1.3 billion. Though the government is trying to change this, most purchases are done with cash. Ola and other Indian cab services accept cash for rides, while e-commerce giant Amazon introduced a cash on delivery option when it launched in India. "Tradition dictates that cash plays a big role for Indian consumers," said Siddharth Shanker, Uber's general manager in Hyderabad.

• In 1.7M miles of test drives over 6 years, Google's self-driving cars have been in only 11 accidents, and caused none: Internet search company Google Inc's self-driving cars have been involved in 11 accidents, but have not been the cause of any, over the last six years since the project began, the program's director said on Monday. A team of drivers that is testing the fleet of more than 20 vehicles have driven 1.7 million miles so far. "...Not once was the self-driving car the cause of the accident," Chris Urmson said in a post on technology news website Backchannel's blog Medium. (bit.ly/1GZciuW) No one was injured in the accidents, Urmson added. "If you spend enough time on the road, accidents will happen whether you're in a car or a self-driving car." The cars had been hit from behind seven times, mainly at traffic lights, with a majority of the accidents being on city streets rather than on freeways.