Cloud rice technology to the US IPO: lack of hematopoietic power by suspected patent infringement provoke criticism


Cloud rice technology to the US IPO: lack of hematopoietic power by suspected patent infringement provoke criticism

Liu Yuanyuan

Following the technology of Hua Mei, another company of millet ecological chain has successfully listed in the US. Recently, Yunmi Technologies was listed on the Nasdaq Stock Exchange under the code "VIOT" and the offering price was $9, which was at the low end of the previous range.

It is understood that Yunmi Technology was established in May 2014, only four years after it successfully landed in the capital market, can be said to be rapid development. But a close look at the prospectus reveals that the company's large-scale performance growth in the past two years has hidden "money shortage" worries. In the first half of this year, Yunmi Technologies realized a net profit of 70.291 million yuan, but its operating cash flow was - 17.88 million yuan. The company's marketing expenses increased sharply from 32.422 million yuan in the same period last year to 147 million yuan.

The cliff-breaking decline of cash flow and the dramatic increase of marketing expenses expose the dilemma of Yunmi Technology which is in urgent need of capital to "replenish blood". Therefore, some people believe that the "hasty" listing of Yunmi Technology is helpless. On the other hand, the prospectus reveals that Yunmi Technology is heavily dependent on millet. In 2016, 2017 and the first half of 2018, the company's millet income accounted for 95.9%, 84.7% and 62.6% of total operating income, respectively.

In response to these problems, "China Business Daily" reporter called Yunmi Technology, its CFO Jiang Shun said that the company is currently in the silent period of IPO, ended October 20.

It is noteworthy that cloud rice technology, which dominates the concept of "home Internet of Things", has not received much favor in the U.S. stock market. On the first day of the listing, the company's share price once approached $11, but then plunged rapidly, closing up only slightly by 0.89%. The next day, the closing price dropped by 8.59% to $8.30. As of 12:40 on October 11th, Yun Mi technology reported 8.33 U.S. dollars, the market value of $577 million.

Eager to list "blood enriching"?

Statistics show that Yun Mi technology was established in May 2014, the main Internet of things smart home appliances products. The company received an angel round of millet investment in July 2014, and completed a round of financing in 2015. The investors include Shunzhi Capital, Sequoia Capital and Morning Capital, amounting to tens of millions of RMB.

At the beginning of its founding, Yunmi Technology mainly developed and produced small household appliances such as millet intelligent water purifier. In 2016, Yunmi Technology began to shift from small household appliances to Internet household appliances, covering water purifiers, dishwashers, washing machines, refrigerators, lampblack machines and so on.

Prospectus disclosed that in recent years, the performance of cloud rice technology has increased rapidly. From 2016 to 2017, business income increased from 313 million yuan to 873 million yuan, an increase of 179.8%; in the first half of 2018, Yunmi's scientific and technological revenue reached 1.040 billion yuan, exceeding the annual income of last year, an increase of 283.76% compared with 271 million yuan in the same period last year.

In terms of net profit, it increased from 16.259 million yuan in 2016 to 93.24 million yuan in 2017, an increase of 47.3 percent. In the first half of 2018, Yunmi Technology reaped a net profit of 70.291 million yuan, an increase of 271.5 percent over the same period last year.

However, behind the rapid growth of both revenue and net profit, the company's cash flow situation is not ideal. According to the prospectus, the operating cash flow of Yunmi Technologies in 2016 was 15.499 million yuan, which was basically the same as net profit; the operating cash flow in 2017 was 124 million yuan, which was relatively abundant. However, in the first half of 2018, its cash flow was negative, which was -1788 yuan.

It is understood that operating cash flow is the general term of cash inflow, cash outflow and its total amount generated by an enterprise in a certain accounting period, and is one of the important financial indicators of enterprise profitability. Operating cash flow is negative, which generally indicates that the enterprise's ability to recover funds is weak, long-term operating cash flow is negative companies, hematopoietic capacity generally exist problems.

So why does cloud rice technology happen? It is understood that relying on the ecological advantages of millet, Yunmi Science and Technology has expanded rapidly since its inception. Especially in the past two years, the company has entered the field of all kinds of household appliances, and has determined the strategic blueprint of "Internet household appliances for the whole house". It has launched a series of products, such as dishwashers, cooking fumes, gas stoves, refrigerators, washing machines, water heaters and so on.

The continuous enrichment of product lines also naturally leads to an increase in the company's capital investment. In terms of sales expenditure alone, the company's sales and marketing expenditure during the reporting period were 20.929 million yuan, 95.296 million yuan and 147 million yuan, accounting for 6.7%, 10.9% and 14.1% of operating income respectively, showing a rising trend.

Repeated violations of tort

Interestingly, unlike the year-on-year rise in marketing spending, the proportion of R&D expenditure on cloud rice technology, which is accelerating the expansion of categories, has been declining.

According to the prospectus, in 2016, 2017 and the first half of 2018, the R&D costs of Yunmi Technologies were 29.926 million yuan, 60.749 million yuan and 49.047 million yuan, accounting for 9.6%, 7% and 4.7% of the operating income respectively.

And since the launch of Yun Mi technology products, the industry has been questioning its plagiarism. Previously, media reports said that the brand's refrigerator products were questioned and Haier and other household appliance giants of product similarity is very high, smoke machines, gas stoves and other products are similar to Fang Tai and other kitchen power giants of product appearance.

It is reported that at the US listing of Yunmi Technologies, Chen Xiaoping, founder and CEO of Yunmi Technologies, thanked two people, one is Lei Jun of Millet, the other is Fang Hongbo, the head of the United States, because his years of work in the United States has cultivated his rich industrial experience.

However, the relationship between the United States and Yun Mi technology is not harmonious. According to media reports, at the China Home Appliances and Consumer Electronics Fair (AWE) in March this year, Yunmi Technologies exhibition of the Internet dishwasher was suspicion of patent infringement by the U.S. company on the spot. Subsequently, law enforcement officers of Shanghai Pudong New Area Intellectual Property Office arrived at the scene to investigate, and law enforcement officers of the Intellectual Property Office took pictures and obtained evidence of the Yunmi dishwasher, and compared it with the dismantling machine on the spot.

At the same time, our reporter through the Kaixinbao inquiry found that suspected of patent infringement, in June 2018, the United States under a number of companies have been Yunmi Technology to the Hangzhou Intermediate Court. On September 12, the Hangzhou Intermediate People's Court held a hearing to hear the infringement lawsuit against Yunmi Technology by Foshan Shunde Mei Washing Electrical Appliances Manufacturing Co., Ltd.

According to statistics, there are 9 patents involved in the lawsuit of infringement in the United States, 4 for design patent and 5 for utility model patent; from the claim amount, the claim standard for design patent is 300,000 yuan / piece, the claim standard for utility model patent is 500,000 yuan / piece, and the total claim amount is nearly 4 million yuan.

Liang Zhenpeng, a senior household appliance observer, pointed out that due to the short establishment time of Yunmi Technology and the lack of its own factory, all products are OEMs, which has resulted in its disadvantages in quality technology, quality management, technology research and development. Some large household appliances companies have applied for patents in various fields of the industry, when cloud rice technology reproduction of similar products, it is easy to cause infringement. As a late entrant in the appliance industry, Yunmi needs to think about how to break through the patent blockade of these appliance giants.

Millet dependence is difficult to understand

As we all know, cloud rice technology was first known to the public to benefit from its "millet ecological chain enterprise" label. According to the ownership structure data, Chen Xiaoping is the largest shareholder, holding 71.6364 million shares, accounting for 41.3%; the second largest shareholder is Shun-wei Capital, with 20.5% of the shares held by Lei Jun, founder of millet, and Xu Dalai; and Red Better Limited, the third largest shareholder, holds 33.8182 million shares. It is 19.5%. Lei Jun holds a total of 40% stake in Yun Mi technology. The company expects Chen Xiaoping's stake to increase to 42.5% after the IPO, while Lei Jun's stake will fall to about 33.3%.

In fact, Yun Mi technology relies heavily on millet. Most of its revenue comes from millet. According to the prospectus, the millet brand products produced by Yunmi Technology are sold through the millet network and marketing channels, and commissions are paid according to the commission sales agreement. The company also sells its own brand products through Xiaomi channel, and pays 8% commission to millet.

In 2016, 2017 and the first half of 2018, Yunmi Technology sold products to millet companies with revenue of 299.8 million yuan, 739.5 million yuan and 651.5 million yuan, accounting for 95.9%, 84.7% and 62.6% of the total revenue in the same period. Among them, the company's sales of millet brand products accounted for 89.7%, 75% and 54.3% of the total revenue.

In 2016, 2017 and the first half of 2018, Yunmi Technology paid 200,000 yuan, 3.3 million yuan and 2.8 million yuan commissions to millet, respectively.

"At present, there are less than 1000 outlets under the Yunmi technology line, mainly relying on the network and sales channels of millet sales." In Liang Zhenpeng's view, the lack of its own channels is another big disadvantage that cloud rice technology needs to solve.

Overall, however, cloud rice technology is reducing its reliance on millet, and the company said in its prospectus that much of its history has come from millet-branded products, especially millet-branded smart water purification systems. However, in recent years, through the development of new products and the introduction of new product categories, the company is vigorously promoting the sales of Yunmi brand products.

Liang Zhenpeng told reporters that Yunmi Technology, as a newly established enterprise, is still a small enterprise in the whole household electrical appliances market. At first, it did rely on bundling millet to sound the popularity, so that consumers have established a preliminary trust in it. "But I think that cloud rice technology can not completely forget the relationship with millet, if it removed the trace of millet, at this stage is definitely more harmful than beneficial."


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