Smartphone Manufacturing Sector in India - Overcapacity is Unavoidable

The uninterrupted Smartphone growth in India coupled with "Make in Initiative" launched by Government of India with many tax riders raised eyebrows of established Smartphone player as well as contract manufacturer.

Foxconnoffers 2.5 Mn handset manufacturing per month capacity with more than 25 assembly lines and in the process of adding 10 more lines. The Client list of Foxconn include Microsoft, Xiaomi, Oppo, Gionee, Asus and American brand Infocus

Optiemus Infracom which owns Zen Mobiles along with Taiwan-based OEM Wistron Corporation will commission its first factory by march 2016. It will have 16 Smartphone assembly line with installed Smartphone manufacturing capacity of 1.5 Mn per month.

Karbonn Mobile also jumped into manufacturing space by collaborating with VSUN and came out with 22 Smartphone assembly line with the monthly manufacturing capacity of 2.5 Mn per month. Karbonn Mobile made its intention clear that they will be investing multi million Dollars in due course to be the leader in the space .Intex investment in Greater Noida to expand its manufacturing capacity to speed up Go to market time of their devices or accessories in order to reduce the cycle time. Lava also earmarked multimillion Dollar to expand their manufacturing plant to fulfill their Smartphone device segment requirement as well as act as ODM for other OEM's willing to tap Indian market,

Micromax already started manufacturing mobile phones at its Rudraprayag facility inUttarakhand. Lenovo, one of the fastest growing brands is already procuring Smartphone through its contract manufacturer Flextronics. Other Smartphone player like Celkon, Spice and Videocon already manufacture their own Smartphone. India number one Smartphone player already manufacture their device in their one of the plant located in Noida. Last but most importantly, there are 100's of other manufacturers who entered into the segment with small number of assembly line in order to tap unbranded mobile handset player by offer them price benefits.

If we calculate the total capacity already in the market place then it is higher than total expected consumptions in Indian market place. Many of the Smartphone players are also using India as Manufacturing hub to export their Device to other countries such as CIS or Africa where they see huge potential. It is expected that more and more capacity will be added in due course. It is a known fact that replacement cycle in India is 2 years and over capacity may lead to a scenario where contract manufacturing price war start very soon which will dent in RoI of above mentioned players.

Who is Responsible for Yahoo Current Dire Situation - Reckless Acquisition or Lack of Leadership or Confidence around Alibaba & Yahoo Japan Stake

Yahoo - is One of the pioneer of Internet during Internet era of 1995 onwards which acted as driving force of innovation. The revolutionary email and chat solution from Yahoo attracted millions of active users on daily basis and their equity price skyrocketed during Internet bubble. The higher price point enabled Yahoo to acquire multiple to mid range companies through Share swap mechanism in order to grow their business. The Internet bubble burst during 2001-2003 and loose coupled integration of acquired organization by Yahoo landed yahoo in a situation where they failed to monetize the properties.

The entry of Google by 2006 - 2007 in big way also attracted many organization towards Google for search engine due to their fast and clean business model whereas Yahoo struggled to maintain their falling equity price in flagging revenue with near to zero growth.

This led Yahoo to fire multiple CEO's and landed in paying Millions of $ in Golden parachute  package and every CEO tried two things; Acquiring new companies and taking huge charges for firing thousand of resources with an commitment to stakeholders that they will be on the path of growth soon. Unfortunately nothing happened. Most interesting in each and every investor conference call, they touched Alibaba and Yahoo Japan operation which is the Jewel in Yahoo Crown to deviate the shareholders. During Alibaba IPO, 

Yahoo made handsome capital gain and distributed it among shareholders to keep them happy rather than introspecting about their product line and subsequently investing in Research and Development for the betterment of Future product roadmap. They acquired Tumblr which is a blogging site with an intention to attract more users and paid $1.1 Bn but it seems that they will close that too in next few years.

Most interesting when Microsoft made an acquisition offer, they felt that the offer is undervalued and rejected the offer and I am sure that all must be regretting today for shooting down the offer. In my point of view, Yahoo should get out of the Confidence factor that they have multi billion $ cash hoard in the form of equity in Yahoo Japan and Alibaba and focus on their product line in serious manner. As they are open for sale but what is the use of being tagged as looser in Technology world when they were the pioneer of the segment. Cheer up Yahoo team and come up with revolutionary product line.

Why Whatsapp And Facebook Investor Would Lose In Long Run

In next series of giving detailed insight about the gaps of FB-WhatsApp deal which in one or another way is going to hurt FB investor dearly and WhatsApp investors heavily. I was surprised to see deal news splashed all over internet. Somebody termed it Facebook move to protect its own turf and I was among those whereas some termed it as expensive one. It also started new discussion war among Analyst about the potential valuation of existing messaging Apps by keeping WhatsApp deal as threshold. In my point of view, both WhatsApp and FB investor is going to lose.

The purpose of FB was to acquire mobile centric user with highest probability of repeat users. Even though both the organizations are claiming that they won’t be supporting Ad filled revenue opportunities but do readers knows that

In just released Q4, 2013, Facebook generated $2.59Bn revenue and Ad revenue was $2.34 that translates in 90.34% revenue coming from Advertisement and mere $241 million revenue coming from other sources.

At the deal announcement time, Facebook promised WhatsApp $4 bn Cash, $12 Bn in Stocks and $ 3 Bn in restricted stock option. This will dilute FB number of total shares by 8.66%. At the same time, FB is going to offer 222 million shares to WhatsApp owners. It is going to put pressure on FB to sustain the same growth rate of 50% and 30% in revenue and net profit respectively.

It is also interesting that the FB Earning per share ratio of 111.3 at the time of deal which indicates the inflated valuation on the back of exponential growth expectation due to new love of ad attached revenue. Single $ fall in FB share price is going to lower the deal price by $222 million. Currently, FB share prices at and around its lifetime high and pundits are expecting higher share price moving forward. One must be careful about uneven behavior of Internet attached business.

1. Do anyone remember once the darling of Internet MySpace.
2. What happened to AOL
3. What happened to Orkut
4. What happened to Microsoft multi Billion $ acquisition of Skype
5. What happened to Cisco multi Billion $ acquisition of WebEx

One misstep or even simple Application offering may act as havoc for both the company investor. I am expecting that Facebook cleverly attached deal through provisioning and infact invested only $4 Billion in cash and fair value of Facebook share even at flashy growth is not more than $25. It would translate the whole deal around $9 Bn plus. Its my personal assessment and opinion and would recommend investors to be in or out of the Facebook equity given their own assessment. I am expecting huge write-off by Facebook in next 2 years.