SMARTPHONES: Creditor Chases LeEco; TCL Teases BlackBerry

Bottom line: A new arbitration claim by a LeEco supplier could trigger a domino effect that sends the company into crisis, while TCL’s first BlackBerry model is likely to get lukewarm reviews when it debuts in March.

We’ll close out the week with a couple of smartphone headlines, which seems appropriate since the world’s biggest consumer electronics show, CES, is taking place this week in Las Vegas. All 3 companies in the news are showing off their wares at CES, including cellphone stalwart TCL (Shenzhen: 000100), which is teasing us with video of its first model under a new tie-up with struggling smartphone pioneer BlackBerry (Toronto: BB).

Meantime, the other company on my radar, the cash-challenged LeEco (Shenzhen: 300104), was also in CES headlines earlier this week after showing off a sexy new energy car it’s helping to develop. But the company has just landed in a far more ominous headline here in China, where one of its smartphone manufacturing partners is calling for arbitration to try and get cash for a growing pile of unpaid bills.

Both of these stories underscore the important role that smartphones have taken on for many tech companies. That’s because many see such phones and other similar devices as the “command centers” that consumers will use in the future for a huge array of tasks in their daily lives, from getting directions, to watching movies, to remotely turning devices on and off in their homes.

That “command center” mentality was central to LeEco’s decision to enter the space around 2 years ago, with a goal of creating an ecosystem of devices and content centered on its core entertainment products and services. But the company may be starting to regret that decision, since its rapid expansion has left it with billions of dollars in commitments and limited funds to actually pay for those.

LeEco’s current predicament first burst into the headlines two months ago, when media reported the company was failing to pay some of its many suppliers. LeEco denied those reports, and its suppliers also toed the party line over concerns that failure to do so might mean they would never get paid at all. But many of those companies are probably growing impatient, and now one of its smartphone partners, Haosheng Electronics, is taking legal action to try to recoup some of its money.

According to the latest headlines, Haosheng has officially applied for arbitration to resolve the matter, as it tries to collect 50 million yuan ($7.1 million) owed to the company by LeEco. (Chinese article) The reports point out that the case is the first of a LeEco creditor resorting to legal means to recoup some of its unpaid bills. That’s not completely true, since a Hong Kong newspaper previously sued LeEco to try to recover a relatively modest unpaid bill for advertising.

But this is certainly the first major case of a supplier resorting to legal means, and I expect we’ll see more of these going forward. Whether or not the cases will ultimately cause LeEco to collapse is the much bigger question. At this point I would say the likelihood of such an outcome is growing rapidly, though it’s far from inevitable just yet.

TCL Teases BlackBerry

Next let’s look at TCL, which last month announced a tie-up that would see it become the first, and presumably the exclusive, manufacturer of BlackBerry brand phones. (previous post). That deal came as BlackBerry seeks to get out of the hardware business that brought its original fame and transform into a software and services company.

I didn’t have too much positive to say about TCL’s ability to revive the BlackBerry name, and the latest teasers coming from CES aren’t making me revise my opinions. TCL hasn’t unveiled any new phones at the event, but did issue a press release and a video of what its first  BlackBerry model will look like. (company announcement; English article) TCL notes that BlackBerry and its other Alcatel brand will form the core of its product offerings going forward, and promises to unveil an actual BlackBerry model at another major global telecoms event in March.

Since all we have is a video, most people are focusing on the fact that TCL’s first BlackBerry model will have a real keyboard rather than the virtual style one used by most phones now. I personally am a fan of such keyboards, but also have to wonder why such models have gone the way of the dinosaur in the current market. Perhaps it’s because nobody wanted them, with the exception of a few people like myself.

Either way, I’m not at all confident that this new model will be the tonic to bring BlackBerry back to life. I do expect the phone will get a big audience from curious product junkies at the upcoming Mobile World Congress in March, though the reviews will probably be lukewarm at best.