WEIBO TALK: Xiaomi Goes Upscale; Sohu’s Zhang Deflects Rumors

The microblogging realm has been buzzing with posts from tech executives this past week, many of whom were hyping their products at a major gadget show taking place in Las Vegas. But back in China, smartphone sensation Xiaomi was generating its own usual buzz with hints that it may try to go upscale and challenge Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930) more directly with a pricey new offering later this month.

Meantime, the microblogging realm also saw some unusual noise from 2 tech executives who have been mostly quiet in the space for more than a year. The loudest noise came from Charles Zhang, founder of web stalwart Sohu (Nasdaq: SOHU), whose microblog on Sina Weibo (Nasdaq: WB) suddenly came to life as he moved to deflect rumors about massive layoffs at his company. Meantime, Chinese Internet patriarch Lee Kai-fu also made a rare tech-related post on his microblog, breaking a prolonged period of relative silence since he returned to his native Taiwan for treatment of cancer.

Let’s jump right into the latest microblogging buzz with Xiaomi, which I previously named as my China company of the year for its rapid rise to fame. Since its founding just 5 years ago, the company has shot to prominence as the first homegrown Chinese smartphone maker to develop a loyal following by positioning itself as a cool and trendy brand that sells and markets its products mostly online.

Xiaomi likes to compare itself to Apple, and began its life as a maker of mid-range smartphones. But since then it has moved downmarket with its line of low-end Red Mi phones that cost as little as 800 yuan ($130) and have been a flagship product in the company’s global expansion. That move, combined with bloody price wars at home, have hurt margins for not only Xiaomi, but also many of its domestic rivals like Huawei and Lenovo (HKEx: 992).

But a new microblogging post from Sina (Nasdaq: SINA) vice president and tech watcher Wang Gaofei is hinting Xiaomi will try to move back upmarket with the launch of its newest product later this month. (microblog post) Xiaomi has already indicated it will launch its newest smartphone on January 15, and Wang suggests the company now has the name recognition and pricing power to sell phones costing 3,000 yuan or more, which would be squarely in the middle range.

Xiaomi is famous for leaking this kind of information before its official launches, and I wouldn’t be surprised to see it unveil a mid-end model at this kind of price point at its launch event later this week. Frankly speaking, the company needs to go more upscale if it wants to truly become a global player and escape the bloody price wars taking place at the lower end of the market.

Meantime, let’s move on to the Sina Weibo microblog of Sohu CEO Charles Zhang, which suddenly became quite active over the last week after years of relative silence. Zhang admits his own company’s microblogging service failed to gain traction over the last few years, hinting that he may follow others like NetEase (Nasdaq: NTES) and Tencent (HKEx: 700) in scaling back or shuttering their own services in a sign of surrender to industry leader Sina Weibo. (microblog post)

But the most interesting of Zhang’s posts relates to rumors that have circulated saying Sohu is preparing for major layoffs as its gaming, video and search units all struggle with competitive issues. Zhang raises the rumors that Sohu will lay off 30 percent of its workers, though he doesn’t exactly refute them. (microblog post) Instead he simply says that his company currently needs to hire people in some of its departments, leading me to suspect that some kind of major layoffs are indeed coming.

Finally let’s look at Lee Kai-fu, whose post is more interesting for what it says about him personally than its actual content. Lee was once one of China’s most respected private sector Internet voices, working as a top executive for Microsoft (Nasdaq: MSFT) and Google (Nasdaq: GOOG) before striking out on his own to start Innovation Works, a Beijing-based tech incubator. But he was diagnosed with cancer in 2013 and went to his native Taiwan for treatment, as rumors also swirled that he may have been chased away by Beijing censors after becoming too vocal about sensitive issues on his microblog.

Lee has remained quite talkative on his microblog since going to Taiwan, but has largely avoided politics or even talk of his Internet business since then. But in one of his latest posts, he complains that one of Innovation Works’ most promising companies, app-finder Wandoujia, has been excluded from another popular mobile assistant product offered by leading search firm Baidu (Nasdaq: BIDU). (microblog post)

As I’ve already said, the post is less interesting for its actual content and more noteworthy because it hints that Lee may be preparing to return to his previous role at Innovation Works soon. It does seem that his cancer treatment should be wrapping up soon, and enough time has passed since he began toning down his online rhetoric. So perhaps we could see him return to Beijing later this year if all goes smoothly.