Is Huawei likely to buy millet?

No. The friend who asked the question clearly did not quite understand what the "takeover" was doing and under what circumstances it would succeed. I would like to talk briefly with this hypothesis.

Fund side: We believe that Huawei's mobile phone division has been in 0 profit or meager profits, the acquisition must be all dependent on the profit of the communications equipment business. On the scale of Huawei's current size, with all the cash, a portion of the loan, it should be barely available for the purchase of millet (USD 45 billion). It should be said that such a bold acquisition in the world few precedents, there are similar to the brain fever behavior, and finally ended in failure (AOL acquisition time Warner), shaking the operating foundation. If the use of stock exchange, and Huawei's operating habits do not match, and millet valuation so high, are unlisted enterprises, single price is difficult to talk about, the way to change shares is not cost-effective. The last way is for Huawei to go public after refinancing, it is relatively easy to see the feasibility, but Huawei does not seem to have the plan. Or take a step back and buy some stakes, which is much cheaper, but still not necessary, for the following reasons.

Price side: Millet's valuation is less than one-fourth a year ago, and if you buy at the current price, it will be too expensive unless you are extremely sure of its prospects. We believe that even Samsung's mobile phone sector, the market to the real value of less than 30 billion U.S. dollars, according to 16 PE to 7 times times. Millet valuation So high, is entirely at the inflated peak of the advance effect, Millet has advanced 3-5 years, such as rapid growth of the valuation, so why not wait a few years? Valuations will be reasonable after everything is stabilized, and given the size of the money, it is better to miss opportunities than to fail.

Foreground side: If the brain is really hot, let's think about the future, how many years will the goodwill of hundreds of millions of be filled? The mobile phone industry is unpredictable, and a random accident can make investment a one-off. The so-called synergy effect is not significant from the amount of money, the bet is too bold, the failure of the words, except Apple all the industry's affordability.

Strategic side: Huawei's mobile phone sector is growing well, not the main source of revenue, and there is no need to spend billions of dollars to buy other brands. And the two sides themselves are in a competitive relationship, the same kind of disability is the biggest threat.

Industry side: mobile phones into the commercialization of inevitable, more and more manufacturers, long-term look at everyone's goal is to maintain the scale, to ensure survival, in case the market worsened to make a fortune to leave is the best policy, no manufacturers will hit more funds, borrowing is a big taboo.

Historical experience: From the perspective of historical experience, the vast majority of the objects are winners (more than 95%, the exception is a minority in the financial crisis when the malicious Low-cost acquisition), and the investors to want to return to the time is not easy (you are welcome to say, the probability will not exceed 30%), the acquisition has the following characteristics of the likelihood of success:

Valuations are cheaper than peers;

Complementary products, less repeat products;

The two sides have a cooperative relationship;

The object of acquisition has a strong sense of existence in the emerging markets without participation.

The hypothetical object lacks these characteristics.

Mobile phone industry has not yet had a successful large acquisition, because the change is too fast, overvalued value when no one can afford, and no one is willing to be a sucker, cheap when already, so more cautious.

Similar case: With this assumption most like the beginning of last year FB acquisition WhatsApp, is the acquisition has a strong rationality, and FB can withstand the risk of failure. Mobile phone industry cases such as Microsoft's takeover of Nokia, Sony took over Sony Ericsson, Lenovo's acquisition of Motorola, is currently not a success, although the amount is not too big, but also to the parent company brought a heavy burden. We think there are some bets on these acquisitions, the likelihood of losing is currently 100%, which is a cautionary tale for the latter.

Millet is willing to sell: although a large amount of cash is the dream of all enterprises, but from the tone of lei millet is not likely to sell, in the development of the peak of the enterprise is not holding a rational view.

Assumptions occurred after the situation: Although the stock ownership structure of millet is not open, but I believe that lei my shareholding will be very high, Lei is the biggest winner, is expected to become China's richest man in an instant. Huawei has poured out of its savings to make a huge uncertainty, a big loser.

To talk about rationality again: Under what circumstances will Huawei have to make the choice to buy its peers? First of all, must be the main business is sluggish, analogy Kodak at the beginning of the century, hand held a large amount of cash, the industry has fallen into a structural decline, can be said to be forced.