The $2 billion acquisition of Vizio by Chinese company LeEco will make the latter the sixth-largest TV manufacturer in the world and will give LeEco a firm foothold in the American TV market, according to an analyst from research firm IHS Technology.
However, LeEco will need to tread carefully between now and when the transaction closes by the end of the year, according to IHS analyst Paul Gagnon. Vizio is the No. 2 TV brand in the U.S., and LeEco will need to assure Vizio’s retail partners that there won’t be any problems with product quality and supply, customer service or the supply chain during the transition.
“After the completion of the Vizio acquisition, LeEco will effectively shortcut the learning curve for the U.S. TV market via Vizio’s expertise,” Gagnon said in a statement. “The U.S. company has plenty of experience managing the TV business in the U.S. and good relationship[s] with retailer partners and local content providers.
“The acquisition will also provide a chance for Vizio, which lacks market exposure outside of the U.S., to expand more regions with the help from LeEco and partners, including in China.”
The combination of the companies has supply chain benefits for both and will give LeEco an opportunity to better challenge its competitors by selling TV hardware at below manufacturing cost, while focusing on paid content subscriptions, a business model LeEco currently applies in China, Gagnon noted.
The deal has the Vizio hardware and software businesses owned and operated as a subsidiary of LeEco, with Vizio’s Inscape data business being spun out as a separate company