Meitu contracts brand, smartphone, some hardware ops over to Xiaomi

Meitu, a Chinese specialist in selfie apps, image software and smartphones, has inked a major new strategic agreement with Xiaomi after issuing a profit warning for the second half of the year. Under the deal, Xiaomi will take over the Meitu brand and brand license for smartphones and other smart hardware operations, and also design, develop and produce smartphones under that brand. Xiaomi will also take care of business operations, sales and marketing for the smartphones. Meitu will meanwhile keep responsibility for certain image-related algorithms and technologies, and keep the license for certain skin-related smart hardware products. 

 

No financial details were disclosed. 

Meitu said it will receive 10 percent gross profit share for each cooperation smartphone sold over the next five years, or sooner if a certain threshold is crossed. After that, phase two of the licensing arrangement will kick in, if Xiaomi wants to continue. Under that contract, Meitu will get a specific dollar amount for each smartphone sole, with an annual guaranteed amount of USD 10 million, Phase 2 will run for 30 years. Other terms will apply to the hardware part of the dea. 

Meitu issued a profit warning, citing near-term challenges faced by its smart hardware business. The net loss for the second half is now expected to reach a range of CNY 950 million to CNY 1.2 billion, from a loss the year before of127.4 million. The company said it shipped less smartphones and launched less models in the year, all with lower average selling prices (ASPs) in the second half, on the back of intense competition. As a result, Meitu said its smartphone business is no longer profitable.