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Apple Inc. (AAPL): Meet The New Steve Jobs From China

December 19th, 2012

Jason Cimpl: Though China (NYSEARCA:FXI) has been on the receiving end of countless fraud accusations, it’s been an alleged victim as well. In fact, a Chinese business accused Apple Inc. (NASDAQ:AAPL) of stealing the word “iPad.”

China ruled against Apple in that case, requiring the company to pay a massive fine. However, the feud between Apple and China may not be over … that is not after China’s media claimed to have found the next Steve Jobs.

The Chinese are known for making duplicates that often look like the real thing. However, a closer inspection typically reveals that the quality is much worse than the original. So the claims about the next Apple or Steve Jobs could be just as brittle.

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[Must Read: Apple: The 4 Stage Collapse Of Apple Shares]

Truthfully, I was skeptical at first, too. But after a second look, the media’s designation appears to be well earned … at least at this point. Moreover, this reincarnate of Steve Jobs is doing things with his company that should make current Apple CEO Tim Cook envious.

Xiaomi Technology is, in all respects, Apple’s doppelganger.

In three years, the smart phone maker went from zero to $4 billion in value. In fact, analysts are likely downplaying its value ahead of a likely IPO.

Last year, Xiaomi reported $2 billion in revenue from 7 million phone sales – not bad for a company that started production in 2011 with a goal of 5 million device sales. The $2 billion gives the company a price-to-sales ratio of two. However, Apple’s current P/S ratio is 3.2. Apply that same number to Xiaomi’s sales and it’s about a $6.5 billion company.

But the value and growth behind Xiaomi are not the only reasons why many are calling founder Lei Jun the new Steve Jobs. Jun is a visionary and marketing whiz.

Xiaomi doesn’t sell phones in large volume like competitors Lenovo, ZTE or Huawei. Instead, the company sells its phones in small batches to a dedicated customer base.

First, Jun dangles product teasers in front of nearly four million followers on his blog. Then the blog stirs up massive interest for the new device. Since Xiaomi sells its phones only in smaller batches, the pent-up demand is huge and products sell like hot cakes.

[Related: Apple: Is The Triggered “Death Cross” To Blame For The Fall?]

This marketing tactic works by creating an aura of exclusivity. Apple is famous for that same approach. The company holds daylong events for each new product, which in the past were led by Steve Jobs. Often the events would generate so much buzz that Apple wouldn’t even have to advertise for the new device.

Xiaomi has succeeded in mimicking Apple’s marketing approach, though it charges a lower price. The company prefers to sell the hardware at cost and make profits from the software. The system works because their first batch (50,000) of the newest smart phone sold out in only two minutes. Jun’s fanatical customer base ate up subsequent larger lots in minutes, too.

Perhaps the most similar aspect between Jun and Apple’s fallen leader is their meticulous attention to detail. Apple makes products that people want, but not need. Only a product built to perfection can satisfy that type of audience. And Jun is up to the challenge. He has been quoted saying, “We’re not a company that chases sales volume. We chase customer satisfaction. We look for ways to give the customer a great surprise.”

Though Jun leads a profitable company ($200 million last year), he has his share of naysayers. Many experts believe that small manufacturers have no chance to survive in an industry that’s dominated by high-volume companies. The analysts may be wrong because China’s telecom market isn’t like the U.S., where carriers largely dictate the phone you buy. China’s mobile market is open and manufacturers do not need to be in bed with the large carriers to succeed.

[Related: Why Apple Needs To Pay You Now?]

Also, Apple didn’t always make high-volume products nor have the largest market share. Apple became the biggest company in the world through its dedication to bringing its customers the best product it could make.

I don’t know if Xiaomi will become the next Apple. But it’s on the right track.

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Written By Jason Cimpl From Wyatt Investment Research

Wyatt Investment Research is led by founder Ian Wyatt, who serves as Publisher and Chief Investment Strategist. Our team also includes a group of talented research analysts and editors who aim to uncover great investments and present those investment ideas to our growing group of loyal subscribers.


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