Alibaba Group Holding Ltd (NYSE:BABA) has its own mobile operating system called YunOS. But few vendors install its OS on their smartphones. In fact, the online retail giant pays smartphone makers to install its OS. By comparison, Android has captured about 90% of the Chinese smartphone OS market. Alibaba wants its YunOS to run millions of devices in China in order to create a strong ecosystem as it expands into travel, mobile payments, film production & distribution, and healthcare.
Alibaba has over $20 billion in cash
To challenge Android, the Hangzhou-based company will have to spend some of its cash pile to acquire or sign strategic agreements with smartphone makers, especially in China. Alibaba raised $25 billion in its record-breaking IPO in September. The company raised another $8 billion in a bond offering last month. The Chinese company has more than $20 billion in cash and cash equivalents, report Angus Whitley and Lulu Yilun Chen of Bloomberg.
Last month, Alibaba vice-chairman Joseph Tsui said that YunOS can knit the company’s various services together. It can pursue a stake in Xiaomi, the largest smartphone company in China, which was valued at close to $50 billion in its latest round of funding. Another option could be to buy Coolpad, valued at $903 million, to make sure that its OS gets installed on the factory floor.
Alibaba-Xiaomi alliance unlikely
Strategy Analytics Inc executive director Neil Mawston told Bloomberg that he expected Alibaba to take several shots at the smartphone industry in the next decade. Mobile is a market too big to ignore. YunOS is important because Chinese consumers are shifting from desktop to smartphones and tablets. The online retail giant wants its OS to connect its wide range of services.
Forrester Research analyst Vanessa Zeng says that there is a possibility of collaboration between Alibaba and Xiaomi because the Jack Ma-led company will “struggle to win market share on its own.” Though an Alibaba-Xiaomi partnership could be a good way to challenge Android’s dominance. But Xiaomi has its own operating system MIUI (a tweaked version of Android). It wants to integrate software and hardware to build an ecosystem around that. Xiaomi’s ambitions with its own OS could thwart any alliance with Alibaba.
Alibaba shares fell 1.44% to $106.35 at 10:31 AM EST on Monday.
