LeEco to cut hundreds of staff in U.S. amid capital woes: reports

Updated 2017-05-24 09:01:38 Global Times

Facing insufficient capital resources, Le Holdings Co, also known as LeEco, will dismiss 75 percent of its employees in the U.S. as soon as this week, domestic news portal tech.sina.com reported on Tuesday.

More than 320 staff members of LeEco's U.S. section will be laid off, said the report, citing unidentified sources.

Analysts said the move sends a positive sign about the prospects of LeEco, which has encountered capital shortfalls after fast expansion.

The company did not respond to a Global Times inquiry over the reported layoffs as of press time, but it referred to CEO Jia Yueting's comments on Sunday that "personnel optimization" will take place in the company's non-listed operations to enhance management efficiency.

A screen capture of the company's internal e-mail was circulated online via CNBC, calling employees in the U.S. together for a meeting held in three of LeEco's U.S. locations - the California cities of San Diego, Santa Monica and San Jose - on Tuesday morning (U.S. time). The e-mail did not reveal what will be discussed at the meeting, but a person familiar with the matter was quoted by CNBC as saying that a round of a massive layoffs is expected.

"Personnel layoffs are a wise move, indicating that LeEco is shifting its focus from blind expansion to its core businesses such as online video streaming and car development," Zhang Yi, CEO of Guangzhou-based market consultancy iiMedia Research, told the Global Times Tuesday.

The layoffs in the U.S. will involve almost all of LeEco's businesses, except its automobile operation and film production, according to tech.sina.com.

Last autumn, LeEco set up headquarters in San Jose and made a grand entrance into the market with the launch of various products, ranging from smartphones to TVs and from bicycles to driverless cars.

In the future, apart from listed operations, Jia will focus on the development of driverless cars, and the A-round fundraising of LeEco's car business is expected to be completed within this year, according to information sent to the Global Times by LeEco on Tuesday.

Zhang agreed that driverless electric cars are an industry trend, but he said that he is concerned about the sustainability of LeEco's car business as the development of driverless cars will need lots of investment.

Property developer Sunac China Holdings, LeEco's second-largest shareholder, appeared to be prudent when it comes to LeEco's car business.

Sunac founder Sun Hongbin said during Sunac's shareholder meeting on Monday that although Internet-based cars are interesting, the company has no intention of investing in LeEco's car business at present, according to media reports.

The massive layoffs in the U.S., if they do occur, would be the latest move by Jia to push forward his strategic restructuring program. Jia stepped down from his general manager position of LeEco's listed online video streaming arm Leshi Internet Information & Technology Corp over the weekend.

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