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Alibaba-backed Chinese phone maker Meizu to cut 5% of workers

[HONG KONG] Meizu Technology Corp, the Chinese smartphone maker backed by Alibaba Group Holding Ltd, is planning to cut as much as 5 per cent of its roughly 4,000 staff to strengthen its performance as industry growth cools.

Meizu plans to trim as many as 200 people from its workforce by mid-February and will cap headcount growth at under 10 per cent this year, Li Nan, a spokesman for the company, said on Tuesday. 

Chief Executive Officer Bai Yongxiang told employees he drew inspiration from a "20-70-10" vitality model espoused by former General Electric Co. Chairman Jack Welch, intended to root out the bottom 10 per cent of performers, Li said.

China's smartphone market growth is expected to have slowed to the "low single-digits" in 2015, IDC estimates.

That deceleration is affecting a domestic industry crowded with lower-end brands such as OnePlus, Oppo and Meizu, in which Alibaba bought a minority stake last year for US$590 million to promote its "YunOS" operating system.

Xiaomi Corp, the country's second-largest vendor, was in danger of missing its target of selling 80 million smartphones in 2015, people with knowledge of its production plans said in November.

LOW BLOW

"The mid to low segment of the smartphone market is shrinking," said Jeff Pu, a Taipei-based analyst at Yuanta Securities Co. "Even though Alibaba's support helps Meizu price itself very competitively, it faces a challenge in hardware profitability."

Meizu is expected to grow shipments 25 per cent to 25 million smartphones this year, according to estimates by Bloomberg Intelligence, reflecting intensified competition in the low-end smartphone market where the company mostly competes. That compares with 350 per cent growth in unit sales in 2015, Mr Bai said in a message to employees that Mr Li confirmed.

Meizu began making MP3 players in 2003 and smartphones only four years after. Though it's never ranked among the nation's top brands by volume, it's managed to carve out a place in the market for itself since the release of its MX4 and MX Pro devices last year, according to Neil Shah at Counterpoint Technology Market Research.

Meizu devices use chips from MediaTek Inc and Samsung Electronics Co, displays from Sharp Corp and camera sensors from Sony Corp, according to the company's website.

BLOOMBERG