Xiaomi, the Apple killer

Apple is my only recommendation in my book Scoring Stocks published in May 2013. It has been highly profitable since then. Now, I recommend to take some profit it as the rival is coming.

Xiaomi, a Chinese phone maker, will most likely come to the USA in 2015 after conquering several emerging markets including India. Its phone is almost as good as the latest model of iPhone at about half the price. It also has a low-end version priced at about $100 that would set up a standard for entry smart phones.

Xiaomi prices the latest phone model barely above the manufacturing price and makes money in the decreasing component prices. It gains more profit by stretching the model to a longer life.

Apple’s lawyer will prevent its entry that Samsung found out the hard way. For starters, Xiaomi needs to modify the user interface to avoid some of the obvious lawsuits in the USA.

Even if Xiaomi will not enter the US market, it will steal more sales from Apple. Apple has to learn from Cisco. You do not want to make China angry. If they do, they may stop Apple from selling their phones in China. Hence, you may win the battle, but lose the war.

Xiaomi could be one of the companies that would force the mobile phone to become a commodity product.

When the phone becomes a commodity, both companies have to make money in the content. Today Apple depends on iPhone for over 50% of its sales. After mid 2015, Apple stock may face some challenges even without Xiaomi entering the US market. Eventually the smart phones will become a commodity product and they may have to face Xiaomi or other similar companies.

It is one’s opinion and I would face a lot of opposition from the Apple lovers; it is the same when I recommended Apple in May, 2013 when no one wanted to buy Apple’s stock. Buy any stock depending on the potential appreciation (via individual analysis), not on the love of its products, the company or the management.

Here is a current update from Business Insider.

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