Gionee, a well-known Chinese smartphone manufacturer, has filed for bankruptcy. In a ruling from the Shenzhen Intermediate People’s Court, Gionee’s bankruptcy proceedings moved forward, after 20 suppliers filed an application for bankruptcy reorganization with the Shenzhen Intermediate People’s Court. Gionee had reportedly been losing anywhere between $143,804 and $28.7 million every month but the financial misfortunes of the company hit the climax in the most unexpected manner.
According to a Chinese language Jiemian website, Liu Lirong, Chairman and founder of the popular smartphone brand, lost 10 Million Yuan or $1.4 Billion dollars of company fund while gambling at a Casino in Saipan, China. But Lirong later clarified that he had actually gambled away $144 million, and claimed that he did not misappropriate the funds but was rather borrowing the amount. The court recently accepted a bankruptcy liquidation application, so liquidation is still possible. The company may see complete reorganization the coming months and Liu Lirong may be forced to step down.
Gionee was one of China’s leading smartphone brands and had registered a huge growth in India as recently as 2017. According to Counterpoint Research, Gionee accounted for about 4.6 percent market share in India when it came to selfie-focused smartphone brands (OEMs offering a selfie camera above 8MP) in Q1 2017. The manufacturer also made it to the list of the top five fastest growing brands in the 15,000 to 30,000 rupee smartphone price bracket during the same period. However, in 2018, since the second quarter Gionee has been seeing a sharp decline in worldwide shipments.
Gionee now owes a CNY 20.2 billion or about $3 billion to 648 creditors. The Company, along with other brands like Micromax, Lenovo and Sony had been facing turbulence while larger Chinese brands have captured about 87 per cent of the region’s market share, as of the latest readings in 2018.
The Chairman could not have chosen a poorer timing to try his fortunes at a Casino with company funds which posed as a final blow to the ailing manufacturer. It is surprising to see that the founder, with all his wisdom, took to gambling away precious company funds jeopardizing the entire company and its employees. A lesson can be learnt from the experience of Warren Buffet, the third richest man in the world. At the age of 15, the American octogenarian sold newspapers and made up to $175 which allowed him to buy up to 40 acres of land, but the future CEO of Berkshire Hathaway lost $175, while betting on a string of horse races. Quoting him from a biography, “I’d committed the worst sin, which is that you get behind and you think you’ve got to break even that day. The first rule is that nobody goes home after the first race, and the second rule is that you don’t have to make it back the way you lost it. That is so fundamental, you know.” He decided that he would make up for the loss by working extra hours until he recovered the amount, and learnt that “you don’t have to make it back the way you lost it.”