2003: Starting with Foreign Trade

Chapter 876 Arrogance Has Its Own Foundation
Tan Jincheng, who flew to North America, went straight to Microsoft headquarters and had a private conversation with Microsoft's executive vice president for several hours, which attracted considerable attention.

Meanwhile, another event in the country has attracted considerable attention.

That was an investigation under the leadership of Zhao Xinyi, covering the entire industry chain. As instructed by Zhao Xinyi, the special assistant of the president's office, this investigation was not limited to Wei Lai or Shan Chi.

Rather, it extends to all of Mr. Tan's businesses, and even to some special suppliers, covering a scope far beyond imagination.

Such a large-scale investigation, personally overseen by Zhao Xinyi, who holds a high position of power, could not possibly escape the eyes of the media.

According to supplier reports, this large-scale investigation is only targeting LeEco, and Dexian Electronics, Tan Jincheng's most important mobile phone battery supplier, has cut off all business dealings with LeEco.

As one of the top ten mobile phone battery suppliers in China, with numerous users including Xiaomi, Apple, and OPPO/Vivo, it's truly perplexing that Dexian Electronics would disregard losses in such a manner.

In 2016, LeEco was definitely one of the hottest mobile phone suppliers in the market, selling 230 million units in a single month in the second quarter, with a market share of 4.9%, ranking seventh.

By benchmarking against Xiaomi's high cost-performance ratio, partnering with carriers for exclusive sales, and generating buzz through various product launches and first-day sales events, LeEco's mobile phone market share surpassed that of brands like OPPO and Vivo.

With its acquisition of Coolpad and a 48 billion yuan financing round in August, LeEco appears to be a highly competitive company to those unaware of the full story. Tan Jincheng's actions from across the ocean seem rather abnormal.

Even Lu Qi, who was far away in North America, heard the news.

There was no other way. Ever since his private conversation with Tan Jincheng last time, which lasted for several hours, he had developed a strong interest in Tan Jincheng's business and had been collecting information from various sources through his connections.

“They have no money; their funding chain has broken down. In my opinion, there is no need for cooperation anymore. As for what others think, that is not something I can decide.”

“Doing business can involve investing heavily in a specific direction, but it is definitely not gambling. I would not gamble on a company that has clearly broken its cash flow.”

LeEco still has so many investors. Besides Jia Yueting's excellent financial accounting skills, there are many other aspects involved. However, many people have probably been deceived by him, including Sun Hongbing, who was already preparing to enter the market.

Whether they were genuinely scammed or not, one reason is that they were betting that LeEco could survive. It's like participating in a gamble; if you win, you make a fortune, and if you lose, you lose everything.

Given the predetermined outcome, Tan Jincheng would certainly not participate in this gamble.

"I've heard about LeEco's situation too. Has it gotten that serious?"

Tan Jincheng has been staying in Silicon Valley for the past few days. In addition to meeting with Lu Qi, he has also met with other people, such as Nvidia's Huang and Tesla's Ma, etc.

From its launch in August 2015 to August 2016, Nvidia's stock price rose significantly, revenue and profits surged, and its financials and market capitalization soared.

With the surge in demand for GPUs in gaming, data centers, and AI, the newly launched flagship GTX 1080 not only offers a 50% performance improvement over its predecessor but also reduces power consumption by 30%.

In addition, it supports VR technology, driving the upgrade of gaming and virtual reality hardware, and also features the Tesla P100 GPU for data centers, specializing in deep learning and high-performance computing.

These are the fundamental factors supporting Nvidia's market value of over $400 billion, and it can be said that Nvidia has weathered its most difficult period.

Based on the acquisition that began in March 2012, plus other purchases made over time, Tan Jincheng currently holds 6121.91 million shares of Nvidia, with a market value exceeding US$41 billion, making him quite wealthy.

When Mr. Tan invested, it was probably the most difficult time for Nvidia. That investment was very important to Nvidia. However, times have changed, and everyone is a businessman. It's impossible for Tan Jincheng to expect Mr. Huang, who is heavily influenced by Western culture, to remember his personal favor.

Business is business.

Besides inviting Lu Qi to join the team, Tan Jincheng also intends to discuss a business deal with Lao Huang: to stock up on graphics cards, and even more.

Originally, based on the computing power requirements, the various companies under its umbrella had already started stockpiling graphics cards. However, ever since Cheng Linfeng mentioned that quantitative fund to him last time, Tan Jincheng felt that the pace should be faster.

Many seemingly incomprehensible behaviors have a deeper meaning. Why would a quantitative fund that invests in stocks hoard so many graphics cards? Are they burning through cash?
Or is it that the team led by the boss is mentally unstable? Obviously not, since the entire team at Zhejiang University consists of highly intelligent individuals.

Clearly, they felt that a certain direction was good, or rather, they had become aware of it.

Tan Jincheng was better informed than them. Since everyone else had started stockpiling graphics cards, there was no reason for him not to speed up his own stockpiling. Besides, given the current level of computing power development, a price increase for graphics cards was almost inevitable.

Lu Qi is still considering it, but compared to when he came to North America before and had no confidence, Tan Jincheng is now much more confident.

Although he couldn't meet with Lu Qi often these past few days, the two communicated quite a bit in private. Lu Qi would ask Tan Jincheng about matters concerning his businesses, such as the investigations coming from China and his business relationship with LeEco.

Besides these, he would also ask Tan Jincheng about things happening in China. Even if he was well-informed while abroad, there would still be things he didn't know, and the same was true for Tan Jincheng.

Lu Qi's performance gave Tan Jincheng a lot of confidence, and even though he still preferred Baidu, he wasn't in a hurry.

Lu Qi apparently only stayed at Baidu for 15 months before being kicked out. He could easily wait 15 months; it was better than going to Pinduoduo.

Lu Qi's time at Pinduoduo was limited to serving as the chairman of the compensation committee, and he didn't stay long. After that, he was practically retired. It's fair to say that his time at Baidu was a significant blow to him.

Lu Qi's departure from Baidu back then caused a huge reaction, almost like he was kicked out. It even caused some unpleasantness between the two sides. Looking at the domestic professional manager market, such behavior is extremely rare.

The only comparable case is Sun Tongyu being ousted by Ma Huateng, but in terms of contribution, Sun Tongyu's contribution to Ali is not as significant as Lu Qi's contribution to Baidu.

Today was the second time Tan Jincheng and Lu Qi met. After this meeting, he would be returning to China. Although Lu Qi had not yet agreed, he inquired about Tan Jincheng's specific business in the internet field.

This is also why I started paying attention to the LeEco incident.

"LeEco's stock price has fallen for five consecutive days. It's hard to say that it's not related to your investigation, Mr. Tan."

After resuming trading following a six-month suspension, LeEco's stock price rose to a high of 49.74 yuan, shortly after Tan Jincheng arrived in North America. However, following the news, the stock price has fallen for five consecutive days since the 19th, and is currently closing at 44 yuan.

The drop wasn't significant, but the trend was extremely ugly, with each day opening high and closing low. The total trading volume of 35 billion yuan over five trading days strongly resembled a sell-off.

"Haha, this has nothing to do with us. We haven't responded to anything."

When a company's story is about to fall apart, some people want to gamble on it, while others are not optimistic. Taking advantage of the fact that the stock price hasn't fallen too much to cut their losses might be the right decision.

"If it's really as you say, Mr. Tan, then running away at this time is indeed the right decision."

A company with a broken cash flow cannot support a market value of over 800 billion yuan. Cutting losses at this point is indeed a normal decision.

"By the way, Mr. Tan, why didn't you invest in the most popular bike-sharing industry in China right now?"

If we're talking about the hottest venture capital investment in the second half of this year, it has to be Mobike. Starting in Shanghai in April, Mobike had already covered major cities across the country by early September.

In terms of financing, it was even more extravagant, successively investing in Series B, Series C, and Series C+ rounds, creating a unicorn company. Its market share rose rapidly, approaching that of OFO, which was founded earlier.

In just a few months, a two-way competition has emerged in the shared bicycle industry.

In Lu Qi's view, Tan Jincheng is building a comprehensive travel ecosystem, from electric bikes to cars, and he has a lot of influence in the ride-hailing industry. Under such circumstances, he should also be interested in the currently popular shared bicycles.

"It's too segmented, I'm not investing anymore, it's not interesting, and their deposit model is very prone to problems."

The ride-hailing market has been burning through cash. The merger of Didi and Uber seems to have ended the money-burning war, but there are still many places where money will be spent. As far as Tan Jincheng knows, the T3 Alliance is under construction.

The bike-sharing market, which is even smaller than the ride-hailing market, saw both companies burn through a lot of money to grab market share. The key issue is their deposit system, which lacks proper oversight, making it inevitable that something bad would happen sooner or later.

This method of paying a deposit doesn't actually require memories of a past life, which makes it seem somewhat impractical and too risky.

Moreover, as far as Tan Jincheng knew, the bike-sharing company founded by that post-90s generation was quite outrageous. Their extravagant spending after receiving investment money was not something a founder should do.

"Besides, we've already indirectly intervened by investing in a certain group. We won't participate in these money-burning wars anymore; we'll invest our money where it's needed."

Lu Qi remained noncommittal.

Tan Jincheng was an impatient man, and he was going back today. He wanted to hear a definite answer from Lu Qi.

"Come to Orange Technology, Mr. Lu. I can hand over Gaode Maps, Dingding, Orange Technology, and even TiMi Studio to you for management. You'll have users, data, and cash. You can play around with artificial intelligence as you please."

“I promise to give you 10 years, and I will keep my word. As long as Mr. Lu feels that you have not yet achieved your ideals by 2026, I will fully support you.”

"We will create a unique AI environment that exists outside of BAT (Baidu, Alibaba, Tencent)."

Lu Qi sighed, feeling somewhat emotional. In the past week, he had commissioned a business investigation company to conduct a comprehensive review of Tan Jincheng's business in the internet field. What he found was astonishing.

Aside from investments and equity stakes, the partnership includes Orange Technology, Dingding, Gaode Maps, Horizon Robotics, and TiMi Studio!
The five companies under his control cover the entire internet industry, from basic design and map services to social networking and B2C terminal business. If these five companies were merged and integrated into a single entity, the future of Orange Technology would be limitless.

Using games and e-commerce as the two main channels to provide cash flow and profits, and then using user data to sustain the entire industry, it is indeed not much worse than Baidu now.

Most importantly, Orange Technology's reputation is many times better than Baidu's now, and their business is also very simple.

Tan Jincheng didn't mention Horizon, but he knew it was impossible for it to be integrated into the entire system; he hadn't thought about that.

The main businesses of the other four companies are very clear: they are divided into profitable and unprofitable businesses. The two unprofitable businesses are Dingding and Gaode Maps, but it is these two businesses that support the strategic position of Tan Jincheng's Internet business.

In recent years, BAT (Baidu, Alibaba, Tencent) has been booming. Among the latest domestic unicorn companies announced, 65% are related to them, either through incubation or investment. Their influence is ubiquitous in the internet industry.

However, in the area of ​​map services, all three BAT companies are subject to Gaode, especially Alibaba. Their demand for Gaode is so great that they practically beg for it. Jack Ma has wanted to acquire Gaode Maps more than once.

The same applies to Pony.com. They do have their own map service business, but Tencent Maps cannot compete with Gaode Maps in terms of either technology or market share. In other words, Baidu Maps can only barely compete.

To put it somewhat inappropriately, the entire internet business relies on local services. Whether it's ride-hailing, food delivery, online shopping, or even bike-sharing, all services are inseparable from maps.

Tan Jincheng's actions of preemptively acquiring Gaode Maps and then decisively privatizing it have essentially cemented his reputation in the internet industry.

It can be said that as long as Gaode Maps is in his hands, he can navigate the world of internet giants with ease while focusing on real industries, largely because of Gaode Maps.

Any internet company that wants to make a mark in the market has to give him face, and all he has to do is ensure that Gaode Maps remains competitive.

A young and wealthy CEO who fully controls one of the most advanced map service providers in China—take the LeEco incident as an example—if you anger him or he thinks your company is incompetent, he really dares to completely cut off all business dealings.

"Screw BAT."

Lu Qi thought of what Tan Jincheng had said on the first day. At the time, he thought it was really arrogant, but now it seemed that the man really had the right to be arrogant.

What's even more terrifying is that, in addition to Gaode Maps, he also took a different approach and fully incubated Dingding. This app, which originated from the internal management software of Flashpoint Technology, has grown over more than a decade and has finally grown into something that makes people's scalps tingle.

He had also used the Dingding software before, and recently, through Tan Jincheng's connections, he even got his hands on an advanced, unreleased version—it was incredibly powerful.

An app that provides a one-stop collaboration solution for enterprises, organizations, and educational institutions, while also having most of the functions of instant messaging, namely QQ and WeChat.

There are actually quite a few apps like this on the market, and many large companies have their own internal apps, but none of them are as powerful as Dingding.

In Tan Jincheng's words, their investment over the past decade or so was not just empty talk; they provided money and manpower as needed, and basically did not seek any return.

As of 2016, the entire Dingding team had more than 500 people.

"I must say, Mr. Tan, your idea is very tempting, and I am also very interested. However, there is a premise that I don't know if you have considered. If you acquire Dingding, Gaode Map, and even TiMi Studio in the name of Orange Technology, wouldn't that mean that you have lost independent control over these three companies?"

Although Lu Qi didn't have much contact with Tan Jincheng, the information he gathered from both domestic and international peers and investment institutions indicated that Tan Jincheng was extremely concerned about equity or control over the company.

The ideal is wonderful, but he's afraid it's just a pie in the sky.

He is already 55 years old.

"It doesn't matter. As long as it makes the company bigger and stronger, I don't mind giving up some profits on a certain project. Besides, I can increase my controlling stake in Orange Technology through share issuance."

The Ministry of Science and Technology valued Dingding at $15.5 billion, while Gaode Maps' valuation remained largely unchanged from its privatization at $30 billion, placing them both in the $10 billion to $50 billion unicorn category.

This is officially endorsed. The two companies have a combined value of $45.5 billion, which translates to over 300 billion RMB. TiMi Studio is still in its early stages and hasn't received any funding yet.

However, based solely on its ability to be self-sufficient and its potential blockbuster games, saying it's worth $10 billion is simply Tan Jincheng doing good for capital.

If he offers $10 billion and says he's selling, Pony Ma and Ding Lei will have to fight over it.

"My plan is to integrate Dingding and Gaode Maps into the existing listed company system through private placement and cash acquisition. These two companies are worth about 300 billion yuan, which is a large-scale acquisition."

"Of course, if Mr. Lu feels that TiMi Studio also needs to be acquired, then I will not hesitate to do so. However, this would increase the acquisition cost, and we will have to see if Nasdaq agrees."

The fact that Tan Jincheng is the sole actual controller of all these companies clearly constitutes related-party transactions.

This is a common practice in the A-share market: using listed companies' money to buy junk assets held by controlling shareholders or major shareholders at prices far exceeding the market average. However, this is much more difficult to do in the US, where the financial system is well-developed.

Dingding and Gaode have clear valuation systems and official endorsements. They also greatly complement Orange Technology's existing business, so the shareholders and Nasdaq are likely to agree.

However, it's hard to say what the valuation of TiMi Studio will be; it may take some time to adjust.

Lu Qi thought for a moment and said, "It's a bit difficult. Dingding and Gaode are very important in terms of strategic position, but in the eyes of the listed company's shareholders, these two businesses are not profitable and may drag down the company's finances."

"If you want to acquire the whole company, then it's necessary to include TiMi Studio in the deal."

"Sure, no problem. You can decide this after you take office, Mr. Lu. I will fully cooperate."

Lu Qi's words make some sense. As a financial investor, I am very concerned about the company's profit changes. The strategic position is true, but the inclusion of Dingding and Gaode Map will indeed affect Orange Technology's existing profit system.

Whether from the perspective of acquisition or future operations, it is a considerable burden for listed companies.

If you interpret this restructuring plan as Mr. Tan selling his unprofitable businesses to his own listed company, there's not much wrong with that interpretation.

Lu Qi was both amused and exasperated: "What do you mean I'll decide after I take office? I haven't even agreed to that yet."

It has to be said that this young man is quite unique, but he seems a bit too impatient.

"Haha, Mr. Lu, please stop arguing. You said yourself that you are 55 years old now."

"Although I've never thought there was anything wrong with your age, you can imagine that in the year you retire, you will personally hand over one of the most powerful artificial intelligence companies in the country, or even the world, to your successor. Wouldn't that be amazing?"

"So what if you're a Microsoft executive vice president? Is that any more impressive than personally building the world's most awesome AI company?"

"I hope that next year your identity will be the new Orange Technology; oh no, let's call it Orange Group, the CEO of Orange Group."

"Furthermore, I hope that when you retire, these two positions will be at the very top of your resume."

Lu Qi's heart skipped a beat, and he felt the passion of his youth return.

However, having weathered many storms, Lu Qi was still able to maintain a calm demeanor.

"You've promoted me already?"

When they first met, Tan Jincheng referred to him as the Executive Vice President and CEO of Orange Technology.

Although Lu Qi only stayed at Baidu for 15 months, he was of great significance to Baidu. In addition to quickly turning around Baidu's image, he also boosted Baidu's market value by more than 300 billion US dollars.

The "All in AI" strategy is a key driver in Baidu's transformation from a "search company" to an "AI company," anchoring the long-term value of technological innovation for Baidu.

Unfortunately, after leaving, he changed back. Ever since leaving Google, Lao Li has been living off the legacy of his previous ventures.

Tan Jincheng smiled and nodded: "Yes, you've been promoted, so you should accept it."

Lu Qi's current achievements are certainly not due to his procrastination. He had already made up his mind: "How about this, the National Day is coming soon. I will go back to China for the National Day and then go to Ningbo to talk to you in detail?"

"OK, no problem."

That's it, that basically means he agreed. It seems Lu Qi really wants to make something of himself.

"By the way, Mr. Tan, you went to Nvidia to talk to Mr. Huang twice. Could you tell us what business you discussed?"

"Haha, there's nothing I can't say. The announcement about reducing the shareholding and buying graphics cards will be released in a few days. But remember to keep it a secret, Mr. Lu."

(End of this chapter)