Xiaomi profits called into question, made only $56 million in 2013

Xiaomi, one of the world’s largest smartphone manufacturers, only turned over a profit of 347.48 million yuan ($56.15 million) last year from revenues worth 26.58 billion yuan ($4.30 billion), according to new Chinese securities filings. This amount is substantially less than the figure suggested by The Wall Street Journal just over a month ago.

Figures previously seen by The Wall Street Journal, which came from a document presented to banks during the company’s latest batch of fundraising, suggested that Xiaomi made 3.46 billion yuan ($566 million) in profit from 27 billion yuan ($4.30 billion) worth of revenue. Although the revenue numbers match, the latest figures suggests that Xiaomi’s profit margins are much thinner than previously reported.

Xiaomi’s operating margin comes in at less than 2 percent, notably lower than other smartphone manufacturers of a similar size. For comparison, Samsung’s mobile division reported 18.7 percent operating margins in 2013, while Apple managed 28.7 percent.

The financial results were disclosed to the Shenzhen Stock Exchange following Xiaomi’s purchase of a 1.3 percent state in Midea Group Co Ltd, an electrical appliance company, for 1.27 billion yuan. A spokeswoman from Xiaomi confirmed the accuracy of the document. It is not clear why the earlier report suggested a much higher amount of profit for Xiaomi, perhaps the details were misread or miscalculated.

They’re growing so fast and so lean, I wouldn’t be surprised even if they were losing money – Bryan Wang, Forrester Research

Previous industry reports and speculation had suggested that Xiaomi was operating on very thin margins, due to the low-cost retail price of its high-end products which undercut the big players in the industry. Whether or not this strategy remains viable in the long runs is still up for debate, but Xiaomi seems to be making a profit for now, even if it is just a small amount.