Amazon and Tencent Back Smartphone Maker Essential -- Update
August 09 2017 - 2:32PM
Dow Jones News
By Rolfe Winkler
Essential Products Inc., the smartphone maker founded by the
creator of Google's Android mobile software, confirmed it has a new
$300 million war chest as it prepares for the seemingly
insurmountable task of taking on Apple Inc. and Samsung Electronics
Inc.
The startup on Wednesday unveiled the large roster of investors
taking a chance on it, including Chinese internet company Tencent
Holdings Ltd. and Amazon Inc.'s Alexa Fund. Essential also
disclosed that Best Buy Co. stores and Amazon.com Inc. will be its
retail launch partners in the U.S.
But the company stopped short of the big reveal: When exactly
its $699 titanium-encased smartphone will be available.
"We're a few weeks away," said Niccolo De Masi, Essential's
president, repeating what company founder Andy Rubin said a few
weeks ago. "I will give you an exact date in a week."
Mr. Rubin's company is attempting to challenge Apple and Samsung
with a new phone at roughly the same time as the smartphone
behemoths unroll major releases. Apple in September is expected to
unveil three new phones, instead of the usual two, including a
special 10th-anniversary iPhone with a different display and new
features like wireless charging and facial-recognition technology.
Samsung next month is expected to launch its premium Galaxy Note 8
phone.
Essential has gained attention largely because of the pedigree
of Mr. Rubin, who sold his previous startup, Android, to Google --
now a unit of Alphabet Inc. -- in 2005, and then helped turn its
software into the world's most-used smartphone operating system,
rivaling Apple's iPhone.
Ultimately, Essential is trying to create the same brand
affinity that Apple has created by building a complete
hardware-software ecosystem. The Essential smartphone itself comes
with a special port that the company hopes will attract the
development of a wide range of accessories, to go with its own
360-degree camera. It also plans a device called Home that will
control household smart devices. Mr. De Masi also declined to
provide release-date details for that device.
"In the Western world there is a need for there to be a new
lovemark," Mr. De Masi said, "a brand where there is an emotive
connection for consumers."
Essential isn't targeting mass-market popularity out of the
gate. The initial strategy is to take advantage of the company's
small scale to innovate faster than larger rivals, said Mr. De
Masi, pointing to his phone's titanium-ceramic shell, which he said
wouldn't be possible to manufacture in iPhone-size quantities.
"If we are able to sell low single digit millions [in the first
year] that's very successful for a startup," Mr. De Masi said.
Distribution will be limited at the start. Sprint Corp., the
fourth-largest carrier in the U.S., is the only wireless company
that will stock it in the U.S. Telus Corp. will carry it in Canada.
The phone will also be available unlocked, for use on any carrier
network, at Amazon.com, Best Buy and Essential.com.
Mr. De Masi declined to provide details for those carriers'
offers. He said international carrier relationships would be
announced later this year.
Analysts are skeptical of Essential's chances.
"Having a good product isn't enough in a crowded market" said
analyst Neil Mawston of research firm Strategy Analytics,
emphasizing the importance in the U.S. of distribution via top
carriers AT&T Inc., Verizon Communications Inc. and T-Mobile
US. Inc. "If you don't get buy in from the big three, you're
stopped before you've even started."
Essential was set earlier this year to raise $100 million from
SoftBank Group Corp., which owns Sprint, but the Japanese investor
scrapped the deal partly because of its close relationship with
Apple, The Wall Street Journal previously reported. Apple committed
$1 billion to SoftBank's Vision Fund.
Instead, Essential turned to a number of new investors for the
latest round, including Access Technology Ventures, which led the
investment, Vy Capital and Australia's sovereign-wealth fund.
Mr. De Masi declined to disclose Essential's valuation.
Equidate, a marketplace for private-company shares, estimated
Essential's valuation at $1 billion based on its shares outstanding
and share price. Essential has raised a total of $330 million.
Write to Rolfe Winkler at rolfe.winkler@wsj.com
(END) Dow Jones Newswires
August 09, 2017 14:17 ET (18:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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