LeEco, the Meltdown

On a recent weekday afternoon, a PingWest reporter paid a visit to the Silicon Valley headquarters of LeEco, a Chinese tech company that entered the US just eight months ago. At the launch event in October, billionaire CEO Jia Yueting declared that LeEco was “not a Chinese company, [but] a true global company,” and one that would leapfrog the likes of Apple and Samsung to become a “new category” within the industry. That afternoon, however, the office parking lot was largely empty, and windows around the building were darkened. A look into the ground floor office revealed rows of desks without any people. “Are you here to buy a desk?” asked a young man at the front of the building. “Or a computer? They say the MacBook Pros are really cheap.” The equipment, he explained, was being offered up on Craigslist. 

Though LeEco’s North American operations have not been pronounced dead as yet, the autopsy reports have mostly already been written. The last several months have seen a steady stream of escalating and dire news out of the company, including unpaid bills, reshuffling of its board, and mass layoffs. Former employees and industry observers have had plenty to say about the slow motion implosion, and there many faults to count. But what may have been most damning, and likely most damaging in the long run, were months-long efforts by LeEco to deceive even its own employees.

Though unknown in the US, LeEco has had some credible success in China. Originally founded as a video streaming service under the name LeTV in 2004 by Jia Yueting, an ebullient and charismatic CEO, the company expanded with abandon, and by last year had diversified into phones, TVs, and even smart bikes. It rechristened itself LeEco in allusion to a supposed all-encompassing “ecosystem” of devices and content it was meant to offer. 

But even with such an abundance of ambition, the company’s push to expand overseas was surprisingly aggressive, as it sought to establish operations in both India and the US. The latter was something virtually unprecedented; to date, no other Chinese tech company has attempted to enter the US consumer market so boldly or so forcefully. LeEco, however, seemed determined that it would charge into the US consumer market with an immediate onslaught of products and services.

In October, then, the company launched in the US to much self-produced fanfare in a lavish press event titled “Big Bang” (and replete with smoke machines, no less), while also purchasing a 49 acre, former Yahoo campus as part of its ambitious plans of hiring 12,000 people. 

Little else was heard from the company until the start of this year, when reports began to emerge that LeEco was strapped for cash and even skipping on paychecks. (It did itself no favors by issuing denials, even once the news was confirmed). It was then announced that the company was seeking to offload the Yahoo campus it had only just acquired in the US, as well as a $450 million property in Beijing that it had bought last year. A hoped for acquisition of US entertainment electronics maker Vizio fell through, while Faraday Future, an electric car startup in Nevada backed by Jia, has also stalled out. In May, the news came that Jia would step aside as CEO (though remaining in a reduced role), while the US staff would undergo cuts of nearly 90%, leaving today only a skeleton crew of fewer than 50 people. 

The causes behind all this chaos are many. The company may have suffered from China’s heightened capital controls, preventing it from shifting promised cash out of China to its overseas business, but it is generally agreed even by its own erstwhile employees that LeEco made more than a few avoidable mistakes on its own. It did not take the time to build a reputation with the US public, or even basic recognition; it relied on marketing techniques like flash sales that, while feasible in China, were maladapted for the US market; it went in for bombast and big visions without enough substance to back them up. But as more information has emerged in recent weeks, it seems that shortcomings of strategy, however serious, were not its greatest fault. 

One former employee recounted how, some months ago, as problems brewed within the company, many of the staff began working from home, partly to give themselves time and cover to start looking for other work. When she herself returned to the office herself after some weeks, she found her floor deserted. Not long after, she too left. But “LeEco didn’t just start layoffs recently,” she said, referring to the news that broke in May. In fact, they began almost as soon as the company made its official launch.

Reports have since emerged from former employees that problems had started even before the October “Big Bang” event, which had been delayed at least twice. Layoffs began as early as December, but were kept quiet and gradual so as to avoid drawing media attention. The company put a hiring freeze into effect, yet it continued to bring job candidates in for interviews and even held a recruitment event at UC Berkeley—which it described as “successful” in its own account—seemingly just for show.

Employee reviews of the company on Glassdoor make for grim reading. Though individual reviews cannot be verified, they are in line with the accounts of former employees we spoke with, one after another castigating LeEco’s management for misleading its staff. Many also allege that the company purposefully held on to its social media staff expressly to help combat negative news about the company online, or to post fake reviews on Glassdoor to try to cast it in a positive light. 

Brute tactics were brought into play to cut costs even as the company was cutting workers. Another former employee said that the HR department persuaded some fulltime workers to switch their official status to that of contractors with the enticement of being paid more for overtime, only to then let them go (and thereby avoiding having to pay them the compensation due fulltime employees that are laid off). “It was like a trap,” she said. She summed up the company in a single word: “Liars.”

As our reporter stood outside LeEco’s Silicon Valley office that afternoon, two moving trucks pulled up, there to carry away office furniture and equipment. For the time being, LeEco’s North American office nominally remains open, but with no more than a few dozen official staff. Meanwhile, the company’s trials continue, with Jia more recently being pushed out from his role as director of LeEco’s car subsidiary, and its China-based smartphone division announcing layoffs of half its staff. But even if it should survive, it is unclear what path forward could remain for it outside of China. Funding shortages and failures of strategy can potentially be resolved, but LeEco’s mishandling of both its staff and its public relations seem to have already poisoned its reputation. 

As one former employee advised: “If you see someone from LeEco’s HR in Silicon Valley, run as fast as you can.”