Female clerk mans Z-Obee's exclusive new sales outlet in Shenzhen featuring its VIM line of handsets. Photo by Andrew van Buren

CELL PHONE DESIGNER and manufacturer Z-Obee Holdings Ltd (SGX: ZOBE) is putting its money where its mouth is with its first exclusive franchised store, located along Shenzhen’s Electric Avenue. 

The Singapore-listed firm, which saw a difficult year-to-March performance on a slowing global economy, did have some good news recently for investors as its FY2009 net cash position swelled to 34.5 mln usd, or 0.07 usd per share. 

Z-Obee, which markets its handsets under the VIM label, on Monday (June 8) said it had further thrown its lot into the handset business by inking a milestone agreement with Tencent Holding’s popular networking service QQ.

Z-Obee (SGX: ZOBE), whose production and R&D facilities are also based in the southern Chinese industrial city, is a full-set solutions house that provides complete design services spanning the entire handset design cycle. 

It made a strategic choice in opening its first exclusive retail sales venue near its manufacturing base, and within Shenzhen’s most sought-after IT and electronics real estate.

Midweek buyers at Z-Obee's first point-of-sale on Shenzhen. Photo by Andrew van Buren
NextInsight had no trouble finding Shenzhen’s equivalent of Tokyo’s Akihabara district or Hong Kong’s Nathan Road, with the taxi driver needing no more than the words Hua Qiang Bei (华强北 short for “Strong China North Road”) to know I was headed for the domain of gizmos and gadgetry. 

Z-Obee’s product display is located in the collection of shopping centers known as CyberMart Digital Market (赛博数码广场), which is directly adjacent to the sprawling Shenzhen SEG Plaza (赛格广场). 

I asked a female clerk manning the Z-Obee display how business was for the newly opened VIM stand. 

“We sell well because VIMs look great. Women seem to like the colors a lot too,” she said. She added that some of the Z-Obee handset models “specifically target” females. 

“Most of our customers are female. The red handsets are particularly popular with women, they’re very attractive, and very easy to use.” 

She added that she didn’t know of any direct competitors who were doing this in a major way. She said the display at CyberMart was the only exclusive dealer of VIM phones, but expected more venue options going forward. 

“They will be available at the neighboring Shenzhen SEG Plaza later,” she said. 

She said that while none of the VIM models at the display were 3G-enabled: “They will be in the future.” Z-Obee’s VIM line of cellphones is not yet a major advertiser, but she said the company has been on the receiving end of some good publicity from the Singapore press given its relative newcomer status. 

In December 2008, the group started to sell its proprietary handsets under the brandname VIM. 

“We don’t advertise yet, but there have been numerous positive reports about us in the Singapore media.” 
A set of phones for lovers. For the girl, it's light silver with 3 choices of colour gemstone (red, blue green).

She said VIMs were not trying to compete head on with the big boys like Nokia and Motorola at this point.

 “Of course we’re not directly trying to go after the big names for now, but we definitely hold our own and then some against the smaller players. But we may compete directly with the established players sooner than many think.”  

Z-Obee confident timing of new tieup ‘right on QQ’ 

Z-Obee is well aware that in the highly cut-throat handset industry, any possible strategic advantage gained over the competition is not to be trifled with. 

That forward-thinking mindset for management led to their signing yesterday of a milestone agreement with Hong Kong-listed Tencent Holdings. Under this strategic partnership, Z-Obee will equip its VIM series phones with Tencent QQ communication software packs -- the widest used Internet instant messaging (IM) tool in China. 

Both parties are expected to benefit significantly in terms of target user groups, sales channels and resources. 

“QQ is China’s version of Microsoft MSN Messenger. With Tencent’s added mobile QQ communication features complimenting VIM series phone’s existing features, it is clear why it is ideally suited to our brand promise of VIM: versatility, innovation and multiculturalism,” said Mr Wang Shih Zen, Chairman and CEO of Z-Obee Holdings.  

Underlying industry indicators remain positive 

Z-Obee had a rough FY2009 (year-to-March 2009). 

Revenue decreased by 13.4% year-on-year to 103.6 mln usd mainly due to the continuous drop in demand arising from the slackening consumer market in the PRC when the global financial crisis broke out in 2007, which has prolonged and far-reaching effect on all industry sectors. 

Gross profit was also lower in FY2009 at 8.5 mln usd due in part to special discounts granted to certain customers; and a less confident consumer which led to the lower gross margins for mobile handset products and related services such as solution and assembly. 

On a positive note, the Group’s net cash generated from operating activities remained strong at 4.1 mln usd in FY2009, reversing the cash outflow of 606,644 in FY2008.

This further strengthens the Group’s balance sheet as total cash balance increased from 23.4 mln usd as at 31 March 2008 to 34.5 mln as at 31 March 2009.

Chic packaging for the headphone.
The company said it is confident that “the underlying industry indicators remain positive and will continue to pursue business opportunities cautiously and progressively, and we will expand our product mix to include 3G and CDMA handsets.” 

“Although the global business environment remains vulnerable and uncertain, the underlying industry indicators are pointing towards a positive trend. Statistics from Research and Markets show that the number of mobile subscribers in China to increase to 738 million in 2010. Notwithstanding the short-term revenue contraction and margin erosion, we will continue to expand our business cautiously and progressively. 

“This will include the enhancing of our flagship VIM brand through the raising of awareness though various channels and continued extension of the VIM distribution network in PRC, HK and other Asian countries; expanding product mix to include 3G and CDMA handsets to gain higher market share,” Mr. Wang, CEO, added. 

Following the successful launch of its proprietary VIM phone E818 last December, Z-Obee has launched another two new models of mobile phones – D52 and M520. 

The D52 boasts Z-Obee’s in-house developed Draw-it function. 

Draw-it is an exclusively patented function comprising 13 different built-in drawing tools and a variety of 256 colors giving one the flexibility and ease to visualize one’s imaginations. Moreover, users can save them as a digital file and share with anyone via MMS or Bluetooth.


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