ALIBABA Group Holding Ltd. is taking a US$590 million stake in an obscure domestic smartphone maker as the e-commerce giant tests ways to expand its mobile operating system in a shrinking, cut-throat handset market.

    Extending a previously muted push into hardware, Alibaba said yesterday it will buy an unspecified minority stake in smartphone maker Meizu Technology Co. Dwarfed by rivals like Xiaomi Inc., privately owned Meizu’s slice of China’s smartphone market is estimated by analysts at below 2 percent.

    The deal, unlike U.S. rival Amazon.com Inc.’s foray into smartphones with its own-brand Fire Phone, is designed to help Alibaba push its mobile operating system within China through Meizu’s handsets. In return, Zhuhai, Guangdong-based Meizu will get access to Alibaba’s e-commerce sales channels and other resources, the companies said in a joint statement.

    For China’s e-commerce king, with a market value of US$213 billion, the US$590 million price tag may be a costly entry fee. Meizu’s reach in China, and likely that of the Alibaba operating system, is severely blunted by domestic leaders Xiaomi, Huawei Technologies Co. and Lenovo Group, as well as multinational giants Apple Inc. and Samsung Electronics Co.

    “You could say they’re spending US$590 million to experiment a bit and see what happens — it’s an expensive experiment, right?” said Michael Clendenin, Managing Director at Shanghai-based RedTech Advisors.

    “My concern is that some Internet players are confusing being able to just spend a couple hundred million dollars to buy a piece of hardware that looks pretty cool but is essentially a copy of what Apple has done and what Xiaomi has done,” he said.

    Together, the leading five brands accounted for nearly 60 percent of China’s smartphone market in the fourth quarter of 2014, said Nicole Peng, a Shanghai-based analyst with data research firm Canalys.

    Meizu has pumped up shipments from a few hundred thousand in previous years to under 2 million in the last three months of 2014, but it still had less than 2 percent of China’s smartphone market share in that quarter, said Peng.(SD-Agencies)