Who would pay $1 billion for a company with no value? Discount Chinese electronics specialist Xiaomi is reportedly mulling an offer to buy action-camera maker GoPro (GPRO -4.49%), a business that could fetch that fantastic sum, but one that drone maker DJI also supposedly thought about acquiring but decided not to, because it "saw no value."

According to The Information, Xiaomi is seriously considering a bid, and if you value it the same way Hewlett-Packard did when it bought struggling Palm nearly a decade ago the camera company could fetch as much as $1 billion. That might seem like a lot, but it's also a long way down from GoPro's more than $10 billion valuation at its height.

Snowboarder wearing a GoPro camera

Image source: GoPro.

What has brought GoPro so low is that it primarily builds good cameras that don't need to be upgraded very often, but the cameras also compete against cheaper rivals, like those from Yi Technology, which happens to be a Xiaomi partner.

Yi Technology claimed it was the first company to make a 4K camera that shot 60 frames per second in 2017, and it has released several action cameras since that seriously challenge GoPro's various Hero models. In addition to being technologically comparable, they have the added benefit of being lower priced, too.

An investment in the future

While $1 billion might sound like a lot for a company that appears to be on its way down, there are benefits Xiaomi could derive that would make the price worthwhile.

Xiaomi is expected to go public later this year, and analysts have suggested it could end up being valued at around $100 billion. If the IPO went off as expected, it could become the biggest tech offering of the year, and having the GoPro nameplate would help burnish Xiaomi's identity with investors. It would also help introduce the company and its products to U.S. consumers.

Xiaomi is a tech giant, but it's primarily limited to China. It produces laptops, smartphones, mobile apps, electronics, and low-cost fitness bands that give Fitbit a headache at the low end of the market.

The biggest hurdle might be regulators who would look askance at a Chinese company buying the U.S. camera maker during a period of heightened trade tensions. 

Then again, maybe not

While GoPro is the top name in the industry, it also comes with a lot of baggage in that it has little to offer other than its cameras. While their rugged build makes them popular, sales have been slack because they don't deliver much in the way of innovation, with even the newest models simply a variation on a theme.

GoPro's latest discount cameras are essentially the same as its high-priced ones, minus a few high-end features. Also, GoPro's attempts to diversify beyond cameras, such as getting into the drone market, haven't fared well. That may have been enough to lure DJI into sniffing around the edges, but what it likely ultimately saw was simply a camera company and dropping a billion dollars for it in hopes it could one day come out with something new probably wasn't all that appealing.

That may hold Xiaomi back as well. The Information reported that Xiaomi worries about overpaying for the company, and it's possible that if it bides its time it may be able to acquire GoPro for a much cheaper price.

GoPro CEO Nick Woodman has said he prefers GoPro to remain independent, but that if an offer came along he wouldn't turn his nose up at it. A billion dollars at this juncture would probably make Xiaomi a hero, indeed, particularly as the action-camera maker looks like it has few avenues to turn itself around. A buyout may be its best option, but the question is whether Xiaomi sees any value in the business.