Baidu Considers IPO of Streaming Video Unit iQiyi
February 13 2018 - 6:24PM
Dow Jones News
By Maria Armental
Baidu Inc. is considering listing online-video unit iQiyi in the
U.S. as a separate public company while increasing investment in
its mobile and artificial intelligence.
The investments, coupled with exiting parts of the business no
longer deemed key to its operations, "will sow the seed for Baidu's
future growth in autonomous driving and conversational AI,
particularly in the home environment," Chief Financial Officer
Herman Yu said in a prepared statement.
IQiyi, which in 2016 broke the $1 billion revenue mark and last
year became the only Chinese service to license Netflix Inc. shows,
competes with the likes of Alibaba Group Holding Ltd.'s Youku Tudou
and Tencent Holdings Ltd.'s Tencent Video.
In New York trading, Baidu's American depositary receipts have
outperformed the market, rising 22% over the past 12 months. Its
ADRs rose 4.6% to $235.80 in after-hours trading Tuesday.
As it released fourth-quarter and annual results on Tuesday,
Baidu confirmed it had filed preliminary documents for an initial
public offering in the U.S. If it ultimately goes through with the
IPO, Baidu said it expects to remain iQiyi's controlling
shareholder.
Founded in 2000, Baidu built its business around online search.
But as the core search business reaches maturity, Baidu has moved
to make AI the centerpiece of its business plan.
Baidu has pledged to deliver a self-driving bus by the end of
the year and fully autonomous cars by 2021.
The heavy investment comes with a price tag, however, and
research and development costs reached 3.7 billion yuan ($569
million) in the most recent period, up 25% from the year
earlier.
Meanwhile, content costs reached 3.75 billion yuan ($577
million), up 46% from the year-ago period, with most of that
increase coming from iQiyi as Baidu pushed to stay ahead in China's
fiercely competitive video-streaming sector.
Overall, fourth-quarter profit edged up to 4.16 billion yuan
($639 million), or 12.38 yuan an ADR. Excluding stock-based
compensation and other items, profit rose to 14.90 yuan an ADR from
13.23 yuan a year earlier.
Revenue rose 29% to 23.56 billion yuan ($3.62 billion), beating
internal projections.
Analysts surveyed by Thomson Reuters expected 13.38 yuan an ADR
in adjusted profit and 23.05 billion yuan in revenue.
Revenue from online marketing, which contributes the bulk of
Baidu's top line, rose 26% in the latest period as Baidu reported a
2% increase in the number of active online marketing customers and
continued to squeeze more money from each advertiser.
Meanwhile, Baidu's other service revenue, which is typically
driven by iQiyi subscription services, surged 53% to 3.14 billion
yuan.
For the current quarter, Baidu expects 19.86 billion yuan to
20.97 billion yuan in revenue ($3.05 billion to $3.22 billion),
compared with analysts' estimates of 21.18 billion yuan.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
February 13, 2018 18:09 ET (23:09 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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