Baidu has confirmed it’s getting ready to record its video streaming unit within the US, because the Chinese language group continues to pivot away from its core search engine enterprise towards rising applied sciences akin to synthetic intelligence and autonomous driving.
The Nasdaq-listed firm mentioned on Tuesday that it filed paperwork with the US Securities and Alternate Fee for an preliminary public providing of iQiyi. Baidu mentioned it anticipated to stay iQiyi’s controlling shareholder following any itemizing of the enterprise, which Jefferies analysts valued at $15bn in a current be aware.
Subscription charges from the video streaming service, which has been likened to Netflix, have been the important thing driver behind Baidu’s sturdy income development in 2017, which marked a turnround from a disappointing efficiency the yr earlier than.
The corporate on Tuesday reported working revenue of Rmb4.8bn ($734m) within the quarter that led to December, a rise of 118 per cent from the identical interval a yr earlier.
Complete income within the fourth quarter rose to Rmb23.6bn, a 29 per cent enhance from the identical interval the yr earlier than and beating forecasts of Rmb23.05bn. Full-year income reached Rmb84.8bn, a soar of 20 per cent.
Shares in Baidu have been up greater than 5 per cent in after-hours buying and selling.
Based in 2000, the search engine firm was initially closely reliant on internet marketing, however that mannequin proved inadequate to permit Baidu to maintain up with cash-flush rivals Alibaba and Tencent.
To beef up iQiyi towards in style video streaming platforms run by rivals Alibaba and Tencent, Baidu has spent greater than $2bn buying content material. That represents a rise from 11.1 per cent of complete prices in 2016 to 15.eight per cent final yr. A licensing deal between Netflix and iQiyi final yr additional boosted iQiyi’s portfolio of international language hits.
Itemizing iQiyi within the US would increase money to fund the video unit and preserve it forward of Tencent Video and Youku Tudou, Alibaba’s YouTube-style video website.
iQiyi “seems to be good on the skin but it surely burns lots of money. Netflix is identical,” mentioned a Hong Kong-based banker who advises tech corporations.
Baidu chief govt Robin Li tried to purchase a majority stake in iQiyi in 2016 at a valuation of $2.8bn, however was rebuffed by shareholders who felt the supply undervalued the streaming service.
Baidu additionally has positioned heavy bets on synthetic intelligence. As a part of efforts to diversify its income streams it spent $1.99bn on analysis and growth final yr, up 27 per cent from 2016, to construct new merchandise together with its Apollo autonomous driving system, an open-source software program platform, and AI-powered house gadgets.
The corporate projected income of Rmb19.86bn to Rmb20.97bn for the present quarter, in contrast with analysts’ estimates of Rmb21.18bn. It mentioned it anticipated year-on-year development to be flattered by low earnings within the first quarter of 2017 as Baidu weeded out a lot of its smaller advertisers.
Baidu’s first-quarter steering was decrease than the consensus estimate due to new income accounting requirements adopted January 1 of this yr, in accordance with an organization spokesperson.
Extra reporting by Louise Lucas in Hong Kong