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Why Baidu Is Spinning Off Another Division

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Baidu is spinning off its Global DU business

Chinese Internet giant Baidu (BIDU) is spinning off another division. Earlier this year, it spun off its financial services business and iQiyi, its video streaming division, which went public.

Now the search giant is spinning off its Global DU unit, which includes its mobile ad business and utility apps. Baidu plans to sell a majority of its stake in the unit and will maintain 34% stake in the business, which will then raise additional capital to expand.

The company is increasing its focus on its fast-growing AI unit on which it has already spent a lot of money. Baidu has AI labs in Silicon Valley and Seattle.

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Baidu is doing well, and the sell-off seems to be overdone

Baidu stock has plunged 15.5% since May 16 after its COO Qi Lu, a highly-rated AI specialist, stepped down. The stock has been range-bound for the last nine months.

The recent plunge does seem to be overdone if it is solely on the basis of Lu stepping down. As the graph shows, the company is doing well and expects its revenue to rise 26%–33%. Right before the sell-off, the stock reached its all-time high since the markets were pleased that the company is sharpening its focus.

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