The departure of Baidu Inc’s (百度) most senior operational executive threatens to derail the Chinese Internet search giant’s ambition of placing artificial intelligence (AI) at the heart of its business.
On Friday last week, the company stunned investors with the revelation that Microsoft Corp veteran Lu Qi (陸奇) — hired just over a year ago to accelerate its drive into everything from autonomous cars to digital assistants — was stepping down because he could no longer work full-time in China for personal reasons.
His departure triggered a 9.5 percent plummet in Baidu’s share price, the biggest fall in almost three years, on fears its revival had been cut short.
Credit Suisse Group AG became among the first to raise a warning flag when it downgraded the stock.
Lu arrived early last year, a signature hire for a company then struggling to recover from a major healthcare advertising scandal that provoked a government crackdown.
To get the company back on track and focused on core technology, he presided over the sale or spin-off of cash-burning businesses such as food delivery unit Waimai (外賣) and the Netflix-like iQiyi Inc (愛奇藝), greatly expanded its Apollo self-driving car platform and even ushered in crowd-pleasing gadgets such as Baidu’s answer to Amazon.com Inc’s Alexa.
His unexpected departure, just a year after losing widely respected chief scientist Andrew Ng (吳恩達) to Silicon Valley, now casts doubt over the company’s ability to attract the high-wattage talent it needs to compete.
“While we are encouraged more than before by Baidu’s refocus on [its] core business, [the] latest loss of its top AI executive may add higher uncertainty to AI monetization visibility,” Jefferies Group LLC analysts led by Karen Chan wrote in a note yesterday.
Baidu said it had appointed Wang Haifeng (王海峰) as senior vice president and the new general manager of the company’s AI Group.
Baidu president Zhang Yaqin (張亞勤) is also to take on more responsibilities, including for the Apollo driverless car program, but Lu’s absence could be keenly felt.
Since his appointment was announced in January last year, the company’s share price has risen more than 50 percent, while revenue and net income have both increased.
In downgrading the stock, Credit Suisse analyst Thomas Chong wrote that Lu was “instrumental” to Baidu’s AI transition.
That strategy remained unchanged, but “visibility is needed about the execution of new initiatives post-new appointments,” Chong wrote on Friday last week.
Baidu, the smallest of the Chinese “BAT” triumvirate that also includes Tencent Holdings Ltd (騰訊) and Alibaba Group Holding Ltd (阿里巴巴), is coming off a difficult year after government regulations wiped out a chunk of its advertising revenue.
Analysts and investors have cited Lu as a key reason behind the company’s revival in areas such as newsfeed advertising.
Wang, Baidu’s new AI overseer, joined the company in 2010 and oversaw its core search products.
Baidu founder and chief executive Robin Li (李彥宏) on Friday last week said that Lu had laid the foundation for future growth.
The departing executive said he intended to work in research and investment after leaving Baidu, while staying on as vice chairman.
“Baidu is likely to see its core online marketing business strengthen this year as it regains customers lost amid its healthcare ad scandal in 2016,” Bloomberg Intelligence analysts Ling Vey-sern (凌煒森) and Kai Tung Pang wrote in a note that called Lu’s departure a “bump” in the firm’s AI transformation. “Margins should improve as Baidu sheds tangential businesses and focuses investment on AI projects that complement its core products.”
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