You can thank Travis Kalanick for Baidu Inc.’s strong earnings Friday.
If it weren’t for the chief executive officer of Uber Technologies Inc. being pragmatic about his China business and selling to Didi Chuxing last year, Baidu wouldn’t have been able to swap its shares in Uber China for those of the nation’s dominant ride-hailing provider.
That three-way trade and other income reaped 1.796 billion yuan ($261 million) for the search-engine giant in the fourth quarter and was the primary reason for Baidu beating earnings estimates. The rest of the P&L looks less impressive. Revenue beat by a mere 0.2% and operating profit missed estimates, according to data compiled by Bloomberg.
“The past year was one of contrition and reassessment of Baidu’s business model as regulators and consumers criticized the quality of ads it carries, notably for medical and healthcare services. Chief financial officer Jennifer Li said in Friday’s statement that the worst is behind it:
During the fourth quarter we largely completed our initiative to ensure that new and existing customers meet our stringent quality requirements.”
CEO Robin Li told investors that Baidu is primed to lead artificial intelligence in China after years of investment. Traditional search is the past, and artificial intelligence is the future.
While there’s going to be a transition between the two stages in its history, Baidu’s first-quarter outlook —with sales set to miss estimates—shows that dawn has not yet broken on this new era.
Li and his investors need the future to come more quickly, because there’s a limit to how many times the company can prop up earnings with Uber-sized investment gains. Bloomberg