Baidu boss Robin Li just received a $9 billion warning from investors: stay the course. Shares in China's top search-engine operator crashed nearly a tenth on Friday, following news that Lu Qi was leaving his role as chief operating officer. The Microsoft , Yahoo and IBM alumnus helped Baidu home in on its strengths in search, news feeds and artificial intelligence; the worry is it could again be tempted into costly distractions.
Lu said he would move on in July after just 18 months as COO, because he could no longer live full-time in China for personal and family reasons, although he will remain vice chairman. The resulting sell-off was a striking display of so-called key-man risk, especially since Lu was an outsider and recent hire, rather than one of the founders who form the high priesthood of the tech industry.
The reaction is nevertheless understandable. Alongside Alibaba and Tencent, Baidu has been part of BAT, the dominant Chinese online trio. It had lost its way in recent years, though, becoming mired in a medical scandal and frittering away money on competitive, cash-hungry initiatives like food delivery. With a market value of $88 billion, Baidu is now less than a fifth the size of Alibaba and Tencent, and could soon be overtaken by newer contenders such as Ant Financial.
Although Li has been chairman and chief executive all along, Lu’s tenure coincided with a string of welcome changes. Baidu sold food-delivery unit Waimai; overhauled its reviews and group-buying business, Nuomi; closed the Baidu Doctor app; and floated iQiyi, an unprofitable video-streaming business.
That has helped investors concentrate on prospects in AI, where Baidus coding expertise should be an advantage. It is powering ahead in areas such as self-driving cars and smart home speakers. Lu’s decades in the United States were probably an asset, too, at least when it came to communicating with Western stockholders. Baidu shares increased 58% from Lu’s arrival to Thursdays close, and the proportion of research analysts recommending that investors buy the stock went from 54% to 65%.
The implicit message is that Li will have to reassure the market that Baidu is not going to lose its new-found focus.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
