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Monday, 21 May 2018 | MYT 1:26 PM

Baidu star’s shock exit casts AI-first ambitions in doubt

The departure of Baidu Inc’s most senior operational executive threatens to derail the Chinese search giant’s ambition of placing artificial intelligence at the heart of its business. 

On May 18, the company stunned investors with the revelation that Microsoft Corp veteran Qi Lu – 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% 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 in early 2017, a signature hire for a company then struggling to recover from a major healthcare ad 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 and the Netflix-like iQiyi Inc, greatly expanded its Apollo self-driving car platform and even ushered in crowd-pleasing gadgets such as Baidu’s answer to Amazon’s Alexa. His unexpected departure, just a year after losing widely respected chief scientist Andrew Ng to Silicon Valley, now casts doubt over its ability to attract the high-wattage talent it needs to compete. 

“While we are encouraged more than before by Baidu’s refocus on core business, latest loss of its top AI executive may add higher uncertainty to AI monetization visibility,” Jefferies analysts led by Karen Chan wrote in a note Monday. 

Baidu said it appointed Wang Haifeng senior vice-president and the new general manager of the company’s AI Group. President Zhang Yaqin will now also take on more responsibilities, including for the Apollo driverless car program. 

But Lu’s absence may be keenly felt. Since his appointment was announced in January 2017, the company’s shares have jumped more than 50% while revenue and net income have both gained. 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 Friday. 

Baidu, the smallest of a Chinese “BAT” triumvirate that includes Tencent Holdings Ltd and Alibaba Group Holding Ltd, is coming off a difficult 2017 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 via 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 officer Robin Li said Friday 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 a vice chairman. 

“Baidu is likely to see its core online marketing business strengthen this year as it regains customers lost amid its health-care ad scandal in 2016,” Vey-Sern Ling and Kai Tung Pang, analysts for Bloomberg Intelligence, wrote in a note calling Lu’s departure a “bump” in its AI transformation. 

“Margins should improve as Baidu sheds tangential businesses and focuses investment on AI projects that complement its core products.” — Bloomberg