This report is the fourth in the author's Webscale Playbook series, which analyze the “Super 8” Webscale network operators (WNOs), i.e. Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent.
The objective of this report is to assess Baidu's:
- Latest quarterly key performance indicators including revenues, capex, opex, R&D, etc.
- Top 3 spending-related (capex and R&D) priorities
- Network vendor relationships, M&A, and partnerships across different network product categories
- Network-related strategy
- Disruptive impact on the network infrastructure market.
Baidu, often referred to as “China’s Google”, is embarking on a new journey to pursue growth outside its core search and advertising business. That’s vital as the online advertising business is maturing, yet Baidu continues to rely heavily on it (80% of 2017 revenues). Adding to the woes is the increased rivalry from local peers, Alibaba and Tencent, in the core advertising and online content segments, tied with macro-economic risks arising from rigid ad-related policies/regulations and US-China trade war. These factors have thumped Baidu’s 4Q18 topline guidance.
Fortunately, Baidu realizes its position, and is already channeling greater focus on newer sustainable markets that include AI (DuerOS-powered smart devices, smart cities, blockchain) and autonomous vehicles (“Apollo” program, driverless vehicles). The company is also on a non-core divestiture spree aimed at freeing up money and resources for these newer markets. As Baidu builds its portfolio of new markets, the company’s R&D outlays have held steady at around 15% of revenues since 2015.
Below are a few highlights from the report:
- Baidu has been spending more on R&D than capex, as it ramps up its pursuits in AI and connected cars. Capex spend, currently 7% of revenues, is likely to remain well below 10% as Baidu prioritizes research activities and relies on partners for much of its cloud infra
- Baidu’s open-source platform for autonomous vehicles, Apollo, is key to its long-term success as it builds out an extensive web of partners for the platform; that includes more than 100 auto and tech firms, such as Ford, Microsoft, NVIDIA, Intel, and Bosch.
- Baidu is also developing its own AI chip (Kunlun) and building cloud capabilities to support its AI-driven businesses, particularly autonomous vehicles
Format: PDF (PPT available upon request)
2. Revenue analysis
3. Capex & R&D: Spend analysis
4. Baidu's project “Apollo”
5. Baidu's funding in AV startups
6. Other key spending avenues
7. Key technology relationships
8. Baidu's network strategy
9. Appendix 1
10. Appendix 2
List of Exhibits
- Baidu Revenues: 2Q17-3Q18
- YoY Growth Rate (CAPEX vs OPEX): 2Q17-3Q18
- Profitability Margins: 2Q17-3Q18
- Revenues (Annualized & Single Quarter), & YoY Growth
- FY2017 Revenue Split (author estimates*)
- Annualized Capex and R&D, % Revenues
- Baidu’s annualized share of WNO network & IT capex
- Du Xiaoman Financial
- Velodyne LiDAR
- Hesai Tech
- China Telecom