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Baidu (BIDU) to Sell its Food Delivery App Waima to Ele.me?
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China's leading internet search company, Baidu, Inc. (BIDU - Free Report) , is reportedly planning to sell its takeout delivery unit, Waimai to Ele.me.
Backed by Alibaba (BABA - Free Report) , Ele.me is a website that offers customer-to-customer meal ordering services. It is also part of China’s online-to-offline (O2O) trend, where consumers use their smartphones to avail offline services such as booking taxi rides and accessing restaurant reviews through apps.
Baidu, Inc. has outperformed the industry on a year-to-date basis. During this period, the company’s shares have increased 35.3%, higher than the industry’s gain of only 17.9%.
Why the Sale?
The company has not been able to make much profit in its takeout delivery business or we can say that it has not been able to compete well in China's fierce O2O market. Its services faced a lot more competition than expected by Baidu. The company has been paying subsidies and has offered many promotions which have been taking a toll on its profits.
The idea behind this sale is to refocus on its business by using its resources on more profitable areas.The search firm has consolidated several business units and is presently focusing on Artificial Intelligence (AI) technology, more specifically in the autonomous vehicle market.
In this regard, Baidu recently announced a deal with NVIDIA Corp. (NVDA - Free Report) , wherein the former will use the latter’s AI technology in three different areas.
This partnership will help Baidu to bring in the best AI technology in its cloud-computing services, self-driving vehicles and AI home assistants.
Competition
The food delivery market in China has been gaining a lot of momentum. Both Alibaba and Tencent Holdings Limited (TCEHY - Free Report) have been pumping in a lot of money in this space.
iResearch estimates that China’s O2O food delivery market will grow at a rate of 30% per year and cross the $32 billion mark by 2017.
The new deal will offer a competitive advantage to Alibaba in China's rapidly increasing e-Commerce arena especially against its rival Tencent. In May, Alibaba invested $1 billion in Ele.me to help it compete against a service called Meituan Dianping, backed by Tencent. Also, Alibaba has invested in a mobile shopping and dining information app Koubei.com, which enables users to book spa treatments and restaurants reservations from their mobile phones.
However, Tencent has also been looking to ramp up investment to develop its O2O retail capability. It has a joint venture with Baidu and Wanda, the country’s biggest property developer, allowing diners to place orders online and pick them up from nearby stores. Only last week, Martin Lau, President of Tencent said that Meituan-Dianping helps Tencent generate a multitude of transactions. "We are able to have direct coverage of most of the restaurants in China".
According to management consulting firm AT Kearney, China's e-Commerce market is projected to grow at an annual rate of 25% over the next few years, from $390 billion in 2014 to $718 billion in 2017.
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
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Image: Bigstock
Baidu (BIDU) to Sell its Food Delivery App Waima to Ele.me?
China's leading internet search company, Baidu, Inc. (BIDU - Free Report) , is reportedly planning to sell its takeout delivery unit, Waimai to Ele.me.
Backed by Alibaba (BABA - Free Report) , Ele.me is a website that offers customer-to-customer meal ordering services. It is also part of China’s online-to-offline (O2O) trend, where consumers use their smartphones to avail offline services such as booking taxi rides and accessing restaurant reviews through apps.
Baidu, Inc. has outperformed the industry on a year-to-date basis. During this period, the company’s shares have increased 35.3%, higher than the industry’s gain of only 17.9%.
Why the Sale?
The company has not been able to make much profit in its takeout delivery business or we can say that it has not been able to compete well in China's fierce O2O market. Its services faced a lot more competition than expected by Baidu. The company has been paying subsidies and has offered many promotions which have been taking a toll on its profits.
The idea behind this sale is to refocus on its business by using its resources on more profitable areas.The search firm has consolidated several business units and is presently focusing on Artificial Intelligence (AI) technology, more specifically in the autonomous vehicle market.
In this regard, Baidu recently announced a deal with NVIDIA Corp. (NVDA - Free Report) , wherein the former will use the latter’s AI technology in three different areas.
This partnership will help Baidu to bring in the best AI technology in its cloud-computing services, self-driving vehicles and AI home assistants.
Competition
The food delivery market in China has been gaining a lot of momentum. Both Alibaba and Tencent Holdings Limited (TCEHY - Free Report) have been pumping in a lot of money in this space.
iResearch estimates that China’s O2O food delivery market will grow at a rate of 30% per year and cross the $32 billion mark by 2017.
The new deal will offer a competitive advantage to Alibaba in China's rapidly increasing e-Commerce arena especially against its rival Tencent. In May, Alibaba invested $1 billion in Ele.me to help it compete against a service called Meituan Dianping, backed by Tencent. Also, Alibaba has invested in a mobile shopping and dining information app Koubei.com, which enables users to book spa treatments and restaurants reservations from their mobile phones.
However, Tencent has also been looking to ramp up investment to develop its O2O retail capability. It has a joint venture with Baidu and Wanda, the country’s biggest property developer, allowing diners to place orders online and pick them up from nearby stores. Only last week, Martin Lau, President of Tencent said that Meituan-Dianping helps Tencent generate a multitude of transactions. "We are able to have direct coverage of most of the restaurants in China".
According to management consulting firm AT Kearney, China's e-Commerce market is projected to grow at an annual rate of 25% over the next few years, from $390 billion in 2014 to $718 billion in 2017.
Baidu, Inc. Price and Consensus
Baidu, Inc. Price and Consensus | Baidu, Inc. Quote
Currently, Baidu holds a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
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