JD.com To Spin Off Cloud, AI Segment, Focus On Core Retail Business

Chinese online retailer JD.Com Inc JD, which recently spun off its health unit through a $3.5-billion IPO in Hong Kong, confirmed Wednesday that it plans to splinter its technology unit.

What Happened: Nasdaq-listed JD.com's board has authorized the company to explore the feasibility and terms of a potential spin-off of its cloud and AI business into a entity named Jingdong Digits Technology Holding, the company revealed in a filing with the SEC.

JD.com would own a significant minority stake in exchange for certain equity interest in JD Digits.

The planned separation, according to the company, will position JD Digits to deliver "a suite of cutting-edge technology services to its business partners."

At the same time, it will allow JD.com to focus more on its core competencies and synergistic businesses to better serve customers.

JD.com also said Zhenhui Wang has resigned as CEO of JD Logistics. Wang has been replaced by Rui Yu, former chief human resources officer of JD.com. Incidentally, JD.com is also looking to spin-off its logistics business.

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Why It's Important: JD.com's e-commerce business is growing at a fast rate, outpacing the growth of Amazon.com, Inc. AMZN in China.

In the recently reported third quarter, retail revenues, accounting for about 94% of JD.com's total revenue, climbed 27% year-over-year. The potential spin-off of non-core businesses would only help bolster its retail business further.

What's Next: The JD.com board's independent audit committee will work with third-party professional advisors to evaluate the terms, the filing said. 

The transaction is subject to approval by the audit committee as well as the board, and is also contingent on securing any regulatory and other approval. 

JD Price Action: JD.com shares were trading 1.72% higher at $87.62 at last check Wednesday. 

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