JD.com invests US$168 million in Hong Kong-listed cloud computing firm Kingdee
Kingdee International Software Group is looking to bolster its enterprise cloud-computing services business after JD.com, China's largest online direct sales company, agreed to buy a 10 per cent stake in the company for HK$1.3 billion (US$168 million).
Shares of Hong Kong-listed Kingdee rose to HK$5.96 in early trading after the deal with JD.com was announced in a regulatory filing on Monday morning. It was the highest price reached by Kingdee since the stock hit HK$6.10 during its first day of trading on December 31, 2007.
Analysts at CCB International Securities said in a report that Shenzhen-based Kingdee's cloud business has been the growth engine for the Chinese business-management software provider since last year.
Kingdee's cloud revenue is estimated to grow to 594 million yuan by 2017, up from 106 million yuan last year.
"We acknowledge this may be too conservative as we have not taken into account the potential impact of Kingdee's recently announced partnerships," CCB analysts Eric Qiu and Ronnie Ho said in the report.
Under their deal, JD.com and Kingdee will collaborate on providing small-and medium-sized companies with so-called enterprise resource planning (ERP) software through a cloud service.
Cloud computing allows consumers and companies to buy, lease, sell or distribute software and other digital resources as a service over the internet, just like electricity from a power grid. These resources are hosted in data centres.
Last month, Kingdee announced that it signed a global strategic agreement with Amazon Web Services to make its ERP software available on the US company's cloud platform.
Kingdee already works closely with e-commerce kingpin Alibaba Group, internet giant Tencent Holdings and Chinese online search titan Baidu in cloud-based ERP and mobile office services to a vast pool of Chinese users, according to CCB. Kingdee had about three million corporate customers at the end of last year.
"Collaboration with JD.com will further allow Kingdee to take our enterprise solutions to the next level by integrating JD.com's e-commerce and logistics vertical solutions," Kingdee chairman and chief executive Xu Shaochun said in a statement after Monday's announcement.
Xu said the strategic partnership with JD.com will position Kingdee to lead the cloud-based ERP services market in China "for years to come".
Richard Liu Qiangdong, the founder and chief executive at JD.com, said the integration of his company's "best-in-class e-commerce and logistics systems with Kingdee's leading ERP solutions" would meet "the growing demand in China's enterprise solutions market".
Kingdee had around three million corporate customers at the end of last year.
Ricky Lai, an analyst at Guotai Junan International, said Kingdee will likely explore strategic alliances with other internet companies to further expand its cloud business.
Kingdee also provides mobile office cloud, accounting cloud software through youshang.com, and express data cloud for parcel searches under the Kuaidi 100 brand.