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Rumor: New Oriental Spins Off Online Education Business

Lieyunwang.com, 2/17/14

Sun Chang, CEO of Chinese education services provider New Oriental's (NYSE: EDU) online education unit, has announced in a leaked internal email that New Oriental has successfully spun off its online education business.

New Oriental's online education subsidiary, Beijing New Oriental Xuncheng, is primarily involved in the PC, mobile, and smart TV education sectors. Revenue from the online education segment makes up a relatively small proportion of New Oriental's total revenue at present.

According to Sun's email, the company plans to increase investment in the online education segment in the coming years. Specifically, the company's development in the online education sector will come in three forms: 1) Forging alliances with particularly well positioned online education firms; 2) Supporting internal innovation projects and establishing an overseas branch in Hong Kong or another location; 3) Upgrading and improving its existing online education products.

In 2014, New Oriental plans to release an online education app targeting the adult education market, and also will also divide its mobile education products by age segment. At present, New Oriental has released a series of mobile and web-based education products targeting children aged 2-8, the company's so-called "Donut" ("Duona") series of products.

The company's strategy calls for live broadcast platforms to become a more important product line for New Oriental, and following several months of testing, New Oriental now plans to release an online voice-chat-based open education platform by the end of the month, similar to online education products seen from internet company YY (Nasdaq: YY). The platform will look to attract independent teachers to hold lessons on the site, offering a large revenue sharing incentive to participating teachers. During its initial rollout, the platform will only be open to New Oriental teachers, but will be later opened to third-party teachers.

According to an industry source, New Oriental Executive President Chen Xiangdong recently left his role at the company to join YY, taking charge of the company's online education segment.

Sun has revealed that Beijing New Oriental Xuncheng will be given flexibility in its incentive strategies, including possible stock options for employees.

Keywords: Sun Chang Internet New Oriental online education mobile education EDU Chen Xiangdong spin-off

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