Baidu posts loss amid slowdown in China

Bloomberg

Sat, May 18, 2019 - Page 10

Baidu Inc (百度) posted a loss for the first time since going public in 2005 as China’s biggest online search engine struggles with a changing local market and slowing economy.

The net loss was 327 million yuan (US$47.3 million) for the three months that ended in March, compared with the 187.5 million yuan loss expected by analysts.

The Beijing-based company also forecast sales below estimates and said that Xiang Hailong (向海龍), the 14-year veteran who ran the search business, has resigned.

Baidu’s American depository receipts fell more than 7 percent in extended trading.

The search giant is fighting on a number of fronts as the slowing Chinese economy dampens advertising sales and its desktop search business loses users to smartphones.

While it is sinking billions into new technologies from artificial intelligence to self-driving cars, Baidu’s more urgent need is to attract younger users to its apps to keep ad revenue growing.

Rivals such as Bytedance Ltd (字節跳動) are already winning over advertisers in products from news feeds to short video apps.

“It seems like Baidu is facing multiple headwinds in addition to macro weakness,” Citigroup Inc analyst Alicia Yap said in a report after the results.

Revenue rose 15 percent to 24.1 billion yuan, slightly below estimates for 24.3 billion yuan.

The company said that revenue this quarter would be 25.1 billion yuan to 26.6 billion yuan, as much as 14 percent below analyst projections.

Baidu’s American depositary receipt closed at US$153.7 in New York before the results. The board authorized a new US$1 billion stock buyback program.

Baidu’s loss was fueled by escalating costs in content and marketing.

The company partnered with China Central Television to promote its digital wallet during the Lunar New Year and might have spent as much as 1.9 billion yuan on the “red envelope” giveaway, Bloomberg Intelligence analyst Ling Vey-sern said.

“Baidu’s value as the starting point of info search is being challenged as contents become even more segregated and with fiercer competition,” China Renaissance analysts led by Ella Ji wrote in a research note before the results. “Lack of product differentiation leads to low-efficient users-acquisition spending, putting more pressure on its operating margin.”