Earnings reports


Baidu, China’s Google, looks at fresh investments after solid results

PUBLISHED : Friday, 30 October, 2015, 5:13pm
UPDATED : Friday, 30 October, 2015, 7:48pm

Chinese online search giant Baidu, which posted better-than-expected earnings in the third quarter, plans to ramp up investments in online-to-offline (O2O) transaction services, while bolstering its stock price through a new US$2 billion share repurchase programme.

“Our core search business remains very robust and continues to provide a solid, profitable base of operation that enables us to move decisively and aggressively to capture the enormous opportunity in local and transaction services,” Baidu chairman and chief executive Robin Li Yanhong said in a conference call with analysts.

Nasdaq-listed Baidu reported a 36 per cent increase in total revenue to 18.38 billion yuan (HK$22.37 billion), which matched the company’s estimates. That turnover was up from 13.52 billion yuan in the same period last year, primarily due to higher mobile search advertising spending and O2O transaction income.

Mobile revenue accounted for 54 per cent of its total turnover last quarter, compared to 37 per cent a year ago.

The so-called gross merchandise value for Baidu’s O2O transaction services, which include Nuomi group-buying and Waimai food-delivery platforms, jumped 119 per cent year on year to 60.2 billion yuan.

“The momentum in transaction services gives us the confidence to continue investing,” said Jennifer Li, Baidu’s chief financial officer.

Third-quarter net profit, however, decreased 27 per cent to 2.84 billion yuan, down from 3.88 billion yuan a year earlier, due to greater selling, general and administrative expenses, research and development spending, and content costs for online video service Iqiyi.

Baidu estimated its fourth-quarter revenue to range from 18.2 billion yuan to 18.75 billion yuan, representing a 29.5 to 33.4 per cent year-on-year increase.

The company said it will cease to consolidate the financial results of loss-making online travel service Qunar after October 26. That stems from last Monday’s blockbuster share swap, in which Baidu exchanged the shares it owns in Qunar for 25 per cent of the larger online travel company Ctrip.com International.

“We view the results and core guidance as better than expected,” Alicia Yap, head of China internet research at Barclays, said in a report yesterday.

Yap also pointed out that Baidu’s investments in O2O services, as well as in Iqiyi and online travel services, were “necessary to provide a comprehensive local search function” to ensure that the company “stays as relevant as possible in the dynamic mobile internet environment”.

Monthly active users on Baidu’s mobile search service grew 26 per cent year on year to 643 million as of September 30. That broad consumer base helped Baidu engage 623,000 active online marketing customers as of last quarter, representing a 20.7 per cent year-on-year increase.

Baidu said on Friday that its board of directors authorised a new share repurchase programme of up to US$2 billion over the next 24 months. That would follow the company’s recently completed share buyback worth about US$1 billion it announced in July.

Baidu’s share price rose up to 6.81 per cent to US$180.50 in after-hours US trading. The stock has declined about 26 per cent this year.