Baidu Bounces Back as Ad Revenue Rebounds -- 2nd Update
February 14 2018 - 01:14AM
Dow Jones News
By Alyssa Abkowitz in Beijing and Maria Armental in New York
Chinese search giant Baidu Inc. is clawing its way back from a
challenging year on the strength of advertising and its move to
pare down its noncore businesses.
The Beijing-based company on Tuesday reported revenue of 23.6
billion yuan ($3.7 billion) for the three months ended Dec. 31, up
29% from the year-earlier period. Net income rose to 4.2 billion
yuan, up 1% year over year.
Sales and profit both topped expectations, sending Baidu's
American depositary receipts up 5% to $237.03 in after-hours New
York trading.
Analysts said the strong results showed Baidu's progress on two
fronts--providing a steady stream of revenue while it transitions
to new businesses such as self-driving cars, and moving past a 2016
medical-advertising scandal that forced it to curtail advertising
for health care.
The company also sold its cash-burning food-delivery business in
August, which helped lower marketing expenses during the fourth
quarter.
Baidu derives most of its sales from its search-related
advertising, and the company is also seeing growth in revenue for
its customized Newsfeed, which provides video and news clips. Chief
Financial Officer Herman Yu said on an earnings conference call
that Newsfeed revenue has been growing about 20%, and should
continue that pace this year.
Newsfeed launched in 2016 and goes up against better-established
competitors, including Tencent Holding Ltd.'s Tencent News and
newsfeed app Jinri Toutiao.
"It looks like Baidu is becoming quite successful as a late
entrant into the business," said Raymond Feng, an analyst at
Pacific Epoch consultancy firm. "Toutiao used to be very
significant, but it appears Baidu's large platform and big traffic
have attracted advertisers to really think about this
platform."
Baidu also announced that it has filed preliminary paperwork for
its iQiyi video-streaming service to debut on a U.S. stock
exchange, which would help the unit raise money as it pushes to
stay ahead in the fiercely competitive sector.
The company said its content costs overall rose 46% in the
quarter from a year ago, to 3.75 billion yuan, with most of that
increase coming from iQiyi. Baidu said it expects to remain the
controlling shareholder after the IPO.
The long-awaited announcement follows iQiyi's $1.53 billion
fundraising last year, which included a $300 million investment
from Baidu. The investment came months after investors balked at a
$2.3 billion buyout bid from a group led by Chief Executive Robin
Li, saying the proposal undervalued the unit.
While Baidu is still dependent on search-related advertising,
like Alphabet Inc.'s Google, the company is betting its long-term
future on businesses powered by artificial intelligence, including
self-driving cars, home speakers, TVs and storytelling toys.
Baidu said it would commercialize autonomous driving by selling
services, beginning with high-definition mapping. The company also
plans to sell autonomous-driving computing units that can be
plugged into cars to run its software, analysts said. Baidu has
pledged to deliver a self-driving bus by the end of the year and
fully autonomous cars by 2021.
For the current quarter, Baidu expects 19.86 billion yuan to
20.97 billion yuan in revenue, compared with analysts' estimates of
21.18 billion yuan.
Write to Alyssa Abkowitz at alyssa.abkowitz@wsj.com and Maria
Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
February 14, 2018 01:59 ET (06:59 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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