Baidu posts first loss since going public as China slowdown hits business
Baidu, China’s most popular search engine, often called the Chinese Google, posted its first loss since 2005 last week. The company said that rising costs and slowing sales were to blame, but CEO Robin Li nonetheless praised the company’s “solid” revenues, as well as governmental efforts to bolster a less-than stellar macro-environment for businesses.
Baidu’s share price dropped on the news that earnings failed to live up to expectations
Source: Yahoo Finance
Revenues were a strong point, growing by 15% year on year to 24.1 billion yuan. However, the company’s net loss came in worse than expected. Despite never having made a loss in its history as a publicly owned company, analysts were expecting to see one in the last quarter. Consensus estimates were for a loss of around 187.5 million yuan – the final figure Baidu reported was -327 million yuan.
Baidu remains the market leader in search (it has about 70% of the Chinese market). Its success in retaining that position will depend on whether it can stay relevant in an era dominated by mobile search, and whether it can make headway on some of the more experimental stuff it’s working on, like self-driving cars and artificial intelligence.
On the company’s earning call, Li said: “Towards the end of Q1, we began to see the impact of macro environment, compounded by a significant release of ad inventory into the market, causing CPM post Chinese New Year, to not rebound as pronounced as we had historically experienced. Although the Chinese government has announced many economic policies to bolster the economy, given the current macro conditions, tighter government scrutiny on content, cut backs from the VC community and so forth, we are taking a cautious view that online marketing in the near term will face a more challenging environment.”
Dominion holds Baidu in its Global Trends Ecommerce Fund.
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