Search giant Baidu’s shares rally after surprise revenue bump

A Baidu sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 4, 2017. (REUTERS)
Updated 21 August 2019

Search giant Baidu’s shares rally after surprise revenue bump

  • Baidu CEO Robin Li warned employees in an internal letter on Tuesday that “severe external challenges and a weak macro environment” necessitated changes to the company’s personnel and business strategy

BEIJING: Chinese Internet search giant Baidu Inc. beat quarterly earnings estimates on Monday after signing more people up to its video streaming service, sending its shares higher in a relief rally.
Baidu reported a small 1 percent bump in revenue and a 62 percent drop in net profit for the second quarter, but the result was welcomed by investors who had feared worse amid a slowing Chinese economy and stiff competition from rivals like ByteDance’s TikTok.
Baidu’s earnings update followed reports from Alibaba and JD.com last week, which also beat expectations, showing how some tech giants’ diversification strategies might be helping stave off macroeconomic pressures.
Baidu’s video streaming service iQiyi was a key driver of the revenue bump as it crossed the 100 million subscriber mark in June, although there were some concerns about rising costs at the unit associated with winning and retaining viewers.
Baidu’s total revenue for the three months to the end of June rose to 26.33 billion yuan ($3.7 billion) from 25.97 billion yuan a year earlier, beating a forecast 25.77 billion yuan, according to IBES data from Refinitiv. The online giant earned 10.11 yuan per American depositary share, compared with expectations of 6.12 yuan per ADS.
“It makes sense that Baidu beats the estimates because analysts have lowered their expectations to the minimum,” said Connie Gu, an analyst at BOCOM International, adding the market would need to see better-than-expected results for several consecutive quarters for more sustained confidence.
Baidu’s Nasdaq-listed shares rose over 9 percent in after-hours trading. The stock has plummeted more than 50 percent over the past year.
But there were some red flags at separately listed Netflix-like iQiyi, where shares tumbled by the same magnitude after a 20 percent jump in costs as the company spent more on content to entice subscribers undercut a 15 percent rise in revenue to 7.11 billion yuan.
Baidu, whose search engine dominates the market in China, has been under pressure as factors such as US-China trade tensions and tougher government regulation weighed on key revenue contributors like advertising.

HIGHLIGHTS

• Analysts say Baidu still faces structural challenges.

• CEO tells staff firm is making changes, prepare for pain.

• Baidu still facing fierce competition in online ad business.

Analysts said Baidu faced a longer-term structural problem, especially with the rise of new media platforms seeking to lure away subscribers.
“Competition from recently rising large-traffic platforms is becoming more and more fierce, with advertisers shifting budget to those platforms,” said Natalie Wu, an analyst at China International Capital Corporation.
While Baidu has been expanding into other business lines such as cloud services and mini-programs within its Baidu App, most of its success so far has been at iQiyi. Revenues at its core search-engine business dipped 2 percent during the quarter, while Baidu’s net income more than halved to 2.4 billion yuan.
Baidu CEO Robin Li warned employees in an internal letter on Tuesday that “severe external challenges and a weak macro environment” necessitated changes to the company’s personnel and business strategy.
“These changes will bring pain in phases, but will also bring positive and far-reaching effects, which will allow Baidu to walk on more steadily and for longer,” Baidu’s chief said in the letter seen by Reuters.
The company said that no job cuts were planned when questioned about the personnel restructure.


Emirates trims Boeing shopping list amid 777X delays

Updated 20 November 2019

Emirates trims Boeing shopping list amid 777X delays

  • The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion
  • But Emirates’s purchases overhaul reduces the order to 30 planes

DUBAI: Emirates Airline on Wednesday slimmed down its purchasing plans with Boeing amid delays in delivering an order of 156 of the new long-range 777X aircraft, substituting instead 30 of its 787-9 Dreamliners.
The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion, but the overhaul reduces that to 30.
At the same time, Emirates is cutting its 156-strong order of the larger 777X to 126 planes.
The restructuring means that the carrier now has just 156 aircraft ordered from Boeing, compared to 196 previously in both firm orders and initial agreements, an airline spokeswoman confirmed to AFP.
“Emirates reduced its 777X order of 156 to 126 and substituted them with the Dreamliners,” Emirates president Tim Clark told a news conference at the Dubai Airshow.
Boeing said the airline will update its order book “by exercising substitution rights and converting 30 777 airplanes into 30 787-9s.”
Emirates said in a statement that for the 777X, it “will enter into discussions with Boeing over the next few weeks on the status of deliveries.”
Emirates in 2013 signed a $76-billion contract for 150 Boeing 777X twin-engine aircraft, powered by GE’s new GE9X engine, in what was the single largest order by value in the history of US commercial aviation.
The order was subsequently increased to 156 planes.
The 777X was originally scheduled to take off on its first test flight this summer, however its development has been slowed by issues with the engine and Boeing has pushed back the timeframe to early 2021.
The delays also hit as Boeing is in the process of completing changes required by regulators on the 737 MAX, which has been grounded worldwide after two crashes that resulted in 346 deaths.