Apple Feasts on China, Baidu Burps 苹果在华享受盛宴，百度盛宴停顿

By newsdoug on April 25, 2012

Baidu: past its peak? I’ll start off today with 2 earnings stories from companies moving in opposite directions: one from Apple (Nasdaq: AAPL), whose China sales have exploded on the back of its hugely popular iPhones, and the other from online search leader Baidu (Nasdaq: BIDU), whose rapid growth is showing signs of having peaked. Let’s look at Apple first as that’s the story that has the world buzzing the most, with the company reporting quarterly earnings that beat Wall Street forecasts and dispelled doubts that its popular iPhones and iPad tablet PCs were losing their appeal. (English article; Chinese article) China was the story within the story this time, with the Greater China region accounting for a whopping $7.9 billion of Apple’s sales for the quarter, or a fifth of its $39.2 billion in revenue. That huge figure came largely on the back of a 4-fold surge in iPhone sales. While the latest China numbers were huge, there’s every indication that they will continue to grow in the current quarter thanks to a new partnership with China Telecom (HKEx: 728; NYSE: CHA), the most aggressive of China’s 3 telcos, which began selling the iPhone in early March, or right at the end of the first quarter. (previous post) Apple had previously only sold iPhones in China through Unicom (HKEx: 762; NYSE: CHU), China’s second largest mobile carrier. Additional upside could come from settlement of an ongoing trademark dispute over the iPad name, which recently prompted Apple to delay selling the newest iPad model in China. (previous post) I would expect that dispute to be settled as soon as the end of the current quarter, paving the way for sale of the latest iPad in China as early as July or August. Meantime, Baidu has also just announced results that have failed to impress investors, who have bid down the company’s stock by around 10 percent in after-hours trading. Some are blaming the share sell-off on Baidu’s second-quarter outlook that was below market forecasts, but from my perspective the entire report looks relatively uninspired. (company announcement) The company said its profit and revenue both grew about 75 percent in the quarter from the previous year — figures that would look great for any other company besides Baidu. The profit growth is roughly comparable to a 77 percent profit jump in the previous quarter, although revenue growth slowed from the previous quarter’s 82.5 percent gain. Also slightly worrisome was one of the first negative growth figures I’ve seen from this company in its core advertising business, with Baidu reporting that revenue per online marketing customer fell 7.6 percent in the first quarter of this year versus fourth quarter levels. All of this indicates that an advertising slowdown that I’ve been predicting for the last 8 or 9 months is finally arriving, and that Baidu’s growth has peaked and will soon start to slow considerably.

Bottom line: Apple’s explosive China growth could accelerate on the back of a recent new iPhone deal and resolution of a trademark dispute, while Baidu’s growth appears to have peaked.

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