Baidu’s Revenue Zooms, Tries Thailand
Whoever is following online search leader Baidu (Nasdaq: BIDU) these days certainly doesn’t seem to care much about profits, at least based on the company’s latest results. That’s my conclusion after looking at Baidu’s just-released quarterly report, which showed that Baidu’s profit grew at an anemic 1.3 percent in the third quarter. Perhaps investors were just happy that Baidu posted any growth at all, since global tech giant Apple (Nasdaq: AAPL) has just posted its third consecutive profit decline in its latest quarterly report.
But I’m really being a little facetious, as it appears that investors were more focused on Baidu’s top line that showed a continuation of strong revenue growth, following a slowdown in the ad market last year. Investors may also be getting excited about Baidu’s recent string of major acquisitions, along with news of a new tie-up in Shanghai and word that the company is expanding to Thailand.
Whatever the reason, investors were certainly bullish on Baidu’s shares, which rose 3.4 percent during regular trade and then jumped another 5.4 percent after-hours. The company’s shares have been on a sharp upward track since July, rising nearly 90 percent over the last 4 months. Many other leading Chinese tech firms have surged as well, as investor confidence starts to return to these companies after a 2-year-old confidence crisis starts to ease.
So let’s take a closer look at the latest Baidu results, which show that third-quarter profit managed to eke out a small gain, rising to $498 million. (English article) But the bigger story was on Baidu’s top line, with revenue up 42 percent to nearly $1.5 billion. That was slightly better than the 39 percent growth in the second quarter, and 40 percent in the first. Perhaps more exciting was Baidu’s prediction that revenue growth would continue to accelerate in the fourth quarter, with the company forecasting a rise of 46-50 percent.
There’s really not much more to say about the earnings, since Baidu derives nearly all of its revenue from its core online search business. It’s trying to diversify in other directions, following a series of major acquisitions this year in the online video, group buying and app store areas. It’s probably too early to say how big a contribution those new businesses can make in the future, but investors will undoubtedly be watching closely to see what happens. I’m personally not too optimistic, since several of the bigger acquisitions were thought to be losing money. But perhaps they can find synergies with Baidu’s search business to finally turn a profit.
Speaking of new initiatives, let’s look quickly at 2 more that I mentioned briefly above. One will see Baidu launch a search service in Thailand, while the other will see it work together on a news channel project with Shanghai’s leading print media group.
The company is currently advertising for positions in Thailand as part of the first initiative, and confirmed it is planning a service launch there. (English article) Thailand is already dominated by a homegrown search engine called Sanook, and Google (Nasdaq: GOOG) also has a presence there. Baidu’s first outside foray to Japan has been a major disappointment, and it has also launched a search product in Brazil. Thailand certainly looks like a more promising market to me, since it shares more qualities with China than Japan. Still, it remains to be seen how Baidu can compete against well established local rivals.
Lastly let’s look at Baidu’s other new tie-up, which will see it launch a Shanghai-oriented news channel in partnership with Shanghai United Media Group, which itself is newly formed through the merger this month of Shanghai’s top 2 newspaper publishers. (English article) This initiative looks quite promising, as Baidu’s partner in the venture is one of China’s largest media groups. Thus it should have no problem quickly building up a strong presence in Shanghai, and both sides could even leverage their partnership to quickly expand outside China’s commercial capital.
Bottom line: Baidu’s latest quarterly results reflect accelerating growth in China’s ad market, though several of its major recent acquisitions could struggle to find profits.
Related posts:
