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Home / Business / Tab Shakes Baidu to the Core – Baidu, Inc. (NASDAQ: BIDU)

Tab Shakes Baidu to the Core – Baidu, Inc. (NASDAQ: BIDU)



It seems that profits are becoming increasingly difficult to reach today in China's internet sector. It is the big takeaway that comes in the latest results from the search giant Baidu (NASDAQ: BIDU), who has just posted their first loss since becoming a listed company 14 years ago. Perhaps most worrying, the biggest problem seems to be in Baidu's core search, always a cash cow in the past, whose operating results interpreted in the first three months of the year.

The surprise loss is one of the very first that I can remember in China's three largest Internet companies or BAT, namely Baidu, Alibaba (NYSE: BABA) and Tencent (OTCPK: TCEHY). This has led many to wonder if Baidu's glory is rapidly fading into the rear-view mirror, or whether this company may have another trick pony beyond its search activity that has maintained it for years.

I would probably fall into the camp saying that this is a company because of a long-lasting sunset, and that this particular quarterly loss might be like a water sign in its history. More about it soon.

First, let's start with the somewhat shocking headline that saw Baidu post his first loss since it was published in 2005 (English article). That loss amounted to 327 million yuan ($ 47 million), to be precise. But people were obviously focused on the fact that such a profitable company in the past could make a loss at all. Shareholders fled Baidu in droves after the report came out, which led to the shares falling by more than 16 percent.

The sale of Baidu's market value dropped to a very humble $ 45 billion, just about $ 2 billion ahead of No. 2 e-commerce player JD.com (NASDAQ: JD), which has sipped Baidu & # 39 ; s heels for a while as the title jockey as China's third largest internet company. JD is also a loss-making colossus, although investors are also starting to become impatient with that company as well. But that's another topic for another day.

For now, let's go back to Baidu and dive deeper into their numbers. In this case, it is really about Baidu's core search activity, referred to as Baidu Core on the company's earnings report. The income of Baidu Core, which accounts for nearly three-quarters of Baidu, increased by 8 anemic anemias in the first quarter to 17.5 billion yuan – not something to write home about. But far more worrying was a large decline in Baidu Core's operating profit, which fell by 81 per cent.

Growth Competition

Analysts were all upset by what led to the large decline in profits for the company's key search activities. The verdict appears to be that the advertising market in China is becoming much more competitive these days, as companies die for a stagnant or even dizzying pool of advertising dollars. It would not be too surprising since signs coming from China's economy have pointed to such a slowdown for at least the last two years.

In addition, Baidu himself is not advertising the dollar magnet it used to be. The company has become hundreds of a number of scandals in recent years related to deceptive search results that promote paid advertisers without promoting that fact. It was also fire earlier this year from a respected former journalist who said Baidu has actually become a search engine specializing in finding results for his own content.

When it looked like global search giant Google (NASDAQ: GOOG) (NASDAQ: GOOGL) may return to China last year (previous post), many welcomed the feelings that Baidu had become fat, lazy and somewhat corrupt over the last few decades, in the absence of a serious rival. Baidu even realized that it could not rely on searching forever, and founder Robin Li has pushed heavily into artificial intelligence lately to try to diversify ahead of that day.

It is difficult to say at the moment whether the AI ​​effort carries much fruit yet. Most of these efforts are focused on self-driving cars, an area China wants to develop, but one that hasn't gone too far yet to put real cars on the road. Another promising site for Baidu is online video in the form of its upcoming iQiyi (NASDAQ: IQ) device. But iQiyi still loses big money, and it's not so clear whether it's a good long-term profit model there.

At the end of the day I am not convinced that AI will help Baidu anytime soon. Neither wants online video. And these latest results show that the core search business can also lead south. With all the negative signs on the dashboard, it's hard to get excited about this company and one can even start wondering if Baidu has what it takes to survive in the longer term.

Enlightenment : None. 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