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Baidu fourth quarter sales targets lack estimates as regulation, trade saving bett

BEIJING / SAN FRANCISCO (Reuters) – Chinese search engine operator Baidu Inc ( BIDU.O ) on Wednesday forecasts fourth quarter…

BEIJING / SAN FRANCISCO (Reuters) – Chinese search engine operator Baidu Inc ( BIDU.O ) on Wednesday forecasts fourth quarter sales under analytical estimates and says new rules and uncertainty about a Sino-US trade Spat has led to customers cut off advertising.

PHOTO PHOTO: People sit in front of the Baidu company logo at its headquarters in Beijing on December 1

7, 2014. REUTERS / Kim Kyung-Hoon

Baidu, USA, often compared to Alphabet Incs ( GOOGL .O ]) Google also reported a sharp decline in operating margin during the third quarter, as it invests heavily in autonomous driving and artificial intelligence (AI).

The figures come as Chinese technology companies weather the effects of new rules, such as the suspension of new online gaming permits and censorship of content deemed undesirable.

At the same time, ongoing import duties between the United States and China have caused economic uncertainty. Baidu said it expects advertising in areas such as real estate, finance and e-commerce to be adversely affected.

The company “began to feel the effect of political change … as well as general uncertainties from a potential trade war”, said Finance Manager Herman Yu on an income interview with analysts. “We expect this trend to continue.”

Baidu also expects revenue from an ongoing remedy of illegal medical advertising, which occurred in 2016 and led to regulation that slashed the number of eligible advertisers. Subsequent restructuring has shown that Baidu sells cash combustion units.

The company expects revenues from October to December of 25.48 billion to 26.72 billion yuan, compared with 23.6 billion yuan in the same period the year before. The forecast compared with 27.6 billion yuan the average of 17 analysts estimates of refinance.

Baidu shares declined 1.4 percent in the aftermarket trade. The share has fallen more than 20 percent since the beginning of the year, including through a broader sale of Chinese technology shares.

“Generally, there will be some challenges, especially in the internet gaming sector, which will affect advertising costs,” says senior analyst Raymond Feng at Pacific Epox.

“[But] Baidus news flow announcement continues and it gives more time for investors to wait for the next development on AI and autonomous driving, he says.

Baidu’s investors were shaken earlier this year after Alphabet Inc ( GOOGL.O ) said it planned to reboot its Google search engine in China almost seven years after leaving the market in protest against censorship.

Request for Google’s possible mail, Baidu’s CEO Robin Li said on Wednesday: “I do not think a non-China based company has that kind of competency to compete.”

Even though Baidu’s fourth quarterly forecast is under estimate, its revenue in the third quarter of 28.2 billion yuan hit estimates by 2.4 percent. Li awarded performance to improvements in its search platform and news feed using AI.

Baidu is one of China’s largest names in AI, and this month became the first Chinese company to join an AI ethics group with members like Google and Apple Inc. ( AAPL.O ).

Net profit rose 56 percent in July-September, also slightly above estimates, but the operating margin fell to 16 percent from 21 percent. Excluding profits from divestment of financial services, Baidu posted adjusted earnings per share of 19.01 yuan compared with 16.70 yuan analysts estimate.

Li said that the effects of new regulation and trade considerations could extend beyond 2018, but in the long run, “I’m still very optimistic about Baidu and China’s future.”

Reporting of Cate Cadell in Beijing and Jane Lanhee Lee in San Francisco; Editing Christopher Cushing

Our Standards: Thomson Reuters Trust Principles.

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