Daily Management Review

Virus Outbreak In China To Hit Baidu’s Q1 Revenue From Business And Advertising


Virus Outbreak In China To Hit Baidu’s Q1 Revenue From Business And Advertising
There can be as much as a 13 per cent year on year drop in its first quarter revenues because of the sudden and extensive slowdown of economic activities and advertising because of the spread of the coronavirus, said China’s biggest search engine company Baidu Inc.
The company said that it now expects its first quarter revenues to be between 21 billion yuan and 22.9 billion yuan or $3 billion to $3.3 billion which will be short of an average estimate of 23.1 billion yuan, as reported by Refinitiv.
The higher end of the forecast range represented a drop of 5 per cent from the forecast for the same period a year earlier.
“The rebound of the economy after the outbreak will continue to be a long-term project,” Baidu CEO Robin Li said in an internal letter that was published in recent reports. The company later confirmed the contents of the letter.
Baidu forecast an even potentially steeper drop in the core revenue - sales made from advertising, for the first quarter as the company estimated a drop of between 10 per cent and 18 per cent.
 “Baidu will also struggle more than other internet companies in China due to its greater reliance on the advertising market,” said Haris Anwar, an analyst at financial markets platform Investing.com.
Baidu said that its offline advertising business was hit particularly hard because of the unusually long extension of the Chinese Lunar New Year holidays as well as the extensive quarantine measures that were imposed by Chinese authorities right across the country, to prevent spreading of the deadly coronavirus, which resulted in a prolonged closure of shops.
However there was a gradual uptick in its business already in China, said confident executives of the company and they hoped that the end of the c==virus epidemic will see a rebound in demand for advertising.
“At Baidu, our employees are gradually returning to the office, applying strict safety measures. We assume businesses across China will do the same, and that our marketing services will pick up at a faster pace into quarter end,” Chief Financial Officer Herman Yu told an earnings call.
The total revenues of the company for the fourth quarter of last year rose by 6 per cent to 28.9 billion yuan which was slightly more than market expectations.
There was a 7 per cent jump in the  sale revenues from its iQIYI service — a Netflix-like video service service that rivals similar services such as the Alibaba-backed Youku and Tencent Holdings’ Tencent Video, touching 7.5 billion yuan, Baidu said. As of December 31, the number of subscribers for its iQIYI was at 106.9 million.
Baidu reported earnings of 26.54 yuan per American depository share, on an adjusted basis while analysts were expecting 24.24 yuan per ADS.

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