Feb 4 Baidu Inc, China's largest search
engine company, reported its slowest profit growth since 2009,
as competition in the sector heats up and more users switch to
Shares of Baidu were down 6.7 percent at $100.01 in after
hours trading on Monday.
Baidu had previously warned of a soft fourth quarter as
China's economy slows. Industry analysts warn that rapidly
changing user habits and an increasingly crowded search market
could weigh on revenue in the near future.
"That's the general concern, you're going to see moderation
in topline growth and you're going to see margin compression,"
said Oppenheimer & Co analyst Andy Yeung.
Fourth-quarter revenue of $1.017 billion was above Wall
Street targets and the company's own forecast of $979.3 million
to $1.010 billion.
But the 41.6 percent year-on-year revenue growth rate
underscored a continuing slowdown in Baidu's revenue growth,
which expanded at roughly double that pace in the year-ago
Baidu said its revenue per online marketing customer fell
slightly compared to the third quarter, even as its traffic
acquisition costs grew to represent a larger share of total
Morningstar analyst Dan Su said the higher traffic
acquisition costs reflect increasing competition from Qihoo, an
Internet browser and China's largest free anti-virus software
maker that launched a search engine in August to compete with
Qihoo has so far gained only a small share of the search
market, with Baidu still holding around 80 percent, according to
research firm Analysys International. But analysts expect Qihoo
to ramp up its search monetization products early this year to
At the same time, users are increasingly accessing Baidu's
search services on mobile while the bulk of the company's
revenue stems from desktop-based searches.
"The key question here is, going forward, will Baidu be able
to really leverage its investments in the new products and
services to really cement its position on the mobile front and
to handle the competition in the PC search," said Morningstar's
Baidu's net income of $448.7 million increased roughly 36
percent year-on-year. The company said it earned $1.28 per
American Depository Share, in line with Wall Street
For the first quarter, Baidu said it expects revenue between
$945.4 million and $975.9 million. Analysts polled by Thomson
Reuters I/B/E/S were looking for revenue of $964 million on
average in the first quarter.
Baidu shares have fallen about 7 percent since the end of