Chinese search giant Baidu lowers revenue forecast, shares fall

(Reuters) - Chinese online search giant Baidu Inc BIDU.O cut its revenue forecast for the current quarter, saying regulatory scrutiny into healthcare and related ads was hurting its advertising revenue.

A smartphone showing the Baidu Browser application is seen in this picture illustration, February 22, 2016. REUTERS/Damir Sagolj/Illustration/File Photo

The company’s shares plunged 6 percent in extended trading on Monday.

Chinese regulators imposed limits last month on the number of medical ads carried by Baidu after the death of a 21-year-old student who underwent an experimental cancer treatment, which he found using the company’s search engine.

Baidu cut its revenue forecast for the second quarter to $2.81 billion-$2.82 billion from $3.12 billion-$3.19 billion, citing “a reduction or delay in spend from a significant portion of medical customers.”

Baidu said its move to reduce the number of sponsored links on its platform to improve user experience also weighed on its forecast.

“Regulatory authorities continue to review the online marketing practices of medical, pharmaceutical, healthcare and other similar businesses, and have also implemented stricter advertising regulations for medical organizations,” Baidu said.

The company, however, added that it expected to recover business from “high quality” medical customers gradually as they adjust their practices to comply with the new regulations.

Analysts estimate that healthcare accounts for about 20-30 percent of Baidu’s search revenue, which represents more than 80 percent of the company’s total sales.

Baidu’s shares were trading at $153.60 after the bell.

Up to Monday’s close, the stock had fallen about 16 percent since April 29, the last trading day before China’s internet regulator announced the probe.

Reporting by Sai Sachin R in Bengaluru; Editing by Kirti Pandey