Baidu posted its first loss since going public almost 15 years ago, as the Chinese technology group saw its advertising business hit by a slowing domestic economy and analysts warned that it should prepare to be hit by the escalating trade war with the US.
The company reported net losses of Rmb327m ($49m) for the first three months of the year, sending shares down 9.9 per cent in after-hours trading despite Baidu announcing plans for a $1bn share buyback programme.
It was the first time the New York-listed company has posted a loss since going public in 2005, according to Bloomberg data.
The company, once one of the three titans of China’s tech scene before falling rapidly behind Alibaba and Tencent, also announced the departure of Hailong Xiang, the head of its search business.
“Given the current macro conditions, tighter government scrutiny on content, cutbacks from the VC community and so forth, we are taking a cautious view that online marketing in the near term will face a more challenging environment,” said Robin Li, Baidu’s chief executive.
Analysts said Baidu, which derives the bulk of its revenues from advertising, faces a further blow as advertisers tighten spending as the trade war between the world’s two largest economies escalates.
This week, the US banned Huawei from selling technology to American companies and Beijing said it would raise tariffs on $60bn of American goods. The moves came after the Trump administration increased levies on $200bn of Chinese goods to 25 per cent last Friday.
“The trade war is such a big issue, it will have an instant impact,” said Raymond Feng, senior analyst at Pacific Epoch. “With these changing dynamics, advertisers may change their spending plans accordingly, reducing their recharge frequency and amount.”
Advertising accounted for 73 per cent of total revenues in the first quarter. The company forecast second-quarter revenues could drop to as low as Rmb25.1bn, which would be a 3 per cent fall on a year earlier. Revenues in the first quarter grew 15 per cent to Rmb24.1bn, slightly less than analysts’ expectations.
“With the resignation of [Mr Xiang] . . . and a US$1bn share buyback programme initiated, together with softer-than-expected 2Q guidance, it seems like Baidu is facing multiple headwinds in addition to macro weakness,” Citi analyst Alicia Yap wrote in a note to clients.
The search company was one of the leading tech groups in China but has fallen behind rivals after finding it difficult to adapt to the rise of the mobile internet. It struggled to entice Chinese internet users away from competitors’ super-apps with their inbuilt search features.
The company also faces growing competition from start-ups such as ByteDance, which hosts wildly popular short videos.
Baidu also faces tightening healthcare regulations as Beijing cracks down on fraudulent medical advertising found through its search platform.
This article has been amended to reflect the fact that net losses were Rmb327m ($49m)
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