Tag Archives: tcehy

Baidu Set To Report Q1 Amid ‘Low Expectations’ For Margin Growth

Baidu ( BIDU ) reports Q1 earnings after the close on Thursday, with analysts expecting China’s search leader to maintain its dominant position in mobile ads, retaining its share of ad budget allocations from large advertisers. “Regarding profitability, we see several potential upside catalysts that could positively impact Baidu’s shares in the near to medium term,” wrote ITG Research analyst Henry Guo in a research note Tuesday. Baidu stock was up a fraction in afternoon trading in the stock market today , near 188.50. Baidu stock has gained 88% since touching 100 last August, its lowest point since July 2013. But Baidu stock is down 11% in the past 12 months. Citing proprietary data, Guo said Baidu’s mobile ecosystem — its mobile search, mobile app marketplace, mobile video, and mobile browser — has stayed dominant, which Guo said “helps the company control several of the most-important mobile Internet user traffic gateways, boding well for future monetization.” Data from ITG Research indicates “that Baidu’s Mobile Search app dominates the mobile search market with more than 23% installation penetration among Chinese mobile users, well ahead of its key competitors Sogou Search (1.7%) and Qihoo 360 Technology ( QIHO ) Search (0.2%),” wrote Guo. Baidu’s rivals in mobile search include e-commerce giant Alibaba Group ( BABA ) and its No. 2 Shenma search unit. In overall search in China, Baidu vies with No. 2 Qihoo 360 Technology, which has struggled to shift to mobile. Sohu ( SOHU ) search engine Sogou is No. 3. Tencent Holdings ( TCEHY ), the third of the Baidu-Alibaba-Tencent (BAT) Chinese Internet giants, owns a big stake in Sohu’s Sogou. Baidu’s fast-growing video wing, Qiyi, surpassed Alibaba-owned Youku Tudou’s user base in early 2015, Guo said. In March 2016, Qiyi had about 20% penetration among Chinese mobile Internet users, compared to Youku Tudou’s 11.5% and Tencent Video’s 10.4%, said Guo. Baidu announced last month that the company has received a nonbinding proposal from two Baidu executives to acquire Qiyi for $2.8 billion. Already one of China’s largest online video streaming services, Qiyi is looking to become a bigger force in the country’s video-streaming and moviemaking fields, a nearly $6 billion market that also includes Baidu rivals Alibaba, Tencent and Sohu.com. Last year, Netflix ( NFLX ) said it wants to begin operating in China, but the streaming media company has given no timetable. Wall Street has “low expectations” for Baidu’s 2016 margin improvement, said Guo. Baidu’s profit margins will continue to face pressure from (1) higher traffic acquisition costs (TAC) due to increasing mobile search contribution, (2) iQiyi content cost, and (3) O2O (online-to-offline) investments, he said. TAC refers to what Baidu must pay to other sites to carry its ads. Analysts polled by Thomson Reuters expect Baidu to see Q1 revenue of RMB 15.83 billion ($2.4 billion), up 24% year over year. Analysts polled by Thomson Reuters are modeling EPS ex items to fall 11% year over year to 5.96 RMB (92 cents). FactSet is expecting revenue of $2.44 billion, up 24%. FactSet is expecting Baidu to report EPS ex items of 1.03, down 11.9%.

Intel’s Next Threat: AMD Chinese Deal May Plunder Server Market

Advanced Micro Devices ( AMD ) is making a play for Intel ’s ( INTC ) Chinese server market — and maybe “Super 7” clients Alibaba ( BABA ), Baidu ( BIDU ) and Tencent ( TCEHY ) — as the No. 1 chipmaker prepares for 12,000 layoffs, MKM analyst Ian Ing suggested Friday. Late Thursday, during AMD’s Q1 earnings call, AMD CEO Lisa Su announced a $293 million joint venture with China’s Tianjin Haiguang Advanced Technology Investment to “help gain share in the fastest-growing region of the server market.” Su might as well have shouted a battle cry. This week, Intel announced a 12,000-layoff restructuring plan, cutting about 11% of its workforce, to “intensify” investments in the Internet of Things, memory and data centers. Intel’s Q1 data center sales rose 9% year over year, vs. 7% for the company overall. AMD’s Chinese joint venture is “(the) best challenge yet to Intel’s server dominance,” MKM analyst Ian Ing wrote in a research report. Last year, Chinese officials announced a plan to curb reliance on foreign chips. Partnering in China gives AMD “access to design and IP resources that are tailored to the China market and significant local field sales and support resources to help win designs at a wide range of customers,” Ing wrote. Intel’s turn from PC reliance — 55% of its total sales in Q1 — could further boost AMD, which might scoop some PC market share, Ing wrote as he upgraded AMD stock to buy from neutral but maintained his price target of 4. For Q1, a 13-week quarter, AMD reported $832 million in sales, down 19% year over year, and a per-share loss ex items of 12 cents vs. a 13-cent loss in the year-earlier quarter. Both metrics topped the consensus of 27 analysts polled by Thomson Reuters for $818.2 million and a 13-cent per-share loss. The consensus’ Q2 sales guidance, calling for a 15% sequential hike, implies $956 million, which would be up 2%. The consensus saw $889 million, Rosenblatt Securities analyst Kinngai Chan noted in a report. AMD stock jump 52% Friday, to 3.99, a 19-month high. Intel stock fell 1%; AMD’s graphics chips rival Nvidia ( NVDA ), a Tesla Motors ( TSLA ) partner, fell a fraction.

Baidu Reportedly Pulling A Google, Spinning Off Video Service

Baidu ( BIDU ) will reportedly spin off its professional Baidu Video service, as the China Internet search leader looks to pare is newer, money-losing businesses from its core search operation. Baidu Video would receive RMB 1 billion ($154.3 million) in new investment as it takes on two more partners, according to a report Thursday from Young’s China Business blog . Rumors about changes at Baidu Video come soon after reports  of a major corporate reorganization at Baidu that aims to separate its older, profitable search services from its newer businesses, many of which are losing money. This is similar to what Google did in creating Alphabet ( GOOGL ) as the parent company for all its operations. Like Alphabet, Baidu is investing to develop self-driving cars and other technology not related to its core search operations. In November, Baidu announced it had submitted an application for a direct-banking license in partnership with China’s Citic Bank and for an online insurance license in partnership with Allianz ( AZSEY ) and Hillhouse Capital. To continue its growth, Baidu should follow in Google’s footsteps “and split its non-core businesses from its core search and ads business. If they do this, Baidu stock would likely receive a big boost, leaving them with the cash to make a foray into the U.S. market,” Taiwan-based Sephi Shapira, CEO of mobile advertising platform MassiveImpact, told IBD via email in February. Baidu Could Be Eyeing Big Structural Changes Young’s China Business said the Baidu Video unit is separate from Baidu’s iQiyi.com, the online video service that is similar to Google’s YouTube. Baidu announced in February that it would sell money-losing iQiyi to an outside group led by Baidu CEO Robin Li. IQiyi is looking to become a bigger force in the country’s video-streaming and movie-making fields, a nearly $6 billion market that also includes Baidu rivals Alibaba Group ( BABA ), Sohu.com ( SOHU ) and Tencent Holdings ( TCEHY ). Last year, Netflix ( NFLX ) said it wants to begin operating in China, but the streaming media company has expressed uncertainty about its planned move into the country by 2016. Baidu plans several changes to its business structure, including establishment of a subsidiary that will house its online search services, said Marbridge Consulting, citing a release via Baidu’s official account on Tencent’s   WeChat mobile messaging platform. According to Marbridge , the spinoff will see New Culture Media Group and venture capital firm SAIF each invest about RMB 500 million ($77.1 million) in Baidu Video. Each of the new partners would receive about 20% of Baidu Video, Marbridge said. Baidu stock has nearly doubled since skidding to a three-year low of 100 in early February. Baidu stock broke out of a cup-with-handle base in late March, at a 189.90 buy point. Shares were flat in midday trading in the stock market today , near 194. Baidu will report Q1 earnings on April 28 and has given revenue guidance below analyst expectations, as the company invests heavily in its “O2O” (online-to-offline) strategy to draw Web shoppers to in-person services and physical stores. Baidu recently  said it is seeking  a $1 billion loan. A Baidu spokeswoman said the company aims to borrow the funds through a five-year syndicated facility for general corporate purposes, according to the Bloomberg report. Image provided by Shutterstock .