Chinese search engine giant, Baidu.com Inc (ADR) (NASDAQ: BIDU) reported late on Monday that fiscal fourth-quarter profit jumped 36% thanks to double-digit revenue growth; nonetheless, shares slumped nearly 6% in aftermarket trading as the Wall Street analysts were unimpressed by rising company’s costs even as doubts linger on whether the Company would be able to take advantage of rising usage of mobile computing.
Baidu, whose nearly entire revenue is generated from search advertising, has posted steady revenue-growth in recent quarters even as it enjoys the number position in Chinese search engine market, leaving behind nearest rival Google in 2010 as it was forced to shift its regional search traffic to Hong Kong following disagreements with Chinese officials concerning online censorship.
Nonetheless, Baidu’s share in the search engine market as a percentage of revenue has witnessed has been languishing. It was down to 79% in the fourth quarter of fiscal 2012 from 76% in the same period of fiscal 2010. As advertisers trimmed their budget outlays in the wake of economic slowdown in China, Baidu was pressed to do more to attract advertisers.
Moreover, competition is also rising. An antivirus company, Qihoo 360 Technology Co., launched its search engine, last August, and it remains to be seen whether this will impact Baidu’s market-share.
Now in order to retain its number -one search engine status, the Company has been investing on mobile services as more and more users in China, just like the U.S. prefer smartphones for computing. Lately, Baidu has also launched its own mobile browsers and working closely with handsets manufacturers.
Still, the Company will need to do a lot for gaining traction in mobile internet business, said Company’s Chief Executive, Robin Li to analysts and investors in a conference call. “there’s a lot of work we need to do to make [internet mobile business] a better channel for our advertisers,” adding that it can take two more years before Baidu can properly reap benefits from mobile internet business.
For the fiscal fourth quarter, Baidu reported a profit of 2.8 billion Chinese yuan ($448.7 million), or 7.99 yuan an American depositary share ($1.28), compared with 2.05 billion yuan, or 5.87 yuan an ADS, in the year-earlier quarter.
After excluding onetime items such as stock based compensation, earnings stood at 8.18 yuan an ADS or $1.31, slightly ahead of analysts’ forecast for $1.29, according to a data compiled by Thomson Reuters.
Revenue during the quarter climbed 42% to 6.335 billion yuan.
While selling, general and administrative expenses leaped 52% from the same period of last fiscal to $127.2 million, research and development expenses jumped 70% from the year earlier quarter to $112.6 million.