The name Baidu was derived from the title of a poem written 800 years ago. It means "search for the ideal." (Photo : Reuters)
With the anticipated release on Monday, July 27, of the second quarter report of Chinese tech giant Baidu, analysts are more than just expecting the company to report a 38 percent hike in its revenue and 8.9 percent increase in net profit compared to a year ago. Baidu's forecast is Q2 earnings of $2.6 billion to $2.7 billion, up 36 to 40 percent.
They join investors in wanting to have more details into Baidu's aggressive spending in the last few month. Baidu - China's largest search engine - went into food delivery, movie ticketing and other services as its way of adapting to more consumers using mobile devices instead of computers in accessing the website, reports The Wall Street Journal.
The foray entailed heavy spending on promotion of these new services that are offline and location-based linked to Baidu's search and map businesses. Baidu expects these new services to be the driver of future growth as more people use their smartphones to go online. At the same time, it hopes to make up for the shrinking revenues from mobile advertising.
Arete Research analyst Muzhi Li wrote that some investors want to know why Baidu invested in food delivery services, pointing out that they worry "where this investment has been spent, how they're going to spend it and what's the future gain or the monetization mode."
The analysts cited Baidu's unpopular online payment system, Baidu Wallet, which is the key to online users purchasing products or services from its website. This limitation prompted Jefferies analysts to downgrade in late April Baidu's stocks to "hold" from "buy."
Baidu Wallet only has 26 million linked bank accounts, while Tencent has more than 100 million and Alipay has over 400 million. In June, Baidu announced that it would spend $3.2 billion over the next three years to expand Nuomi, its group-buying platform.
Because the Nuomi investment is seen as "a potential drag on profitability over medium term," Morgan Stanley analyst Ben Lin cut on Friday his forecast by 9.5 percent to 40.1 yuan per share of Baidu's 2015 adjusted profit.
In the last two weeks through Friday, Baidu shareprices rose 9.9 percent, reports Bloomberg, while demand for bullish calls has surged. Analysts foresee a one-day boost of 8.5 in Baidu's stock after Monday's release of its quarterly report.
