Baidu Inc (BIDU) Achieves Slower Rate of Operating Profit Growth Versus Top Line In Fourth Quarter

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Baidu Inc (ADR) (NASDAQ:BIDU) seemed to struggle for operational efficiency as the growth pace in operating profit was only 7.8% in the fourth quarter compared to the top line growth of 47.5% over the preceding year quarter. Revenue growth was more to do with mobile performance in the fourth quarter.

Incidentally, Baidu Inc (ADR) (NASDAQ:BIDU) said that, for the first time, its search revenue from mobile exceeded PC in December, indicating the growth importance that mobile plays. The company’s Chairman and CEO, Robin Li, said that it was successful in transitioning to a mobile-first firm from PC-centric. It was the result of investments made in the last few years on mobile. The stage was also set for an even bigger market opportunity in the coming quarters.

Fourth Quarter Results

The company’s net income grew 16% to $520.4 million or $1.45 a share in the fourth quarter. On an adjusted basis, it would have reported earnings of $1.61 a share for the same period.

Baidu Inc (ADR) (NASDAQ:BIDU)’s total revenues surged 47.5% to $2.26 billion in the December quarter. Mobile revenue accounted for 42% of its total revenue in the fourth quarter. In comparison, the company generated 36% of its revenue from a mobile segment in the preceding year. Mobile’s performance underpinned the company’s re-acceleration of revenue growth.

During the December quarter, revenue per online marketing customer was about $4,255, a 26.3% jump from its corresponding period of the previous year, apart from a 1.9% growth from the third quarter. Traffic acquisition cost, as a percentage of revenues, grew to 13.4% from 12.3%.

Full Year Results

Baidu earned a profit of $2.13 billion or $6.01 a share for the year 2014 representing 25.4% growth. On an adjusted basis, it would have earned a profit per share of $6.45. Total revenues advanced 53.6% in local currency to $7.91 billion.

Guidance

Moving ahead for the first quarter, Baidu expects to deliver revenue of $2.038 – $2.106 billion for the first quarter. This indicated a 33.2 – 37.6% year-over-year revenue growth. At the end of December, the company had cash and cash equivalents of $9.3 billion.

Baidu Inc (ADR) (NASDAQ:BIDU)’s CEO said that the company’s guidance reflected the combined effect of mobile’s growing traffic contribution and the late timing of New Year in China. The company was monetizing the mobile traffic growth contribution at a lower rate than PC. The company said that they were looking to expand the monetization of mobile’s rate for the full year.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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