Baidu.com, Inc (BIDU), Entry into Mobile Phone Market, boosts Stock Price
Baidu.com, Inc (NASDAQ:BIDU), a Chinese-language internet search provider, serves three types of online participants including users, customers and Baidu union members. On May-15, the Company announced that it will soon launch a cheap Smartphone with Foxconn Technology Group, Sichuan Changhong Electric Co and China Unicom in China. This announcement marked Company’s entry in the rapidly growing Smartphone market. The market reacted positively to the announcement and the stock gained +1.67% during the trading session.
The Smartphone will use Baidu’s mobile Cloud operating system and will be sold in the market for less than 1,000 Yuan ($160). The Company is expected to do well in the mobile phone space as there is strong demand for mobile phones in the country. Currently, China’s ZTE Corp and Huawei Technologies dominate the country’s low-end smart phone space.
Baidu’s stock has been under pressure since announcement of quarterly results. The stock broke below its 200-day moving average price, which resulted in further downward pressure to the stock. Stock has fallen by -18.17% in the last one month from its peak of $ 151 just before the earnings announcement thus erasing most of its gains during the year. Baidu reported revenue of $677.1 Million in the first quarter growing at 75% on a year-to-year basis and EPS of 87 cents per share, beating analyst’s estimates of 84 cents per share. However, revenue forecast for the second quarter in the range of $847.2 – $867 million, below analyst’s estimate of $862.8 million disappointed the markets.
Baidu’s revenue guidance of 25-28% growth in the second quarter is much below the historical sequential growth rates of 35% seen in the past, which marks a significant revenue deceleration. The Company is facing difficulties in expanding outside its core business of internet search engine like: closure of online retail website, limited success in the social-networking space and spun off its loss-making eCommerce platform Youa, which does not bode well for future revenue growth and may result in lackluster stock performance.