Disappointing second-quarter results, share price plunge trigger move by searchengine
Baidu Inc, China's largest Internet search provider, said on Thursday that it will buy back sharesworth $1 billion after the company's stock price plunged following a disappointing financial report.
The New York-listed Baidu said in a statement that its board of directors has authorized a sharerepurchase program under which the company may repurchase up to $1 billion of its shares overthe next 12 months.
Baidu's shares plunged 15 percent on Tuesday with $10 billion worth of market value vanishingafter it announced second-quarter results and guidance that lower than the expectation of WallStreet investors. It share prices was up 1.18 percent on Wednesday.
The Beijing-based Baidu generated revenue of $2.67 billion in the second quarter, a 38 percentincrease from the same period in 2014. However, net profit increased by only 3.3 percent to$590.6 million as the company is migrating from a desktop search engine to a mobile-drivenbusiness with aggressive plans to connect more smartphone users with offline service providers,such as restaurants and cinemas.
The share repurchase program launched by Baidu is certainly a move to restore investors'confidence in the company, said analysts.
Tian Hou, a Beijing-based analyst with TH Capital, said that Wall Street investors are concernedabout Baidu's prospects as several online-to- offline companies in the US have gone bankruptrecently.
"More importantly, as Baidu is going mobile, its core search engine business isn't as strong as itused to be. But further developing the O2O business requires a lot of investment and time tomake profits. The situation has also triggered concerns among investors," she said.
Robin Li, chief executive officer of Baidu, announced at the end of June that the company wouldinvest 20 billion yuan on online-to-offline services over the next three years as Baidu is goingthrough the transition from connecting people with information to linking people with services.
It appears that Baidu responded to the concerns by launching a so-called aircraft carrier projecton Thursday. Under the project, more than 10 of the company's projects are open for outsideinvestors, including Baidu Takeaway, a typical O2O business, through which users can orderfood via Baidu's partner restaurants and get door-to-door delivery by Baidu's team.
"There is plenty of money in the market but not many high-quality projects," said He Haiwen, wholeads the project at Baidu.
By opening internal projects to outside investors, Baidu aims to make the best out of itsbusinesses even without taking control of them, said He. The company said that its takeawaybusiness has already raised $250 million in its latest financing round.
Liu Xuwei, an analyst with Analysys International, a Beijing-based Internet consultancy, said byspinning off some of its businesses, Baidu can reduce its net loss and make its financial reportlook better.
