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Baidu expects revenues to drop at start of 2020 amid coronavirus outbreak

Chinese internet conglomerate Baidu Inc. expects its revenues in the first three months of 2020 to drop to between 21.0 billion Chinese yuan and 22.9 billion yuan, marking a decline of 5% to 13% year over year, due to potential losses in its marketing business amid the new coronavirus outbreak, according to a Feb. 27 earnings call.

"In the first half of [the] first quarter [of 2020], we see a rather weakness because of the coronavirus and because of extended holidays," Herman Yu, CFO of Baidu, told analysts and media on the call. The coronavirus outbreak in China caused shops to delay their operation and impacted Baidu's marketing business, which has a large portion that relies on brick-and-mortar operations, he added.

However, the company expects to see increased exposure to its search engine due to the recent uptick in proactive search queries on its Baidu App for medical information during the outbreak, according to Robin Li, CEO of Baidu. Li expects the search engine exposure during the first quarter of 2020 to contribute to revenue growth later in the year. The Baidu App recorded a 30% annual growth of in-app search queries in December 2019.

On the call, senior Baidu executive Dou Shen said once the company is able to recover from the impact of the coronavirus in 2020, Baidu will focus on developing its artificial intelligence search capabilities as well as strengthen its content, video and live broadcasting verticals to create another medium for advertisers.

For the fourth quarter of fiscal 2019 ended Dec. 31, net income attributable to Baidu was 6.35 billion yuan, or 18.25 yuan per share, up from 2.08 billion yuan, or 5.93 yuan per share year over year. Total revenue for the fourth quarter was 28.88 billion, up 6% year over year.

Baidu App's average daily active users reached 195 million, up 21% year over year, in December 2019.

Net income attributable to Baidu was 2.06 billion yuan, or 5.60 yuan per share for the fiscal year 2019 ended Dec. 31, down 93% from 27.57 billion yuan, or 78.03 per share, in the year-ago period. The S&P Global Market Intelligence consensus estimate for fiscal 2019 was 6.03 Chinese yuan on a GAAP basis.

Baidu posted total revenues of 107.41 billion yuan in 2019, up 5% year over year from 102.28 billion yuan in 2018.

Online marketing revenue of the company decreased 5% year over year to 78.1 billion yuan in 2019, while other revenues increased 44% to 29.3 billion yuan, driven by growth in membership of listed video platform iQIYI Inc., cloud services and smart devices, the company said.

Baidu recognized a non-cash impairment of 8.9 billion yuan in the third quarter of 2019 due to its holding in Trip.com Group Ltd., and reduced its interest from 19% to 12% of the online travel agency's outstanding shares in October 2019.

As of Feb. 27, US$1 was equivalent to 7.00 Chinese yuan.