SHANGHAI/BEIJING – Chinese internet search firm Baidu Inc posted a forecast-beating quarterly revenue increase and unveiled a U.S. listing plan for its Netflix-like video platform iQiyi as it looks to rev up new drivers for growth.
Baidu posted on Tuesday fourth quarter revenue of 23.6 billion yuan ($3.72 billion), up 29 percent against the same period a year ago and topping analysts’ forecasts of 23.05 billion yuan and the company’s own guidance.
The strong results are a major fillip for Baidu as it looks to ramp up spending on riskier gambles in autonomous driving and fend off cashed-up rivals such as Tencent Holdings Ltd and Alibaba Group Holding Ltd in online video content.
A U.S. listing would bring extra financial muscle for its popular iQiyi platform as it ramps up spending. Baidu said the size of any IPO was not yet set, but that it would likely remain iQiyi’s controlling shareholder. iQiyi could be worth $8 billion or more, according to Reuters Breakingviews.
“An IPO will bolster iQiyi’s position in the market and give it more cash to buy content or make content on their own,” said Ni Shuang, Beijing-based Pacific Securities analyst, adding it would help Baidu keep pace with rivals in the space.
The strong quarterly showing – driven by the core search and news feed businesses – is also key to generating cash flow “to fund our new AI businesses”, Baidu chief executive Robin Li told a post-earnings conference call.
The company’s shares rose nearly 5 percent in extended trading after the results, overturning a nearly 4 percent fall since the start of the year.
Herman Yu, the firm’s chief financial officer, said content costs rose 70 percent last year to 13.4 bln yuan as iQiyi acquired content. These costs would rise at a similar pace this year.
The firm will also raise R&D spending in areas like its Apollo open-source software platform for autonomous driving, which executives said would eventually become a “very material and significant revenue source for the company”.
“Having said that, a key caveat is that this market will take time to build,” chief operating officer Qi Lu told the conference call.
Strong results in its more traditional businesses were central to Baidu’s success, with revenue from its core online marketing – including its search platform and news feed – jumping 26.3 percent to 20.4 billion yuan.
The results will help soothe Baidu investors as the company looks to turn around its fortunes after a series of missteps sparked steep losses in 2016 and hit its advertising revenue from internet searches.
Baidu, part of China’s trinity of tech giants along with Alibaba and Tencent, posted net income of 4.16 billion yuan in the quarter ended Dec. 31, up from 4.13 billion yuan a year earlier.
Excluding one-time items, the company earned 14.9 yuan per ADS, above forecasts.
Baidu pegged its guidance for first-quarter revenue growth, between 19.86 billion yuan and 20.97 billion yuan, a 25-32 percent increase against the same period of 2017. That compared with analysts’ average estimate of 21.18 billion yuan.
Reporting by Adam Jourdan in SHANGHAI, Pei Li in BEIJING and Arjun Panchadar in BENGALURU;
Chinas Huawei Set To Lead Global Charge To 5g Networks
FRANKFURT/HONG KONG – China’s Huawei is forging closer commercial ties with big telecom operators across Europe and Asia, putting the company in prime position to lead the global race for next-generation 5G networks despite U.S. allegations it poses a security threat.
Huawei’s dominant position in China – set to become the world’s biggest 5G market by far – is well-documented. However it has also been making in-roads in the rest of world to compete with rivals Ericsson and Nokia in several lucrative markets, including countries that are longstanding U.S. allies.
5G networks, now in the testing stage, will rely on denser arrays of small antennas and the cloud to offer data speeds up to 50 or 100 times faster than current 4G networks and serve as critical infrastructure for a range of industries.
Deals to start building 5G networks are still largely a year away, but Huawei has signed 25 Memorandums of Understanding (MoUs) with telecom operators to trial 5G equipment, a Reuters review of company reports and announcements found.
These MoUs – pre-cursors to potential commercial contracts – include agreements with Britain’s BT, Bell Canada (BCE), France’s Orange Germany’s Deutsche Telekom and global player Vodafone.
Huawei [HWT.UL] lags behind Sweden’s Ericsson, with 38 MoUs, and Finland’s Nokia, with 31, according to the data, which does not include deals that have not been made public.
However, the Chinese company’s existing partnerships with operators could give it an extra edge; as of 2016, Huawei said it had supplied more than half of the 537 4G networks globally and 59 of the 90 4.5G networks – an intermediate step before 5G.
“Existing network footprint is important because operators still need to maintain their legacy … networks and could save money by using the same vendors,” said Stefan Pongratz, a top industry analyst with research firm Dell‘Oro.
Huawei also has the home advantage: the firm and smaller, domestic-focused peer ZTE are each guaranteed about a third of China’s 5G network contracts, under Beijing’s policy, while foreign players have to compete for slivers of the market.
By 2025, 1.2 billion people worldwide are set to have access to 5G networks – a third of them in China, according to the GSMA, a global trade group of nearly 800 mobile operators.
There are however potential risks ahead; Huawei, like its rivals, has spent billions of dollars developing 5G network technology, there are no guarantees about when operators around the world will adopt the new technology.
Many cash-strapped operators want to see significant consumer and business demand before allocating capital, something out of Huawei’s control. Some emerging markets have yet to adopt 4G, putting major 5G moves at least a decade off.
TRIPLE THE SIZE
Unlisted Huawei is triple the size of either Nokia and Ericsson in terms of its annual revenue, which totaled about $92 billion last year, half of it from China. It sold 32 percent of global mobile radio access gear – antennas and base stations – in the last quarter, against Ericsson’s 30 percent and Nokia’s 25 percent, according to market research firm Dell‘Oro.
Ericsson has been under heavy pressure to cut costs in recent years at a time of dwindling profits, while Nokia has had to integrate multiple acquisitions in its networks business.
Nokia said it was confident its broad 5G portfolio, which also includes software and services to manage networks, would allow it to win a bigger slice of the telecoms market.
Ericsson said its longstanding ties with customers and advanced 5G patent portfolio would keep it competitive. “All our customers are looking at 5G,” a spokesman said.
Huawei’s 5G MoUs include non-binding agreements with big telecom operators in South Korea, Japan and Australia, Italy, Turkey and Saudi Arabia, on top of Britain, Germany, France and Canada.
Potential commercial benefits aside, these agreements indicate that many countries allied to the United States do not share Washington’s security concerns.
A bill introduced in the U.S. Senate earlier this month would bar equipment from Huawei from any U.S. government networks to prevent Chinese spying. A leaked presentation from a U.S. National Security Council staffer earlier this year suggested the U.S. government build its own 5G network – a proposal that was widely ridiculed by industry experts.
Huawei categorically rejects U.S. spying concerns.
“Huawei is trusted by governments and customers in 170 countries worldwide and poses no greater cyber-security risk than any (communications) vendor, sharing as we do common global supply chains and production capabilities,” a spokesman said.
OPERATORS REJECT SPYING FEARS
Bruce Rodin, vice president of wireless networks for Bell Canada, said his company used an external cyber-security firm to conduct extensive testing of Huawei products.
“We’ve been doing it for about 10 years and never seen malicious code or backdoors,” Rodin told Reuters, characterizing the U.S. moves as an effort to protect American companies. “It’s a commercial thing. They are protecting their industry,” he said.
Deutsche Telekom said it cooperates with Huawei on many levels and found no evidence of security risks. “The hardware is built to Deutsche Telekom’s specifications and is examined by our own security department,” a spokesman said. Orange told Reuters it is cautious with Huawei “as with any supplier.”
Thomas Jarzombek, a member of the German parliament and digital spokesman for Angela Merkel’s Christian Democrats, said that in the wake of revelations about U.S. spying by former NSA contractor Edward Snowden, American tech companies were not necessarily to be trusted either.
This month, a trade mission by British Prime Minister Theresa May to China included a glowing endorsement of Huawei for its commitment to Britain.
Debates over the timing of 5G deployment will top the agenda at Mobile World Congress, Europe’s biggest annual technology conference taking place next week in Barcelona. The industry is counting on the new technology to trigger a wave of growth in equipment sales and mobile services starting in 2020.
Reporting by Eric Auchard in Franfurt and Sijia Jiang in Hong Kong; Additional reporting by Jim Finkle in Toronto, Dustin Volz in Washington, Olof Swahnberg in Stockholm, Douglas Busvine in Frankfurt, Mathieu Rosemain in Paris, Emma Thomasson in Berlin, Joyce Lee in Seoul, Jane Chung and Liana Baker in Pyeongchang;
Airbnb Ceo Pledges To Take More Responsibility For Impact To Housing
SAN FRANCISCO – Home-booking company Airbnb has sparred with regulators across the globe, but Chief Executive Brian Chesky on Thursday spoke of coming to terms with his responsibility for how the company can impact housing markets and neighborhoods.
“Every year I think you have a sense you have even more responsibility than the year before,” Chesky said in an interview with Reuters.
Chesky’s view represents a striking evolution for the company, which just a few years ago defended itself as a passive technology platform, not responsible for what homes it listed or how they were used.
“When Airbnb started 10 years ago it was kind of the culture that you really can’t take responsibility for what happens on your platform,” he said. “We changed our point of view.”
Things are certainly different for Airbnb from when it began as a scrappy website for renting an air mattress on a stranger’s floor. Chesky said on Thursday that Airbnb’s revenue grew more than 50 percent from the end of 2016 to the end of 2017.
A person familiar with the matter previously told Reuters that Airbnb’s revenue last year topped $2.5 billion, about $1 billion of which occurred in the fourth quarter.
Chesky spoke to Reuters during an event at Airbnb headquarters in San Francisco, where the company announced new luxury services to attract more high-end travelers and unveiled a large-scale redesign of the company’s 4.5 million property listings to make it easier for travelers to find what they want.
Chesky said the company trimmed fat from its core home-renting business so it could turn a profit last year to invest in the new products and technology. Part of that was weeding out problematic hosts and guests – a single-digit percentage of all users “who tend to become very costly” because Airbnb generally reimburses those who have a bad experience, Chesky said.
With a $31 billion valuation, privately held Airbnb for years has been considered a contender for an initial public offering, but Chesky said the company will not go public this year, partly due to the departure this month of its chief financial officer, Laurence Tosi. Still, Chesky said Airbnb will complete IPO preparations by year-end, including hiring a new CFO and bringing on more independent directors.
Another task, Chesky said, is to ensure he has a solid understanding of how Airbnb’s business can alter neighborhoods and housing markets “before there is a giant magnifying glass on you” in the public markets.
The company has battled regulators in cities from Berlin to Paris and Miami, but its spat with its hometown of San Francisco was among the most bitter.
“We don’t want the history of San Francisco, which was a very difficult history over the last seven years, to happen in every city,” Chesky said.
In lawsuits against San Francisco and other cities, Airbnb invoked Section 230 of the U.S. Communications Decency Act, a 20-year-old statute designed to protect free speech online, to argue it should not be regulated.
But Airbnb last May settled its lawsuit with San Francisco, which was over a local ordinance forbidding home-rental companies from taking bookings for hosts who have not properly registered their homes. The settlement included Airbnb’s creating a registration system for anyone in the city who wants to rent out a room or house on its site. The result was thousands fewer Airbnb listings in San Francisco.
Airbnb, however, is still engaged in lawsuits with the cities of Santa Monica, California, and Miami.
Chesky said executives at technology platforms – including companies like Facebook (FB.O) and Twitter (TWTR.N) – need to better appreciate that when they have millions or billions of users, “every little decision has a massive impact on the world.”
“This is a huge amount of responsibility and I think we are all coming to terms with this responsibility,” Chesky said.
Reporting by Heather Somerville;
Godaddy Revenue Tops Estimates As Customer Base Expands
– GoDaddy Inc’s quarterly revenue topped Wall Street estimates on Thursday, as the web-hosting company earned more from each user and expanded customer base with its acquisition of Host Europe Group.
Shares of GoDaddy, which also forecast current-quarter revenue above estimates, rose 4.5 percent to $57.95 in extended trading.
The company’s average revenue per user rose 6.9 percent to $139 in the fourth quarter. Its total paying customers were 17.3 million, marking 17.6 percent growth from last year.
GoDaddy, which completed its $1.82 billion acquisition of Host Europe in April last year, reported a 53 percent jump in international revenue to $207.3 million.
Chief Executive Officer Scott Wagner on a post-earnings call said the company intends to continue its international expansion.
Chief Financial Officer Ray Winborne also said in an interview with Reuters that “we are always looking (at acquisitions).”
The company forecast current-quarter revenue of $620 million to $625 million, above analysts’ estimate of $598.6 million, according to Thomson Reuters I/B/E/S.
Net income attributable to the company was $92.6 million, or 54 cents per share, in the quarter ended Dec. 31, compared with a net loss of $1.9 million, or 2 cents per share, a year earlier.
The company booked a tax benefit of $86 million in the latest quarter related to changes in the U.S. tax code.
Total revenue rose 24 percent to $602.2 million, topping analysts’ estimate of $594.6 million.
Reporting by Munsif Vengattil and Uday Sampath Kumar in Bengaluru;
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