The Beijing-based Internet search company estimated fourth-quarter revenue between $174 million and $180 million, well below the $205 million expected by Wall Street.
Baidu reported earnings of $72.2 million for the third quarter, while revenue surged to $187.3 million.
The company reported an active online-marketing customer base of 216,000, an 11 percent increase from the previous quarter. Revenue per customer also grew 26 percent.
Complete migration to the new system
The fairly decent third-quarter results can be attributed to the growing traction of the Chinese Internet company’s new Phoenix Nest online-marketing system.
The NASDAQ-listed technology behemoth cited the transitory impact of discontinuation of ‘Online Marketing Classic Edition’, the company’s old marketing system, as the reason for the scaled down forecast.
"With 70% of customers already using Phoenix Nest, we believe this is the right time to complete the switch to the new system," Chairman and Chief Executive Robin Li said.
"The move to a single upgraded bidding platform will more efficiently utilize company resources and relieve customers from the burden of maintaining two systems," added Li.
Shares in a tizzy
The justification, however, could not prevent Baidu's American depositary shares from plummeting as much as 11 percent to $385.03 in after-hours trading.
The stock of the company had been doing fairly well in recent times and had nearly quadrupled in value since mid-December. It had peaked to a 52-week high of $439.90 earlier Monday.
Baidu is not the first tech company to forecast a relatively gloomy fourth-quarter. Sohu.com Inc. (NASDAQ: SOHU), China’s second-biggest Internet portal, too, had predicted lesser-than-expected sales between $134.5 million and $138.5 million for the fourth-quarter.
Sohu shares had plunged 16 percent in New York after the announcement.
The future projections given by these technology companies have surprised some.
“Given data points suggesting that online advertising trends have improved since September and the overall healthier Chinese economy, the guidance for sequentially lower branded advertising revenue trends is surprising in our view,” opined Kathy Chen, a Hong Kong-based analyst at Goldman Sachs Group Inc.
Baidu to maintain lead
Baidu rules the web search market in China with close to 75 percent market share. Google Inc. (NASDAQ: GOOG; LSE: GGEA) is firmly placed second in the country.
"Today more than ever Baidu is the number one search engine in China," said company CEO Robin Li in a call with analysts.
Data, as revealed by the Chinese government, suggests that Baidu's supremacy over Google will carry on as the former is more popular among new Internet users in the country, who primarily belong to rural China.
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