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Market expects fall in profit

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Robin Li, chief executive officer of Baidu.

Nelson Ching | Bloomberg | Getty Images

Chinese search giant Baidu is facing stiff competition from newer rivals, and has seen over $60 billion of its value wiped off since its peak last year.

It’s part of China’s internet trio — Baidu, Alibaba and Tencent — which have collectively been named “BAT.” But it’s facing an increasingly tough advertising market, and has been falling behind the other two rivals.

Often dubbed “China’s Google,” Baidu has seen its shares slide nearly 40% this year. In contrast, gaming titan Tencent is up just over 6%, while e-commerce giant Alibaba is more than 27% higher.

At its peak in mid-May 2018, Baidu was worth around $99 billion — with its shares priced at $284. Stocks of the search giant have fallen to $96.7 a share with its market cap plunging to $33.8 billion. Comparatively, Tencent and Alibaba are both worth over $400 billion.

Baidu earnings

Ahead of its second-quarter earnings report on Monday, analysts are expecting further pain for Baidu.

Wall Street is predicting the following results for the June quarter:

  • Revenue of 25.76 billion yuan ($3.66 billion), according to estimates from Refinitiv. If that number is realized, it would represent a near 0.8% year-on-year decline.
  • Earnings per share of 2.91 yuan, according to Refinitiv estimates. If achieved, that would be a more than 83% year-on-year decline.

For a long time, Baidu has enjoyed dominance of China’s search market given the absence of major competition. Google exited the market in 2010.

But Baidu was slow to respond to the growth of mobile and has faced growing competition from new entrants, such as TikTok parent ByteDance. As a result, advertisers have switched their budgets to other platforms.

“This is a structural change that is unfavorable to Baidu’s core search business,” Xueru Zhang, senior analyst at 86Research, told CNBC.

Mobile push

In China, there is a trend of so-called “super apps.” These are products like Tencent’s WeChat or Ant Financial’s Alipay where a user can do a number of different things ranging from payments to ordering food all within one app.

Baidu has been investing heavily in its own mobile offering. It has an app where users can search and watch videos as well as a number of other functions. The company announced last week that the number of daily active users on the app had surpassed 200 million.

It has introduced features such as mini programs which is an app within the app — something that WeChat has on its platform already. The aim is to increase the amount of time users spend within the app. But Zhang said Baidu is late to the party.

“Baidu is just a follower, and the market did not give much credit to these initiatives,” Zhang told CNBC.

A.I. focus

Baidu has been shifting its business to focus on artificial intelligence (AI) products. This includes its driverless car technology unit and voice assistant for example.

“We are leveraging Baidu AI to provide enterprise solutions to businesses and local governments, which significantly expands our total addressable market,” Baidu CEO Robin Li said in the first-quarter earnings statement.

While 2019 looks to be a year of pain for Baidu, the market sees a recovery in 2020 as some of these initiatives begin to make money.

“Its new initiatives in AI-related area are actually growing very fast,” Zhang said. “Although meaningful financial contribution from new AI initiatives are unlikely to kick in any time soon, the company has proven its capability to commercialize AI technology in a broad range of applications at a pace and scales that is hard to compete (with).”

Zhang said her firm believes “Baidu is one key player riding on China’s upcoming AI era,” and added: “These new AI businesses will be the long-term value driver for Baidu.”

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Lebanon government set to resign amid outrage over explosion: Minister

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Smoke rises after an explosion in Beirut, Lebanon August 4, 2020, in this picture obtained from a social media video.

Karim Sokhn | Instagram | Reuters

Lebanon’s prime minister was set on Monday to announce the resignation of his government, the health minister said, after a devastating explosion in Beirut that has stirred public outrage and spurred a string of ministers to step down.

The Aug. 4 port warehouse detonation of more than 2,000 tonnes of ammonium nitrate killed at least 163 people, injured over 6,000 and destroyed swathes of the bustling Mediterranean capital, compounding months of political and economic meltdown.

The cabinet, formed in January with the backing of the powerful Iranian-backed Hezbollah group and its allies, met on Monday, with many ministers wanting to resign, according to ministerial and political sources.

Health Minister Hamad Hasan told Reuters that Prime Minister Hassan Diab would soon announce the resignation of the entire cabinet. Diab was set to deliver an address to the nation at 7:30 p.m. local time (1630 GMT), his office said.

For many ordinary Lebanese, the explosion was the last straw in a protracted crisis over the collapse of the economy, endemic corruption, waste and dysfunctional governance, and they have taken to the streets demanding root-and-branch change.

The information and environment ministers quit on Sunday as well as several lawmakers, and the justice minister followed them out the door on Monday.

Finance Minister Ghazi Wazni, a key negotiator with the IMF over a rescue plan to help Lebanon exit a financial crisis, prepared his resignation letter and brought it with him to the cabinet meeting, a source close to him and local media said.

Lebanon’s president had previously said explosive material was stored unsafely for years at the port. He later said the investigation would consider whether the cause was external interference as well as negligence or an accident.

Anti-government protests in the past two days have been the biggest since October, when angry demonstrations spread over an economic crisis rooted in pervasive graft, mismanagement and high-level unaccountability. Protesters accused the political elite of siphoning off state resources for their own benefit.

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Senators urge U.S. to remove tariffs on EU foods, beverages

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Bottles of French wine are displayed for sale in a liquor store on December 3, 2019 in Arlington, Virginia.

Olivier Douliery | AFP | Getty Images

A bipartisan group of 13 U.S. senators have asked the U.S. Trade Representative’s Office (USTR) to remove 25% tariffs imposed in October 2019 on European Union food, wine and spirits, according to a letter seen by Reuters.

The tariffs, in retaliation for EU subsidies on large aircraft, hit French wine, Italian cheese and single-malt Scotch whisky, as well as cookies, salami, yogurt, olives from France, EU-produced pork sausage and German coffee.

Seven Republican and six Democratic senators, including Robert Menendez, John Barrasso, Cory Gardner, Susan Collins, Dianne Feinstein, Pat Toomey, Kyrsten Sinema and Cory Booker said in a letter to USTR Friday that American “restaurants, retailers, grocers, importers and distributors” are experiencing “severe economic hardship due to the increased cost of goods.”

The senators noted “demand for these goods has declined, leaving importers and distributors with months’ worth of product, much of it perishable, in storage and in transit with no clear end date for the COVID-19 pandemic.”

USTR did not immediately comment.

Last month, Europe’s Airbus said it would increase loan repayments to France and Spain in a “final” bid to reverse U.S. tariffs and jog the United States into settling a 16-year-old dispute over billions of dollars of aircraft subsidies.

The United States last year won World Trade Organization authorization to impose tariffs on up to $7.5 billion of EU goods.

The U.S. Distilled Spirits Council last month urged ending EU and U.S. beverage tariffs, saying drinks firms on both sides of the Atlantic “have suffered enough.”

The group noted Scotch Whisky imports by the United States fell nearly 33% between October 2019 and May 2020, a $378 million decline over the same period a year earlier.

The EU in a separate dispute imposed 25% tariffs  on all U.S. whiskey imports in June 2018. Since then, U.S. whiskey exports to the EU have fallen by 33%, or $300 million, the group said.

Trade groups are bracing for an escalation this autumn when the EU is expected to win WTO approval to retaliate with its own tariffs over subsidies for U.S. planemaker Boeing Co.

USTR announced in June it was considering imposing additional tariffs on products from many EU countries including gin, vodka, beer, sparkling wine and other whiskies.

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After coronavirus, some CEOs plan to prioritize sustainability

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After coronavirus, some CEOs plan to prioritize sustainability