Baidu’s Investors Need Not Be Alarmed By Delay In Reporting Of Fiscal Year Results

by Trefis Team
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Baidu (NASDAQ:BIDU) is the largest Internet search provider in China with over 70% share of the market. The company usually reports its fourth quarter and full year results by the second week of February. However, the company’s fiscal year 2013 results will come after a slight delay on February 26. Although Baidu has not officially stated any reason for this year’s delay, we note that the recent ruling by an SEC judge on the Big Four accounting firms could be a possible reason. Below are the fourth quarter and fiscal year reporting dates for Baidu for the last four years:

- 02/04/13 Fourth Quarter and Fiscal Year 2012 Results

- 02/16/12 Fourth Quarter and Fiscal Year 2011 Results

- 01/31/11 Fourth Quarter and Fiscal Year 2010 Results

- 02/09/10 Fourth Quarter and Fiscal Year 2009 Results

The SEC judge banned the Chinese ventures of Deloitte, PwC, Ernst & Young and KPMG from auditing the financial statements of U.S.-listed Chinese companies for six months. The accounting firms filed an appeal against the ruling on February 12. The ruling will take a long time to implement even if the firms lose the case and therefore, the 2013 annual reporting for U.S.-listed Chinese companies should not be drastically affected. [1] However, the reporting could be delayed for many companies, such as Baidu whose financial statements are audited by Ernst & Young’s China unit. We think that Baidu may have waited for its auditor to appeal against the SEC judgment before reporting the results for FY 2013 on Wednesday.

Baidu’s recent quarterly results have benefited from its improving monetization on the mobile platform and diversification into other businesses to reduce dependence on search advertising. We believe that the company will continue to see enhancement in mobile monetization.  However, a fragmented market with the presence of various players such as Tencent and Easou limits the near-term scope for significant market share growth. Rising competition from Qihoo, which has already gained more than 15% of the search market since its launch in August 2012, also poses a major threat to Baidu. Qihoo’s management aims to increase its share to 40% by 2015. To learn more about what we expect from Baidu’s Q4 2013 results, read our article: Mobile Will Boost Baidu’s Top Line This Quarter But Will Also Weigh On Profitability.

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Notes:
  1. China Warns U.S. of Consequences from Barring Auditors, Bloomberg, January 24, 2014 []
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