K.C. Swanson
Baidu hopes it will ultimately boost revenue, but the company's customer base of small and medium businesses in China, who aren't familiar with online auctions, will need a little time to get used to the new system, Li explained.
"Some of the older customers may not be so receptive," he acknowledged. "We knew that by hiking up the price, there will be some customer loss, but we think overall in the longer term it should be healthy and beneficial." Complicating matters, Baidu didn't have enough staff to brief all its customers on the shift. "We were not able to hire enough sales and customer service people to explain the change to existing customers," Li explained, adding that the company is now hiring new service representatives. "I believe in the next two quarters we'll be under kind of a transition," Li told analysts and investors on the call. "Beginning in Q2 of next year, we should be back on track with the growth we have been able to achieve historically." Baidu gave fourth-quarter guidance for 13% sequential growth, meaning revenue of $34 million to $35 million, but that's below the consensus expectation for $36.2 million. In addition, Li's prediction of soft revenue in the next two quarters raises questions as to whether Baidu can meet the first quarter 2007 consensus. Leading up to the quarterly report, consensus estimates had been for quarterly sales to grow 20% from the fourth quarter to the first quarter.
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