Baidu, China’s biggest Internet search engine company, said on Thursday it will buy back shares worth $1 billion after the company’s stock price slid following a weak earnings report earlier this week.
The repurchases will take place over the next 12 months and be funded from the company’s existing cash balance, New York-listed Baidu said in a statement.
Baidu shares have fallen 14 percent since July 27, when it reported lower-than-expected second-quarter profit. The company’s plan to spend aggressively on connecting online smartphone users to offline services raised investor concerns on margins, triggering the shares’ worst two-day drop since late 2008.
“The buyback demonstrates Baidu’s confidence in the O2O (online-to-offline) opportunity, and in our ability to capture it,” a Baidu spokesman told Reuters.
The Chinese company has been investing heavily to diversify away from its bread-and-butter search advertising business, which is less profitable on smartphones than on PCs, especially as there are more mobile internet users than PC users in the country.
Baidu said last month it would invest $3.2 billion in linking mobile internet users to nearby offline services such as buying cinema tickets, booking taxis, getting restaurant deals.
But these O2O services are eroding the healthy margins Baidu enjoyed from its core search business.
Chief Financial Officer Jennifer Li told analysts earlier this week the company’s “O2O and Others” business had a negative impact on overall margins of 25.3 percentage points.
(Editing by Kim Coghill and Kenneth Maxwell)
This article originally appeared on Recode.net.