Houston Community News >> Baidu Quarterly Profit Soars

2/14/2007-- SAN FRANCISCO (Reuters) - Chinese Web search leader Baidu Inc. said on Wednesday quarterly net profits quintupled, but stepped up investments and the impact of a late New Year's holiday season will cut sales growth early in 2007.

Revenue, mostly from online advertising, rose 136 percent to 271.3 million yuan, or $34.8 million, in the fourth quarter, slightly above analysts' average forecast of $34.6 million.

The Beijing-based company, known to investors as "China's Google," expected first-quarter revenue of $34 million to $35 million -- growth of 95 percent to 103 percent.

Analysts were looking for $36.6 million to $39.4 million, according to Reuters Estimates.

Baidu Chief Financial Officer Shawn Wang said in a statement the company is making progress developing a Japanese language Web search technology, but it will need to invest in coming quarters to increase technical capacity.

"In the quarters ahead we will continue to make investments in technology, network capacity and physical infrastructure that position us for long-term growth," Wang said.

Fourth-quarter net income for the Beijing-based company rose to 122.8 million yuan (US$15.7 million), or 3.54 yuan (45 cents) per diluted share, compared with the year-earlier quarter's 24.5 million yuan, or 0.71 yuan per diluted share.

Excluding stock option expenses, the latest quarter profit amounted 3.75 yuan to 48 cents per share.

The net profit compared with analysts' consensus forecast of $11.1 million in profits, or 32 cents per share, according to Reuters Estimates. Excluding stock-based compensation and one-time items, the analysts' consensus was 36 cents a share.

The company was expected by analysts to produce fourth- quarter revenue in a range from $33 million to $35.2 million, according to Reuters Estimates.

Online marketing revenue was $34.6 million, a 141.4 percent increase from the fourth quarter of 2005, fueled by overall audience growth and increased spending by existing advertising customers. Baidu counts 108,000 advertisers, which is up 5.9 percent from the third quarter of 2006.

Baidu's results benefited from its growing audience for services beyond core Web search, including online news and blog search services and a user-submitted question-and-answer site.

Baidu recently won approval to become an online news provider giving it an edge in terms of exclusive content over Western rivals such as Google Inc. , or Yahoo Inc. in the second largest Internet market after the United States.

Baidu controlled 62 percent of China's Web search market near the end of 2006, according to China Internet Network Information Center. The state agency said Google had only 25 percent of the market, losing 8 percentage points in a year.

"The results are essentially what we expected," Silicon Valley-based analyst Safa Rashtchy of brokerage Piper Jaffray said.

The lowered outlook for the current quarter reflects increased spending on its Japanese search technology and the unusually late timing of the New Year holiday season in late February, instead of late January or early February, he said.

This means companies such as Baidu have only the month of March to recover from the slowdown in Chinese society that normally occurs ahead of the holiday, Rashtchy said.

"This is affecting all of the Chinese Internet companies, including Focus Media ," he said.

Baidu.com shares rose 1.5 percent, to close at $115 on Nasdaq ahead of the report. Following the results, which came after regular session trading finished, the stock fell as much as $7 before recovering to trade up at $116.30, after-hours.

(Contributed by Reuters)