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Baidu Net Rises 79 Percent After Winning China Users (Update2)

By John Liu

Feb. 14 (Bloomberg) -- Baidu.com Inc., operator of China's most used Internet search site, reported profit and sales that topped analysts' estimates after new services helped win users from rival Yahoo! Inc. The shares rose in extended trading.

Fourth-quarter net income rose 79 percent to 219.8 million yuan ($30.5 million), or 6.32 yuan per American depositary receipt, from 122.8 million yuan, or 3.54 yuan per ADR, a year earlier, Baidu said today in a statement. Sales more than doubled to 571.1 million yuan.

Chief Executive Officer Robin Li lured users away from Yahoo and Sohu.com Inc. in the second-largest Internet market by introducing services for finding celebrity news, financial data and online videos. To further spur growth, Baidu started a service in Japan and plans to open a consumer trading site this year to compete with Alibaba.com Corp.

``Baidu is the dominant search company in China, and no rival is near to overtaking them,'' Eric Wen, an analyst at BNP Paribas in Shanghai, said before the announcement. He advises investors to buy the shares. ``That Baidu, with this lead, is also looking at how to expand and improve its business says a lot about their company culture.''

Analysts had estimated profit of 184.1 million yuan, according to the average of seven estimates compiled by Bloomberg. They projected sales of 548.3 million yuan, based on 12 estimates.

Shares Gain

Baidu rose $12.88, or 4.9 percent, to $273.97 in U.S. after-hours trading following the earnings announcement. The ADRs, which each represent one Class A share, climbed $15.66 to $261.09 today in regular Nasdaq Stock Market trading.

The company expects first-quarter sales of 533 million yuan to 548 million yuan, according to the release. The average estimate of seven analysts surveyed by Bloomberg was 566.7 million yuan.

Development spending in the fourth quarter more than doubled to 46.5 million yuan after the company added workers, Baidu said. Sales and administrative expenses rose 86 percent to 132.2 million yuan as Baidu expanded its direct sales staff.

China added 73 million Internet users in 2007, increasing its tally to 210 million, second only to the U.S., according to the government-backed China Network Information Center.

Market Share

Baidu's share of the Chinese search market rose to 60 percent in the fourth quarter from 58 percent a year earlier, according to Analysys International. Google Inc.'s share climbed to 26 percent from 17 percent, while Yahoo's fell to 9.6 percent from 13 percent. Sohu's share dropped to 1.2 percent from 5 percent, the Beijing-based research firm said.

Yahoo's China unit, operated by Alibaba, said last month it will trim jobs. Fewer than 100 workers will be cut, Alibaba said.

Yahoo, which rejected a takeover bid from Microsoft Corp. this week, became Alibaba's single biggest shareholder in 2005. Alibaba owns China's biggest trading Web sites for individuals and businesses.

Baidu plans to introduce a service in 2008 that will compete for users with Alibaba's Taobao.com, a Web site where individuals sell goods to one another. Alibaba.com Corp. is the parent of Hong Kong-listed Alibaba.com Ltd., which lets businesses exchange goods.
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