Baidu Q1 profit surges on ads; shares gain

BEIJING/LOS ANGELES: Baidu.com Inc, China's top search engine, posted better-than-expected quarterly profits, buoyed by strong traffic growth and online advertising ahead of the Beijing Olympics, sending its shares higher. The company, whose home market share is more than double that of global giant Google Inc, forecast revenues in the current quarter would almost double from a year earlier. Large corporations have bigger advertising budgets for the Olympics this year, money which will continue to be spent over the second and third quarters, Baidu Chief Executive Robin Li said during a teleconference with analysts. "We will be a beneficiary from that," he said.

Shares in Baidu rose more than 3 percent to $353 in extended trade after the results, but drifted lower to $349.5 in later trade after closing down 2.2 percent at $342 on Nasdaq. January-March profit surged 71.5 percent to 146.6 million yuan -- or $20.9 million and earnings per share of 60 cents -- from 85.5 million yuan a year earlier. Excluding stock-based compensation expenses, profit was 67 cents per share. On that basis, the analysts' average target was 64 cents, according to Reuters Estimates. Total first-quarter revenues more than doubled to 574.4 million yuan and would rise by more than a third in the current quarter to 780-800 million yuan, said the company.

Baidu dominated China's Web search market in the fourth quarter with a 60.1 percent share, according to research firm Analysys International. Google had a 25.9 percent share and Yahoo China was a distant third with 9.6 percent. Baidu's expansion into Japan, however, will continue to weigh on profits this year as it plans to spend $20-$25 million building up its operations. "I don't expect any revenues from Japan this year," said Li.

China's Internet population overtook that of the United States to become the world's largest, reaching 221 million at end-February, state media said this week. However, there is still room to grow as the proportion of netizens to the total population was only 16 percent in China at the end of 2007, compared to a global average of 19.1 percent. As part of its expansion, Baidu has hired a number of high-level executives in recent months, including Apple Inc's former China head, and ex-General Motors Corp executive Jennifer Li.