Baidu profit beats estimates as company wins users
Baidu.com Inc, operator of China’s most used Internet search site, reported profit and sales that topped analysts’ estimates after services to find celebrity news and videos helped attract users from Yahoo! Inc.
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 in a statement. Sales more than doubled to 571.1 million yuan.
Chief executive officer (CEO) Robin Li lured visitors away from Yahoo and Sohu.com Inc, extending Baidu’s lead in a market that’s home to 210 million online users. The company today forecast sales this quarter may double as user gains counter Web traffic disrupted by the country’s worst snowstorms in 50 years.
“People tend to travel during the Chinese New Year holiday and that will cut Internet traffic,” JPMorgan Securities Inc analyst Dick Wei, who called the fourth-quarter results “respectable.” The snowstorm “also hurt traffic as a result of power failure or infrastructure damage.”
Wei rates Baidu stock “overweight.”
Analysts had estimated its fourth-quarter 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.
Baidu rose as much as 7.2 percent to $280 in US 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.
Baidu predicted first-quarter sales of 533 million yuan to 548 million yuan, which would mean an increase of as much as 99 percent from a year earlier. The forecast missed the average estimate of seven analysts surveyed for revenue of 566.7 million yuan.
“First-quarter sales will be affected by the snowstorms and the holidays,” CEO Li said on a conference call today. Internet “traffic typically goes down quite a lot during the Chinese New Year holidays.”
China’s worst snowstorms in half a century clogged travel in the nation before the Lunar New Year. More than three weeks of storms knocked out power to half the country’s provinces and closed road, rail and air routes.
“There’s a little bit of concern on the forward outlook,” Colin Gillis, an analyst with Canaccord Adams Inc. in New York, said in a Bloomberg Television interview today. Gillis rates Baidu “sell.”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 five percent, the Beijing-based research firm said.
“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.
Shen Haoyu, vice president of business operations, will oversee the company’s financial operations until a replacement for Chief Financial Officer Shawn Wang is found, Li said. Wang died on Dec. 27 in an accident in China.
China added 73 million Internet users in 2007, making the nation the world’s second-largest Internet market after the U.S. according to the government-backed China Network Information Center.
Fourth-quarter development spending at Baidu more than doubled to 46.5 million yuan after the company added workers. Sales and administrative expenses rose 86 percent to 132.2 million yuan as Baidu expanded its direct sales staff.
The Web company has started a service in Japan and plans to open a consumer trading site this year to compete with Alibaba.com Corp.
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.
Baidu’s Li said the company is “open to all kinds” of share-listing options, though it’s “unlikely” the company will sell stock in Hong Kong in 2008.