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Baidu Profit Rises, but Doesn`t Impress
Wednesday October 26, 10:53 pm ET
Baidu.com`s Profit Rises in First Report Since IPO, but Not Enough to Impress Investors

BEIJING (AP) -- Baidu.com Inc. exceeded analyst expectations in its first quarterly earnings report as a publicly held company, but the performance proved to be a letdown for investors betting on the maker of China`s leading Internet search engine.

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The Beijing-based company said Wednesday that it earned 8.5 million yuan ($1.06 million) or 0.26 yuan per share (3 cents) during the third quarter. The profit nearly tripled from net income of 2.9 million yuan, or 0.10 yuan per share, a year ago.

If not for stock compensation expenses, Baidu said it would have earned 19.3 million yuan ($2.4 million), or 0.59 yuan (7 cents). That figure was a penny above the consensus estimate among analysts polled by Thomson Financial.

"Our growth momentum and financial performance have exceeded our original expectations," said Baidu.com CEO and co-founder Robin Li during a conference call Thursday with analysts.

Li said that since its IPO, the company has expanded its staff from 700 to 1,000 employees, opened a new regional office in the southern Chinese city of Guangzhou and set up a joint research program with Peking University to study Internet use.

Li noted that China, already the world`s second-largest Internet market, still has only 8 percent of its people online, compared with some 70 percent in the United States.

"We are benefiting from the explosive yet long-lasting growth of the Internet market in China," Li said. "We`re very pleased with pace of customer expansion."

Revenue for the quarter totaled 88.9 million yuan ($11 million), nearly tripling from 32.4 million yuan ($4 million) at the same time last year. Excluding the commission that Baidu paid to its advertising partners, the company`s revenue stood at 83.2 million yuan ($10.7 million). That figure also topped the consensus analyst estimate of $9.3 million.

Baidu released the results after U.S. stock markets closed. The company`s U.S.-traded shares plunged 15.5 percent, or $12.55, on the report. Earlier, the shares rose $1.24 to finish at $81.05 on the Nasdaq Stock Market.

The company`s shares have swung wildly since they soared in an August stock market debut that evoked memories of the dot-com boom. After selling at $27 in their initial public offering, Baidu`s shares more than quadrupled during their first day of trading as investors scrambled to buy a stake in a search engine that could become China`s version of Google Inc.

Like Google, Baidu makes most of its money from the ads surrounding a popular search engine. But Baidu still has a long ways to go to catch up to Google, which late last week said it earned $381 million on revenue of $1.6 billion in the most recent quarter.

After seeing Google`s profit increase by more than sevenfold from last year, investors seemed to anticipate similar growth from Baidu.

Heading into Wednesday`s earnings announcement, Baidu`s market value had surged by 23 percent, or about $500 million, since Google posted its results. Google had shared in those gains, too, since it owns 2.6 percent of Baidu -- a stake that has raised speculation that Google might someday buy the entire company as it expands in China.

Piper Jaffray analyst Safa Rashtchy likes Baidu`s long-term potential, but said investors are demanding far too much, too soon from a company still in its early stages. He values Baidu at $45 per share.

Besides disclosing the company`s results for the past quarter, Baidu`s management also predicted its fourth-quarter revenue will range between 102 million yuan ($12.6 million) and 106 million yuan ($13.1 million). The consensus analyst estimate for the fourth quarter had been $10.8 million, according to Thomson Financial.

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Baidu Earnings Conference Call (Q3 2005)

http://us.rd.yahoo.com/finance/confcall/streetevents/SIG=13e…

[streger]

Baidu Profit Rises, but Doesn`t Impress
Thursday October 27, 1:36 am ET
Baidu.com`s Profit Rises in First Report Since IPO, but Not Enough to Impress Investors

BEIJING (AP) -- Baidu.com Inc. exceeded analyst expectations in its first quarterly earnings report as a publicly held company, but the performance proved to be a letdown for investors betting on the maker of China`s leading Internet search engine.

ADVERTISEMENT
The Beijing-based company said Wednesday that it earned 8.5 million yuan ($1.06 million) or 0.26 yuan per share (3 cents) during the third quarter. The profit nearly tripled from net income of 2.9 million yuan, or 0.10 yuan per share, a year ago.

If not for stock compensation expenses, Baidu said it would have earned 19.3 million yuan ($2.4 million), or 0.59 yuan (7 cents). That figure was a penny above the consensus estimate among analysts polled by Thomson Financial.

"Our growth momentum and financial performance have exceeded our original expectations," said Baidu.com CEO and co-founder Robin Li during a conference call Thursday with analysts.

Li said that since its IPO, the company has expanded its staff from 700 to 1,000 employees, opened a new regional office in the southern Chinese city of Guangzhou and set up a joint research program with Peking University to study Internet use.

Li noted that China, already the world`s second-largest Internet market, still has only 8 percent of its people online, compared with some 70 percent in the United States.

"We are benefiting from the explosive yet long-lasting growth of the Internet market in China," Li said. "We`re very pleased with pace of customer expansion."

Revenue for the quarter totaled 88.9 million yuan ($11 million), nearly tripling from 32.4 million yuan ($4 million) at the same time last year. Excluding the commission that Baidu paid to its advertising partners, the company`s revenue stood at 83.2 million yuan ($10.7 million). That figure also topped the consensus analyst estimate of $9.3 million.

Baidu released the results after U.S. stock markets closed. The company`s U.S.-traded shares plunged 15.5 percent, or $12.55, on the report. Earlier, the shares rose $1.24 to finish at $81.05 on the Nasdaq Stock Market.

The company`s shares have swung wildly since they soared in an August stock market debut that evoked memories of the dot-com boom. After selling at $27 in their initial public offering, Baidu`s shares more than quadrupled during their first day of trading as investors scrambled to buy a stake in a search engine that could become China`s version of Google Inc.

Like Google, Baidu makes most of its money from the ads surrounding a popular search engine. But Baidu still has a long ways to go to catch up to Google, which late last week said it earned $381 million on revenue of $1.6 billion in the most recent quarter.

After seeing Google`s profit increase by more than sevenfold from last year, investors seemed to anticipate similar growth from Baidu.

Heading into Wednesday`s earnings announcement, Baidu`s market value had surged by 23 percent, or about $500 million, since Google posted its results. Google had shared in those gains, too, since it owns 2.6 percent of Baidu -- a stake that has raised speculation that Google might someday buy the entire company as it expands in China.

Piper Jaffray analyst Safa Rashtchy likes Baidu`s long-term potential, but said investors are demanding far too much, too soon from a company still in its early stages. He values Baidu at $45 per share.

Besides disclosing the company`s results for the past quarter, Baidu`s management also predicted its fourth-quarter revenue will range between 102 million yuan ($12.6 million) and 106 million yuan ($13.1 million). The consensus analyst estimate for the fourth quarter had been $10.8 million, according to Thomson Financial.

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UPDATE 3-China`s Baidu Q3 hurt by expenses, shares fall
Thu Oct 27, 2005 03:32 AM ET
(Adds company comments, background; changes dateline)

By Eric Auchard and Kirby Chien

SAN FRANCISCO/BEIJING, Oct 27 (Reuters) - China`s leading Internet search engine, Baidu.com Inc. (BIDU.O: Quote, Profile, Research) , said third-quarter profit nearly tripled, but shares fell 15 percent as ballooning expenses caused earnings to miss expectations.

The firm also said it braced for stiff competition from the likes of Google and Yahoo (YHOO.O: Quote, Profile, Research) .

"We are prepared for more competition going forward," chief executive and co-founder Robin Li, told analysts in a conference call.

Baidu reported third-quarter earnings of 8.5 million yuan (US$1.1 million) versus or 2.9 million yuan a year earlier. Diluted earnings per American Depositary Share (ADS) were 0.26 yuan (3 cents), compared with two analyst estimates of 4 cents per diluted ADS.

Expenses almost tripled from the year-earlier period and were up 43 percent from the previous quarter, driven by increased bandwith and marketing costs.

"Expenses were higher-than-expected and the margins were lower. As a result, the upside in revenue didn`t translate to the bottom line," Piper Jaffray analyst Safa Rashtchy said.

Revenue jumped 174 percent to 88.9 million yuan, exceeding the company`s previous forecast.

Revenues rose 29 percent from the second quarter, but the company forecast a slowdown to 15-19 percent sequential growth to 102 million-106 million yuan in the fourth quarter.

Baidu shares dropped to $68.50 in after-hours trading on Wednesday, from a close of $81.05

HEATING COMPETITION

Baidu once dominated China`s fast-growing Internet search market, and still commands over one-third of all traffic among China`s over 100 million Web surfers.

But the firm is facing growing competition in the market from both domestic players and international giants, which have all made major moves in the space in a bid to reap profits and growth similar to U.S. search leader Google.

Google itself, which owns a small stake in Baidu, has made major moves to set up in China, recently hiring two top executives. Yahoo also expanded its presence in the market with its recent purchase of a 40 percent stake in e-marketplace specialist Alibaba.com for $1 billion.

Baidu also faces legal challenges in China stemming from downloads of copyrighted music through its online music search service.

For the time being, investors are taking the rising competitive pressures in stride and have priced Baidu shares at many multiples higher than domestic or international peers.

Even after tumbling in after-hours trade, the shares are priced around 140 times earnings expectations for 2006, excluding one-time items. By comparison, Google and Yahoo now trade at 45 times and 47 times expected 2006 earnings, respectively.

Nomura International in Hong Kong initiated Baidu shares last month with a "sell" rating that asked whether the stock was priced "hundreds of times too much?"

"I don`t think it`s the end of the world. This is a young company with lots of growth ahead," Piper Jaffray`s Rashtchy said of Baidu`s first report as a public company. He initiated the stock with an underperform rating and a $45 share target last month. (US$=8.1 yuan)


© Reuters 2005. All Rights Reserved.

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Baidu.com`s Profit Rises, but Disappoints
Thursday October 27, 6:12 am ET
By Joe Mcdonald, Associated Press Writer
Baidu.com Inc.`s Profit Rises, but Disappoints Investors Who Bet on Faster Growth

BEIJING (AP) -- Baidu.com Inc. said Thursday its earnings rose in its first quarter since its dazzling U.S. stock market debut, but the results disappointed investors who bet on faster growth for the biggest Internet portal in the booming Chinese market.

ADVERTISEMENT
The company reported earnings of 8.5 million yuan ($1.06 million) during the quarter ending Sept. 30 -- nearly triple the net income of 2.9 million yuan from the same period a year ago.

Baidu said that if not for stock compensation expenses, it would have earned 19.3 million yuan ($2.4 million), or 0.59 yuan (7 cents) per share. That was a penny above the consensus estimate among analysts polled by Thomson Financial.

"Our growth momentum and financial performance have exceeded our original expectations," said Baidu CEO and co-founder Robin Li during a conference call with financial analysts.

Baidu surged to prominence with its listing on the Nasdaq stock market in August, when shares quadrupled in value on their first trading day. Investors scrambled for a stake in what many hoped would become the Chinese-language version of the immensely successful Google Inc.

China already has the world`s second-largest population of Internet users, with more than 100 million people online.

And Li noted that China, whose government is aggressively promoting Internet use, still has only 8 percent of its people online, compared with some 70 percent in the United States.

"We are benefiting from the explosive yet long-lasting growth of the Internet market in China," Li said. "We`re very pleased with the pace of customer expansion."

Despite beating analysts` expectations, the results failed to impress investors who saw Google`s profit increase in its most recent results by more than sevenfold from last year.

In after-hours trading, Baidu`s U.S.-traded shares plunged 15.5 percent, or $12.55. Earlier, the shares rose $1.24 to finish at $81.05 on the Nasdaq Stock Market.

Investors were put off by a sharp fall in Baidu`s profit margin after a robust quarter just before its IPO, said Kum Kong Chan, a technology analyst for Nomura Securities in Shanghai.

"Following Goofle`s strong results, expectations ran high," Kum said. "The bottom line didn`t follow through."

Baidu said it had heavier expenses than usual in the quarter as it expanded its staff to about 1,000 from 700 and opened a data center in Beijing and a sales office in southern China.

Li said that since its IPO, the company also has launched a joint research effort with elite Peking University to study Internet use.

"I get the sense that the company`s positioning themselves for future growth. They have a lot of cash on hand, and probably are a lot more willing to spend," said Kum. "`The company is still young, still in the nascent stage. There`s a lot of growth potential."

Heading into Wednesday`s earnings announcement, Baidu`s market value had surged by 23 percent, or about $500 million, since Google posted its results.

Like Google, Baidu makes most of its money from the ads surrounding a popular search engine.

Investment bank Piper Jaffray expects annual revenues from such sponsored search in China to reach $1 billion by 2010, up from $134 million now.

Daily searches by Chinese Internet users are expected to jump from 360 million this year to 816 million in 2007.

Baidu said revenue for the quarter totaled 88.9 million yuan ($11 million), nearly tripling from 32.4 million yuan at the same time last year. Excluding the commission that Baidu paid to its advertising partners, the company`s revenue stood at 83.2 million yuan ($10.7 million). That figure also topped the consensus analyst estimate of $9.3 million.

Baidu management also forecast fourth-quarter revenue of between 102 million yuan ($12.6 million) and 106 million yuan ($13.1 million).

The consensus analyst estimate for the fourth quarter had been $10.8 million, according to Thomson Financial.

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"Negatives Everywhere"
Author and market expert Tom Taulli is turning more defensive in his investment strategy -- but still spots some opportunities


The economy and the market are in "uncharted territory," in the words of Tom Taulli -- author, venture capitalist, and expert on mergers and initial public offerings. As a result, he expects investors to be "risk averse," and he himself has turned more defensive in his investment strategy.
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"There are negatives everywhere you look," says Taulli, pointing to inflation, "massive" budget deficits, energy prices, the impact of hurricanes, a "weakened" Presidency and Congress, and higher interest rates, on top of uncertainties over the successor to Federal Reserve Chairman Alan Greenspan. However, the good news, he adds, is that Corporate America is cash-rich and very competitive.

In this situation, Taulli suggests investors would do well in short-term money. As for stocks, they should focus on large-cap names, with an emphasis on commodities and companies that will benefit from post-hurricane rebuilding efforts. Specifically, he names Exxon Mobil (XOM ). And he does see growth potential in a few smaller names, including iVillage (IVIL ), Bankrate (RATE ), and aQuantive (AQNT ).

These were a few highlights of Taulli`s remarks in an investing chat presented Oct. 13 by BusinessWeek Online. He was responding to questions from Jack Dierdorff and Karyn McCormack of BW Online. Following are edited excerpts from this chat.

Tom, do you have any hope that the stock market will snap back from its doldrums?
I`ve actually been more negative on the market lately -- for the first time in a long time, actually. I wasn`t even a teenager when inflation was big in the `70s, and I think we`re going back into a time when inflation will be a problem. It looks like we`ll have massive budget deficits and a lot of dislocations in the economy from the recent disasters. We also have the sustained high oil prices, and as we go into the winter, the consumer will get hit even harder on energy costs.

I think that this isn`t particularly good for the equity market. There`s also uncertainty on Greenspan`s replacement. The Presidency has been weakened, Congress has been weakened. So there are negatives everywhere you look. The good news is that Corporate America is very strong, has a lot of cash, and is very competitive.

I think investors will be risk averse going forward because we are, in a way, in uncharted territory, due to the recent events that we`ve seen.

Have you made changes to your portfolio -- that is, become more defensive?
I have been more defensive. I`ve sold a variety of stocks over the last few months and, for the most part, have been pretty liquid in terms of money-market type of accounts. With fears of inflation starting to rise, we`ll see higher rates (we`re already seeing that), and being in short-term money isn`t a bad place to be.

In general, what kind of stocks would you recommend for the risk-averse investor in this climate? Any specific names?
Definitely small-cap stocks would not be for the risk-averse investor. You would want to focus on big-cap stocks, but they do tend to have problems when the general market has problems. You would want to again be careful in terms of what stocks to look for.

I think that we`re in a phase where we will have continued high oil prices, so it makes sense to put money in some of the major oil companies like Exxon Mobil (XOM ). These companies have defensive market positions without a lot of competition as far as new companies go, and they have strong dividends that will be paid for years to come.... I think anything in terms of commodities will do well in this environment.

We will also see the rebuilding from Katrina -- we`ll see real estate companies, cement companies, and those types of companies do well as they repair a lot of the damage that occurred. In terms of what I`m looking at right now, those are the sectors that look good.

What are the small stocks that are still catching your eye?
The ones I`m looking at right now include a few in the Internet sector -- I mostly focus there. There has been a lot of merger activity in this area. News Corp. (NWS ) spent millions of dollars on acquisitions. eBay (EBAY ) bought Skype, a company with very little income, for a tremendous sum. A big part of this activity is that there`s still a lot of growth in the sector, and advertising money is pouring into the online world.

Other players, like traditional media players, want to get a piece of the action, so they`re willing to pay a tremendous premium for these Internet companies. There aren`t a lot of the public pure-play Internet companies left -- most are the big ones like Yahoo! (YHOO ) and Google (GOOG ) or the occasional small scattered company. If some of these companies aren`t bought, they`ll continue to grow at a rapid rate.

I like iVillage (IVIL ). The company is a content play for women`s issues, as well as health. They`ve been growing quickly, are profitable, and are attracting more traditional advertisers, like Pfizer (PFE ). I think they`re unique, have a very strong presence in their sector, and would be an attractive buyout candidate for a traditional media company. It`s only a matter of time before they`re purchased.

I also like Bankrate (RATE). They`ve been around for over 30 years. It got its start by publishing bank rates. When the Internet emerged, they transformed themselves into a dot-com. This was a smart move. They`re heavily focused on mortgage and CD rates but brought in a new CEO with a strong background in the media world. He`s someone who really understands the media world, and has done a great job of redesigning and rethinking the business at Bankrate. They`ve expanded into student loans, credit cards, etc.

There are a lot of traditional advertisers that like Bankrate`s content, and this company will continue to grow over the next couple of years. This is certainly another good prospect for investors to take a look at.

Another stock I like is aQuantive (AQNT). They`re yet again a former dot-com high-flyer that`s restructured its operations and is now starting to grow at a rapid rate. They provide a full platform for advertisers to take advantage of the online world.

If you`re a Pfizer and want to target your customers through the online medium, aQuantive would do everything for you. They would create the campaign, form the Web site and track the progress, provide search-engine optimization -- it`s a soup-to-nuts approach to online advertising. Companies that want to enter this world need some hand-holding and expertise, and that`s what aQuantive provides.

While I`m in general negative on the market, I still can find companies with growth stories I like. I do think there are some good prospects still available to investors.

Tom, you track the IPO market closely -- what`s happening there these days? Last time you were with us, you liked Baidu.com (BIDU ), the Chinese search-engine company.
Yeah, I think I wasn`t the only person who liked Baidu -- it looks like it will be the hottest IPO of the year. It demonstrates that IPOs are highly volatile, and it`s generally better to let IPOs get seasoned in the marketplace -- watch that first earnings report, etc. For me, there`s no rush getting into an IPO. With Baidu, you would have lost money had you dropped in too quickly. I still think they`re selling at too much of a premium.

What you should wait for is the lockup period to expire (which means essentially no insiders/employees can sell for six months). A bad market is actually a very good market for IPO investors. It may seem strange, but if markets are having difficulties, IPOs will have more difficulties. If it`s a good company, you`re getting it at a very low price. If the general markets continue to be bearish, that will give IPO investors far more opportunities to get good deals.

I see some interesting ones on the horizon. One of the more interesting companies is iRobot, which does, as the name implies, make robots. It started in 1990 with geniuses at MIT. They`ve gone through different iterations, with the business focused more at the consumer end.

The robots do things like mop your floors, and another one of the robots vacuums your floor. It won`t vacuum the dog, or fall down the stairs -- they`re very intelligent. I don`t think there`s any secret why they`re doing their IPO right now, leading into the Christmas season. But again, if the IPO market is having difficulties, you might not get a jump on the first day, and you could get a company with excellent growth prospects (like iRobot) at an excellent price.

What do you think about the rumors surrounding AOL? The latest is Google and Comcast (CMCSA ) are trying to get a piece of it.
Yeah, the Time Warner/AOL deal back four or five years ago was lauded as a supreme example of synergy and the deal of the century -- and turned into the worst deal in recent memory. Now AOL`s come back and is somehow the crown jewel of Time Warner (TWX ). That`s just the nature of the field.

I think AOL is a prized asset that was neglected for a long time. Time Warner was concerned about a lot of other issues, but now they have time to devote to AOL and realize that there`s a lot of growth as traditional advertisers are going online. AOL is certainly a great platform to take advantage of this, but in order to do this, it makes sense to take a partnership strategy. So why not get a Google or Comcast as not just strategic but also financial partners to give competitors a run for their money?

One way or another, AOL will do something here with a financial partner. That has been AOL`s MO in the past -- they partner with other companies and leverage these relationships to get more growth and profit, so I think it`s an ironic turn of events that hasn`t really had a positive impact on TWX at this point. But if a deal is reached with Google or Comcast, TWX may get a boost. In terms of looking for more of a defensive stock, as we talked about earlier, Time Warner does look like an interesting play at this point.

Bank consolidations and AOL launch us into the world of mergers -- another of your areas of expertise. What`s the outlook there?
In the near future, I think maybe the IPO market falls off a bit and the general market has problems, but I don`t expect that to impact M&A. Companies have huge amounts of cash on their balance sheets, they`re looking for ways to grow and expand, and there are a lot of midtier companies looking for exit strategies.

Venture capitalists have changed their views on things -- they`re not just looking for IPOs, they`re looking at getting their companies sold to bigger companies. This isn`t just in certain sectors, it will be across many industries, and I think it`s a long-term trend. For the most part, I think we`ll see growth in M&A going forward.

What are the private equity guys doing in this market? Do you see more companies going private?
There`s more private equity money than ever before, over $100 billion. Private equity money traditionally focuses on private companies -- buy one, merge it with another, then sell both, or maybe take it public. That tends to be their strategy. But you`re even seeing hedge funds entering the private equity world, doing hostile takeovers -- this is all part of the trend toward M&A activity in the U.S. There`s a lot of money to get deals done through private equity firms and hedge funds.

It`s difficult for an individual investor to benefit from that, but there are some firms that you can buy. Apollo Investments (AINV ) is one of the more well-known. They`re managed by one of the premier private equity firms, and you can buy the stock.

You can benefit from private equity very easily by investing in a company like this that has top-notch management. If you look at wealthy investors, they have some exposure to private equity, and this is something to think about when you`re putting your portfolio together.

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Shares of Baidu.com Plunge
Thursday October 27, 9:41 am ET
By Joe Mcdonald, Associated Press Writer
Shares of Baidu.com Plunged After It Posts Earnings That Beat Expectations but Still Disappointed Investors

BEIJING (AP) -- Shares of Baidu.com Inc. plunged Thursday after the Internet company posted quarterly earnings that beat analysts` expectations but still disappointed investors who had bet on even faster growth for the biggest online portal in the booming Chinese market.

ADVERTISEMENT
The company reported earnings of 8.5 million yuan ($1.06 million) during the quarter ending Sept. 30 -- nearly triple the net income of 2.9 million yuan from the same period a year ago.

Baidu said that if not for stock compensation expenses, it would have earned 19.3 million yuan ($2.4 million), or 0.59 yuan (7 cents) per share. That was a penny above the consensus estimate among analysts polled by Thomson Financial.

Revenue for the quarter totaled 88.9 million yuan ($11 million), nearly tripling from 32.4 million yuan last year. Excluding the commission that Baidu paid to its advertising partners, the company`s revenue stood at 83.2 million yuan ($10.7 million). That figure also topped the consensus analyst estimate of $9.3 million.

"Our growth momentum and financial performance have exceeded our original expectations," said Baidu CEO and co-founder Robin Li during a conference call with financial analysts.

However, in early trading on the Nasdaq Stock Market, Baidu`s U.S. shares were down $9.26, 11.4 percent, at $71.79. The stock is well off its record high of $153.98 hit on Aug. 8, but still more than twice its initial public offering price of $27.

Baidu surged to prominence with its listing on the Nasdaq in August, when shares quadrupled in value on their first trading day. Investors scrambled for a stake in what many hoped would become the Chinese-language version of the immensely successful Google Inc., which bought 2.6 percent of Baidu last year.

China already has the world`s second-largest population of Internet users, with more than 100 million people online. And Li noted that China, whose government is aggressively promoting Internet use, still has only 8 percent of its people online, compared with some 70 percent in the United States.

"We are benefiting from the explosive yet long-lasting growth of the Internet market in China," Li said. "We`re very pleased with the pace of customer expansion."

But even though the results beat analysts` expectations, they failed to impress investors who saw Google`s last quarterly profit increase more than sevenfold.

Investors were put off by a sharp fall in Baidu`s profit margin after a robust quarter just before its IPO, said Kum Kong Chan, a technology analyst for Nomura Securities in Shanghai.

"Following Google`s strong results, expectations ran high," Kum said. "The bottom line didn`t follow through."

Baidu said it had heavier expenses than usual in the quarter as it expanded its staff to about 1,000 from 700 and opened a data center in Beijing and a sales office in southern China.

Li said that since its IPO, the company also has launched a joint research effort with elite Peking University to study Internet use.

"I get the sense that the company`s positioning themselves for future growth. They have a lot of cash on hand, and probably are a lot more willing to spend," said Kum. "The company is still young, still in the nascent stage. There`s a lot of growth potential."

Baidu management forecast fourth-quarter revenue will be between 102 million yuan ($12.6 million) and 106 million yuan ($13.1 million). That exceeded the consensus estimate for the fourth quarter of $10.8 million, according to Thomson Financial.

Like Google, Baidu makes most of its money from the ads surrounding a popular search engine.

Investment bank Piper Jaffray expects annual revenues from such sponsored search in China to reach $1 billion by 2010, up from $134 million now.

Daily searches by Chinese Internet users are expected to jump from 360 million this year to 816 million in 2007.

[streger]

Strong Earnings At Li`s Baidu.com Disappoint
Virginia Citrano, 10.27.05, 11:13 AM ET

Wall Street giveth, and Wall Street taketh away--and never more than when the company involved has the Internet in its business plan. Especially when the company fails to match outsized expectations.

Shares of Baidu.com (nasdaq: BIDU - news - people ) dropped more than 11% on the Nasdaq Stock Market this morning. The Chinese portal reported earnings of $1.06 million for the quarter ended Sept. 30. That was nearly triple its net income for the same period last year--and above analysts` forecasts--but still not good enough. Seems investors have decided that Baidu.com should become China`s version of Google (nasdaq: GOOG - news - people ) overnight.

Baidu raised investor expectations in August, when its shares quadrupled in value on their first day of trading. And Google`s recent strong earnings report may have further fueled hopes for big numbers at the Chinese company.

Baidu co-founder and Chief Executive Robin Li struck a positive note during a conference call with financial analysts. "Our growth momentum and financial performance have exceeded our original expectations," he said. "We are benefiting from the explosive yet long-lasting growth of the Internet market in China," Li said. "We`re very pleased with the pace of customer expansion."

Well, maybe investors will get the results they seek next quarter. Baidu management forecast fourth-quarter revenue will be between $12.6 million and $13.1 million. That`s above the consensus estimate, which now stands at $10.8 million. And if not, remember what Alan Greenspan said about irrational exuberance.

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Baidu`s Song Turns Sad

By Jonathan Berr
TheStreet.com Senior Writer
10/27/2005 11:27 AM EDT

Baidu (BIDU:Nasdaq - commentary - research - Cramer`s Take) failed to inspire investors with its first earnings report as a public company.

While third-quarter net income and sales both rose more than 170% from a year ago, Baidu`s expenses also ballooned, and gross margins fell from the previous quarter. Investors who drove up shares of China`s largest search engine by as much as 354% after its Aug. 5 U.S. public offering took this as a bad sign and dumped the stock. Shares in Baidu, whose name is derived from a Chinese poem, plunged 10% Thursday.

"We think Baidu should be spending aggressively at this point both to grow fast and increase market and also to effectively compete with the U.S. and China heavyweights," said Safa Rashtchy, an analyst with Piper Jaffray who rates the shares underperform and doesn`t own them, in a note to clients. "In short, this was a good performance, but this type of performance or better was expected of Baidu."

Though Rashtchy and Goldman Sachs analyst Anthony Noto both say they remain bullish on the Chinese Internet market, they are less optimistic about Baidu`s share price.

"We have intentionally established aggressive estimates to make sure that we do not get caught in the `stock is always expensive trap,`" wrote Noto, who maintained his rating of underperform/attractive on the stock, in a note to clients. "Even with this stance, the valuation is a stretch."

Baidu currently trades at a premium to large-cap U.S. and Chinese Internet companies. Using a price-to-earnings multiple of 55 times Goldman`s 2006 earnings per share estimate of 59 cents yields an "implied fair value" of around $37.50, according to Noto.

On Thursday, the shares fell $7.69 to $73.36.

Despite the disappointment over Baidu`s performance, don`t expect U.S. investors to give up on the China Internet market. Google (GOOG:Nasdaq - commentary - research - Cramer`s Take) bought a stake in Baidu last year. Yahoo! (YHOO:Nasdaq - commentary - research - Cramer`s Take) paid $1 billion for a 40% interest in Alibaba.com in August.

[streger]

Baidu`s Wild Ride

By Rick Aristotle Munarriz (TMFBreakerRick)
October 27, 2005

The brief public life of Baidu.com (Nasdaq: BIDU) has already been a wild one. The stock went public at $27 and soared into the triple digits on its first trading day. Since then, gravity has sent the stock back into the double digits, where daily gyrations seem to always be on the menu.

Wednesday night was no exception. The stock traded 13% lower after what would have been healthy results if not for the market`s lofty expectations. Revenues surged 174% higher. Momentum is certainly in place, as the company expects revenue growth to accelerate after soaring 215% to 227% higher in the current quarter.

Baidu accomplished this growth with a 148% spike in advertisers. That means the average sponsor is spending more these days on China`s largest website.

The company is profitable, though 10% in net margins pales in comparison with the loftier production of other Chinese stocks, like Rule Breakers recommendations NetEase.com (Nasdaq: NTES) and Shanda Interactive (Nasdaq: SNDA).

However, Baidu`s presence as China`s leading search engine -- with Google (Nasdaq: GOOG) a distant second -- is significant. Stateside behemoths like Yahoo! (Nasdaq: YHOO) and Microsoft (Nasdaq: MSFT) are jockeying for position, while Baidu.com is already where it needs to be. Baidu just needs time for China`s economy to improve to the point at which sponsors are willing to pay more for the region`s eyeballs.

Yes, it`s kind of surprising to see such amazing trading volatility in a company that will take years to vindicate either the longs or the shorts. I bought into the company earlier this month knowing that this was supposed to be a long-term position. I will consume every quarterly report, yet I know that this is the kind of company that will find its success measured in years. Not quarters. Not months. Not the occasional wild trading day.

[streger]

UPGRADES & DOWNGRADES HISTORY	 

Date	Research Firm	Action	From	To

27-Oct-05	Morgan Stanley	Initiated		Underweight

26-Oct-05	Thomas Weisel	Initiated		Peer Perform

21-Sep-05	CSFB	Initiated		Underperform

14-Sep-05	Goldman Sachs	Initiated		Underperform

14-Sep-05	Piper Jaffray	Initiated		Underperform

[gracia]

BIDU kauf 69.36 stop 69.10
BIDU 10:57am 69.09 +0.59 +0.86% 69.08 69.36

[spike_one]

guten tag !! ist hier noch jemand im board oder alle schon weggelaufen??? gruß spike

[schromic]

aus der traum, google hat sich mit der chinesischen regierung geeinigt und wird selber als portal unter .cn antreten, tschüß BAIDU (wird dadurch in china überflüssig).

[topmanagerjrp]

der schoene rene meint dass ding geht ab und wenn der dass sagt hat das hand und fuss!!! Mein Kursziel 30 Euro ende der woche!

[topmanagerjrp]

http://www.wallstreet-online.de/si/?inst_id=2092726&k=baidu&…

hab ich doch gesagt!!! Plus 20 pozent.... Danke Rene

[F 50]

!

Dieser Beitrag wurde moderiert.

[F 50]

recht volatil der wert...

[F 50]

jedoch insgesamt nicht schlecht der traffic von baidu.com im vergleich zu anderen playern...

jedoch auch dort sehr schwankend....typisch china, scheiss politisches system...



http://www.alexa.com/data/details/traffic_details?&range=8y&…