By Gerald Whal
Beacon Contributing Writer
China�s leading online search engine Baidu Inc. (Nasdaq: BIDU) posted an unexpectedly large jump in first-quarter earnings, also providing guidance of further rapid growth presumably due to the partial exit of rival Google Inc. (Nasdaq: GOOG).
In an after-hours announcement Wednesday, Baidu said it more than doubled profits for the quarter ending March 31 to RMB480.5 million (US$70.4 million) from RMB181.1 million for the equivalent period last year. Revenue skyrocketed to RMB1.29 billion for the quarter, an approximately 60 percent increase year-on-year.
The China-based Baidu exceeded analysts estimates by a wide margin, suggesting nervous Google advertisers have jumped to the Chinese search engine juggernaut slightly faster than expected.
“It’s not going to happen overnight but over time Google’s traffic will decline gradually and over time we expect one-third of the advertising dollar to shift to Baidu,” said CLSA analyst Elinor Leung in Hong Kong.
Guidance for the second quarter includes similar revenue growth of between 67 percent and 70 percent, or $268.1 million and $274 million. The Street expects $240.38 million.
“Baidu’s first-quarter results beat our and consensus numbers nicely, but second-quarter revenue guidance is a blowout number,” said Susquehanna Financial Group analyst Ming Zhao in a note to clients.
Baidu�s unexpected growth and mushrooming financial metrics follow Google�s decision to move its Chinese Web search operation to Hong Kong from its mainland site amid complaints by Google and counter-complaints by Beijing of improper operations. Google contends Beijing is unfairly filtering content to mainland user, while Beijing counters by invoking sovereignty prerogative, and at one point in the back and forth charges, also insinuating national security concerns regarding Google�s data collection capabilities and practices.
Following warnings in January of a possible pullout, Google began shutting its mainland servers and rerouting search inquiries to its Hong Kong servers in March to avoid Beijing�s filtering system referred to as the �Great Firewall.� Google said the Great Firewall had disrupted access to Google search results from time to time.
Market share search revenue between the two competitors shifted during the first quarter. Google slipped to 31 percent for the first quarter from 35.6 percent for the fourth quarter, while Baidu saw its share rise to 64 percent compared with 58.4 percent for the fourth quarter of 2009, according to Beijing-based research firm Analysts.
Analysts and Baidu management speculate, however, that Google�s pullout of the Chinese search business, estimated to service 400 million users, will be of little marginal benefit to Baidu.
�The performance of Baidu is largely driven by our own execution, especially when we already have north of 75 per cent of the total traffic share,� said Baidu CEO Robin Li.
�If we can execute well, we will certainly benefit from the growth opportunity of this market. If not, there is lots of competition ready to take up the opportunity,� he said.
Competition will be plenty and well-healed, say analysts familiar with the rapidly evolving Chinese Internet market.
Li and industry analysts suspect Taobao, a unit of Alibaba Group, is gearing up to compete with Baidu.
Tencent, China�s largest Internet company by capitalization, introduced its own search engine, which potentially will begin competing with Baidu as early as next year.
Google�s departure had an immediate effect on Baidu�s traffic, with some top-traffic sites switching its search engine to Baidu following Google�s announcement. But management won�t be resting on its past accomplishments and good fortune.
�We will reward those [partner Web sites] who bring incremental traffic,� said Baidu Chief Operating Officer Shen Haoyu. �Although the competitive environment has changed, there are still other search engines who want to come in. We need to be on the lookout.�
No comments:
Post a Comment