Baidu.com 4Q earnings grow fivefold

China's leading Internet search engine, Baidu.com Inc., reported a fivefold increase in fourth-quarter net income as online marketing revenue more than doubled.

The company's first-quarter revenue forecast fell short of Wall Street estimates, though company Chairman and Chief Executive Robin Li attributed that to the Chinese New Year and a transition to direct sales advertising.

"We do expect stronger growth for the rest of the year," Li said. "Not necessarily in absolute growth percentages, but relatively we do expect a better figure going forward."

Fourth-quarter earnings grew to 122.8 million yuan ($15.7 million), or 3.54 yuan ($0.45) per American Depositary Share, from 24.5 million yuan, or 0.71 yuan per ADS, during the prior-year quarter.

Analysts polled by Thomson Financial expected earnings of 32 cents per ADS.

"We are pleased to deliver another quarter of robust results as our rapidly growing brand recognition and our focus on providing the best user experience allowed us to strengthen our leading position in Chinese search," Li said.

Baidu, which holds more than 60 percent of the Chinese Internet search market, plans to spend $15 million in 2007 on its expansion into Japan, said Li.

The company was approaching the crowded Japanese market cautiously, but as a successful, relative latecomer to the Chinese Internet scene, "we are familiar with how to play catch-up games," he said.

Baidu's revenue more than doubled to 271.3 million yuan ($34.8 million) in the fourth quarter, from 114.9 million yuan during the year-ago quarter. Online marketing revenue more than doubled to 269.9 million yuan ($34.6 million).

Analysts expected revenue of $34.9 million.

Baidu's capital spending of 130 million yuan ($16.8 million) in 2006 will likely see a "significant increase" in 2007, said Shawn Wang, the company's chief financial officer.

"We are very confident in that. We believe it's time to make investments," Wang said.

China's Internet market is the world's second-biggest after the United States, with more than 123 million people online. After Baidu, No. 2 Google Inc. has about 23.5 percent of the Chinese search market, according to government figures.

The number of active online marketing customers grew 6 percent to more than 108,000. New products include Baidu Blog Search and Baidu Favorites.

During the quarter, Baidu.com expanded its entertainment business, launching a venture with EMI Music to let users listen to streaming music for free, and another with Viacom Inc.'s MTV Network, to distribute music videos and other programming online.

Li said Baidu was open to potential acquisitions or investments as it expands in the news, music and online video fields but had no specific news to report at the moment.

For the year, net income grew six-fold to 301.8 million yuan, or 8.75 yuan per ADS, from 47.6 million yuan, or 1.49 yuan per ADS. Revenue more than doubled to 837.8 million yuan ($107.4 million), from 319.2 million yuan in 2005.

The company said it expects first-quarter revenue between 265 million yuan ($34 million) and 275 million yuan ($35 million;euro26.8 million), while analysts project revenue of $38.9 million.

Shares fell sharply in the after-hours session following the news but then rose 60 cents to $115.60 from the regular session close of $115 on the Nasdaq.