Thursday, April 26, 2007

Badiu reported a so so quarter, stock jump after hours

Baidu reported a so so quarter, though earning was more than doubled.

Here is revenue growth table for the last six quarters:

Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07

14.2 16.9 24 30.3 34.8 35.7 49.98
Y/Y 172% 197% 175% 169% 136% 103% Est
Q/Q 29% 18% 41% 25% 15% 2.60%

In the after hours trade, Baidu's stock jumped by about 20% from closing price.

The revenue growth nearly stopped in the latest quarter. Sequential customer addtion was a miserable 3.7% comparing with 5.9% increase from previous quarter.

Brain drains continues after CTO and PR chief, both credited with the Baidu's rise to dominance in Chinese internet market, left the company, COO David Zhu announced decision to leave.

Google is sweeping up the largest Chinese carriers.

Baidu's Japanese operation is nearly grounded at start.

With many cracks appearing in Baidu's fundamentals, why the stock jumped in the after hour trade?

Clearly, investors were heartened by the last item in the table, the projected 40% revenue jump quarter over quarter.

Why Baidu is so confidently projecting such a huge jump in sequential growth? The answer is likely one word: Olympic

In the last month, there are dramatically increased display ads on almost all Baidu properties. The most promised land is now the Baidu News. Though no statistics available in these areas, it is likely that Baidu News is the dominant destination for Chinses internet users. Unlike the ads free Google News, Baidu News shows both display and contextual ads.

My guess is that several Baidu top properties are already overbooked for display ads that came from many large multinationals who are ready for the 2008 Olympic in Beijing. Many travel related businesses are probably ready to tip in too.

A recent quote from a Google rep indicated that Google's China revenue is in tripling pace. The super hot Chinese economy is what really helping Baidu. As a Chinese saying: Rising water lifts the boats.

If Robin Li's team work more deligently and more focused on the Chinese market, with a domestic IPO to raise necessary capital for expansion, the Olympic games in 2008 could make Baidu a real star in the huge Chinese internet market.


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