Baidu Inc., operator of China’s most popular online search engine, reported second-quarter profit that beat analysts’ estimates.  Net income for the three months ended June more than doubled to 837.4 million Yuan ($123.6 million), or 2.40 Yuan per American depositary receipt (ARD), Baidu said today in a statement. That exceeded the 710.4 million Yuan average of 14 analysts’ estimates compiled by Bloomberg. In the year-earlier period, Baidu’s profit was 383.3 million Yuan, or 1.10 Yuan per ADR.

Outperforming Rivals: Baidu’s ADRs fell less than 1 percent in Nasdaq Stock Market trading today before the earnings announcement. The stock has outperformed online rivals in China this year including Tencent Holdings Ltd., the country’s biggest Internet company by market value, and Ltd., the leading local e-commerce operator.  Sales during the three-month period were 1.9 billion Yuan, compared with 1.1 billion Yuan a year earlier. Revenue is expected to rise to as much as 2.26 billion Yuan in the third quarter, Baidu said. This compares with the 2.18 billion Yuan average of analysts’ estimates compiled by Bloomberg.

The adoption of Baidu’s Phoenix Nest advertising system also boosted the company’s sales, according to Citigroup’s Yap. In December, Baidu introduced the program, which is designed to facilitate the sales of online-search keywords to clients.  Baidu accounted for 70.8 percent of China’s search-engine market by revenue in the second-quarter, rising from 67.8 percent three months earlier, according to research company iResearch. Google’s market share dropped to 27.3 percent from 29.5 percent.

In March, Google defied the Chinese government by ending self-censorship of its local search service and redirecting users to an unfiltered Hong Kong site. The U.S. company won the renewal of its Internet license in China this month after submitting a revised application on the grounds that it would now point users to the Hong Kong site, instead of redirecting them automatically.

China had an estimated 420 million Internet users at the end of June, an increase of 36 million from six months earlier, according to data from the government-sponsored China Internet Network Information Center. Source:  Bloomberg

BIIA Newsletter July II – Issue