PREVIEW-Baidu poised to beat Street; portals, games subdued

* What: Q2 earnings for China Internet companies

* When: Baidu to report July 21, Sohu July 26

* Google turmoil seen providing incremental support

* StarMine SmartEstimate show 2.9 percent above consensus

By Melanie Lee

SHANGHAI, July 19 (BestGrowthStock) – China’s top search engine
Baidu Inc (BIDU.O: ) could post robust quarterly results ahead of
expectations as it capitalises on better monetisation from its
new advertising system and gains from Google’s (GOOG.O: ) spat
with China.

After some initial teething problems, Baidu’s Phoenix Nest
advertising word system began to gain traction in the middle of
this year, helping Baidu to consolidate its position as China’s
leading search operator with 70.8 percent of the market.

That position, coupled with the partial withdrawal from
China’s search market by No. 2 player, Google, could keep
Baidu’s earnings growing at a healthy clip in the next few

Baidu, whose name comes from an ancient Chinese poem,
previously gave guidance for revenue between $268.1 million to
$274 million in the second quarter.

Analysts polled by Thomson Reuters/I/B/E/S expect Baidu to
report on average earnings per share of 29.7 cents and revenue
of $271.4 million, an increase of 84.5 percent and 68.6 percent
over the previous year, respectively.


For StarMine comparative data click:

For a graphic on Baidu and Google’s share of China search

revenue click here:

Analysts with the best track records are even more bullish.
Baidu’s earnings could come in 2.9 percent above Street
estimates for the second quarter, according to StarMine’s
SmartEstimates which put more weight on recent forecasts by
top-rated analysts.

“My sense is their quarter is going to be very strong
because of increased customer traction on Phoenix Nest, the
Google sufferings in the Chinese market and the overall
improving China economy,” said Paul Wuh, an analyst with
Samsung Securities.

Eric Wen, head of Internet and Media research at Mirae
Asset expects Baidu to beat revenue consensus by 5 percent and
the firm’s own guidance by 2-4 percent.

Baidu told Reuters earlier this month it expects only
marginal gains from rival Google’s (GOOG.O: ) problems in China.

Those problems saw Google, which trails Baidu by a wide
margin in China’s 7 billion yuan ($1 billion) search market,
shutter its search site earlier this year, even
though it later won permission to keep operating the page with
a link to an uncensored site in Hong Kong. [ID:nSGE6680F9]

Baidu’s shares have rocketed about 90 percent since Google
first said in January it might leave China because of
censorship concerns and a hacking episode that it said
originated in China.


China’s leading portal Sina Corp (SINA.O: ) is set to report
quarterly revenue of $92.6 million, in line with the firm’s
estimate of $90-$93 million, as the Chinese advertising market
slowly recovers and its “miniblog” platform takes off, analysts

Launched last year, Sina’s Weibo with its huge user traffic
is a key growth driver for the future, said Credit Suisse
analyst Wallace Cheung in a research note.

China’s online game plays such as Sohu’s (SOHU.O: ) gaming
unit (CYOU.O: ) and Shanda Games (GAME.O: ) are
expected to report softer profits due to seasonality and a lack
of new content.

Also weighing on game stocks recently was an announcement
by China Ministry of Culture of new online regulations that
have been in the works for the past year.

Analysts expect major content updates and expansion packs
to drive growth in the second half of the year.

Sohu’s Changyou is expected to launch the industry’s most
hotly anticipated title this year, Duke of Mount Deer, in the
third quarter.
($1=6.775 YUAN)

PREVIEW-Baidu poised to beat Street; portals, games subdued