Baidu.com Inc, China's top search engine, yesterday posted an analyst- forecast-beating 86.7 percent surge in quarterly earnings, boosted by Internet traffic growth and rising revenues from advertisers.

Shares also surged.

Net income for the second quarter was 265 million yuan (US$38.6 million), or 7.62 yuan per share, versus 141.9 million yuan a year earlier.

Analysts polled by Reuters estimated earnings of US$35.5 million.

Revenue doubled to 802.6 million yuan, Beijing-based and Nasdaq-listed Baidu reported.

"Our ability to make such progress was due to the appreciation of paid search by our loyal small and medium-sized enterprise customers as well as a growing appreciation of search engine marketing by large enterprises in China," Chairman and CEO Robin Li said.

Gross margin rose to 65.1 percent, up from 60.4 percent in the first quarter.

Li said he saw some economic slowdown and closure of small and medium-sized enterprises in southern China, while believing the strong growth in search would outweigh any macro slowdown.

Baidu dominated China's Web search market with a share of 64.4 percent in the second quarter, up from 60.7 percent in the previous quarter, according to Analysys International.

Google Inc occupied 26.1 percent while Yahoo China had 5.5 percent.

"We maintain our view that Baidu shall see high growth in quarters ahead, with higher search adoption and Internet penetration," JPMorgan analyst Dick Wei said yesterday.

Li is introducing more non-search services, such as online games, to Baidu to win more users in China, which passed the United States in February to become the world's largest Internet market by users.

Baidu also forecast third-quarter revenue to be in the range of 905 million yuan to 935 million yuan, on expectation the temporary changes in user-behavior during next month's Beijing Olympics would boost its business.

"We believe the event will have long term beneficial effect on the Internet industry as more and more people will appreciate the Internet as an effective tool to find information," it said.

Baidu shares jumped as much as 13 percent in after-hours trading following the results announcement.

(Shanghai Daily July 25, 2008)