Baidu Q2 Sales Up 60% To $859M, Almost All Down To Search; Focus Is On Mobile And Cloud Ahead

Search is going very strong in China, and leading player Baidu continues to reap the benefits. In its Q2 results, the company reported sales of 5.456 billion yuan ($858.8 million), up 59.8 percent compared to the same quarter in 2011. The company’s chairman and chief exec, Robin Li, said in a statement that Baidu will “maintain momentum” going forward by investing in new technology, new talent, and more products specifically geared to mobile and cloud services. But these are long-term strategies: for all intents and purposes, just about all of Baidu’s revenues today are coming from online advertising and other online marketing activities: the company controls 80 percent of the search market and ads related to that accounted for RMB5.452 billion ($858.1 million) in sales, the company said.

Operating profit was up by 51.5 percent to 2.815 billion yuan ($443.1 million), with net income also up by a healthy 69.6 percent to 2.770 billion yuan ($436.0 million). Diluted earnings per share were 7.86 yuan ($1.24). Both the EPS and revenues comfortably beat analyst expectations.

In recent months, Baidu has started to lay the groundwork for a more active role in mobile. It has not only waded into launching its own devices based on a forked version of Android, but it is partnering to become the primary search engine for other company’s mobile efforts, such as Apple. It’s efforts are also extending into services joint ventures. NTT Docomo earlier this month announced that it had finalized an investment of $22.5 million in a JV with Baidu to develop games and other mobile content in a China-based JV. The first services to come out of this will be in August of this year.

Other notable points:

— In online ads, Baidu said that it has 352,000 active online marketing customers, up 18 percent on last year and nearly 10 percent up from last quarter. The fact that the customer base is growing slower than revenues indicates that as the Chinese online market continues to mature, businesses are actually spending more on things like search ads to reach those consumers. Indeed, revenues per customer were up 34.8 percent to
RMB15,500 ($2,440).

— R&D investment is on the rise. It was up by 82.7 percent on last year to RMB545.5 million ($85.9 million), which Baidu said was largely down to more staffing.

— Cash position. The company’s cash position continues to improve, too. This is something to keep an eye on for Baidu, which may well start to make some more acquisitions to help further its mobile and cloud strategies. The company’s cash, cash equivalents and short-term investments are now RMB18.257 billion ($2.874 billion).

— Q3 outlook. More rising numbers, but not as big as the ones of this quarter. Baidu says it expects to generate total revenues between RMB6.245 billion ($983.0 million) and RMB6.410 billion ($1.009 billion), or 49.6% to 53.5% year-over-year increase.
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