Baidu.com (BIDU) Great Results, Some Warning Due to Chinese Storm

Baidu.com (BIDU), the "Chinese Google", reported outstanding numbers, soundly trouncing the analysts estimates. But in a sign of how far reaching this Chinese storm (that no one talks about) is, they are cautioning on next quarter due to power outages and some parts of the country having limited Internet access. Something I did not think about when pondering the storm. That said, this is a temporary issue and I continue to like this name. At what price is always the open question with this very highly valued name. Again, this company has scarcity value, and while not a monopoly - something near to it with Google (GOOG) a distant 2nd, and the Chinese government helping Baidu.com at every turn. They are making a push into Japan, but personally I see no reason for them to be distracted when they have the soon to be world's #1 Internet market to focus on.

Technically, Baidu.com has bounced smartly off its 200 day moving average (mid $240s) after closing below that level for 3 sessions (never a good sign). While I am confidant in the business, if the market falters this is a name that will be thrown on the fire. However, I try to buy smaller lots each time it dips, and let them go on these decent sized rallies. At some point the decent sized rallies will turn into a large rally and I do expect at some point in 08 for a very meaningful run in the name. But we don't appear to be there yet.

• China's top search engine, Baidu.com Inc (BIDU), beat expectations with a 79 percent surge in quarterly profit as it attracted more online advertising in the run up to the Beijing Olympics.
• But the U.S.-listed company said recent winter storms that paralysed wide parts of China and cut power would lead to a 4.3-7.1 percent fall in first quarter revenue. This would be the firm's first recorded sequential fall in quarterly revenue, according to JPMorgan.
• "We still like the stock in the long-run," said JP Morgan analyst Dick Wei in a research note. "But we believe there are some uncertainties in traffic and revenue growth in the first quarter of 2008."
• Although the storms may hit earnings in the short term, the medium-term outlook is strong thanks to Baidu's dominant position in the mainland over Google Inc (GOOG), the global search leader but which ranks a distant No. 2 in China. China will soon become the world's biggest Internet market by users.
• Baidu said fourth-quarter net income rose to 219.8 million yuan, or $30.1 million and 87 cents a diluted share, compared with 123 million yuan in the year-earlier period. (vs 71 cents estimate)
• The company also said it was still interested in listing shares in Hong Kong, but that a flotation was not likely this year, adding that any plan would have to benefit investors, employees and customers.
• The expansion into Japan cut reported profit by 10 cents per share in the fourth quarter, and Baidu planned to spend another $20-25 million in the world's second largest economy in 2008, but did not expect any contribution to revenue this year.

Long Baidu.com in fund; no personal position