Baidu poised to beat revenue forecast; portals, games subdued

After some initial teething problems, Baidu's Phoenix Nest advertising word system began to gain a grip in the middle of this year, helping Baidu to consolidate its position as China's leading search operator with 70.8% 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 quarters.

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

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

Analysts with the best track records are more bullish. Baidu's earnings could come in 2.9% above Street estimates for the second quarter, according to Star Mine's Smart Estimates, 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% and the firm's own guidance by 2-4%.

Baidu told Reuters earlier this month that it expects only marginal gains from rival Google's problems in China.

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

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

China's leading portal Sina Corp is set to report a 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 said.

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 players such as Sohu's gaming unit Changyou.com and Shanda Games 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's culture ministry of new online regulations that have been in the works for the past year.