Oct. 26 (Bloomberg) -- Baidu.com Inc., operator of China's most-used Internet search engine, said profit more than doubled as it won market share from Yahoo! Inc. The shares fell after the company forecast sales that missed some analysts' estimates.

Third-quarter net income increased to 181.7 million yuan ($24.3 million), or 5.23 yuan per American depositary receipt, from 85.3 million yuan, or 2.46 yuan, a year earlier, Beijing- based Baidu said today in a statement. Sales also doubled to 496.5 million yuan.

Chief Executive Officer Robin Li boosted the company's share of the Chinese market to almost triple that of closest rival Google Inc. by offering search services for videos and online games. The company forecast fourth-quarter sales of 560 million yuan to 575 million yuan, compared with the average estimate of 573.7 million yuan in a Bloomberg survey.

``Some investors were hoping for a significant upside,'' Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis, said in a telephone interview. He rates the ADRs ``outperform'' and doesn't own any.

Baidu's ADRs fell $14.14, or 4.2 percent, to $320.16 at the end of U.S. after-hours trading. The shares, which have almost tripled this year, dropped $1.70 to $334.30 in Nasdaq Stock Market trading. Each ADR represents one Class A share.

Additions Slow

The number of companies that bought advertisements on Baidu's Web site in the third quarter rose at the slowest pace since its listing in August 2005. It had almost 143,000 such clients as of Sept. 30, a gain of 39 percent from a year earlier. In last year's third quarter, the growth rate was 92 percent.

Research and development spending in the third quarter rose 53 percent to 37.4 million yuan, Baidu said. Sales and marketing expenses climbed 57 percent to 110.3 million yuan.

Baidu may spend as much as $8 million in the fourth quarter for developing and marketing its Japan search service, after having spent almost $7 million through the first three quarters of this year, Chief Financial Officer Shawn Wang said today in a conference call. The Japan site, Baidu's first outside China, is expected to begin in the fourth quarter, he said.

The company also plans to introduce an ``online auction- like'' service next year, CEO Li said during the call. Spending on the service is expected to be ``significantly smaller'' than for Baidu's Japan site, Li said.

Alibaba Competition

Alibaba.com Corp.'s Taobao Web site had an 83 percent share of the online auction market in China during the second quarter, according to research company Analysys International.

``I think it's unlikely Baidu can overtake Taobao,'' said Song Xing, an Internet analyst with Analysys in Beijing. ``There is going to be a lot of longer-term competition between these two companies.''

Baidu's share of the Chinese Internet search market rose to 60.5 percent in the third quarter from 58 percent in the second, according to Analysys International. Google's share climbed to 24 percent from 23 percent, the Beijing-based researcher said.

Yahoo's share fell to 10.4 percent in the third quarter from 11.6 percent in the second, while Sohu.com Inc.'s slid to 1.4 percent from 2.7 percent, according to Analysys.

China was home to 162 million Web users at the end of June, second only to the U.S., after adding 25 million Internet users in the first half of the year, according to the government-backed China Network Information Center.

To contact the reporter on this story: John Liu in Shanghai at jliu42@bloomberg.net

Last Updated: October 26, 2007 01:40 EDT