Baidu Falls as China Web Competition Saps Growth: New York Mover

Baidu Inc., operator of China’s most popular Internet search engine, fell in after-hours New York trading following the slowest profit growth in almost four years.

The company dropped as much as 7.8 percent to $99.90 after saying fourth-quarter net income rose 36 percent. Inc., operator of China’s second-biggest video site, also tumbled 5.5 percent yesterday because of an earnings forecast that trailed analysts’ estimates.

Chinese Internet companies have stepped up spending on development and content as they contend with cooler economy and slower advertising growth. Beijing-based Baidu also faces growing competition in its main search business from Qihoo 360 Technology Co. and

“The short-term prospects for Baidu are pessimistic,” Eric Qiu, an analyst at Guosen Securities Co. in Hong Kong, said in a note today. “Years of rising ad prices are coming to an end.”

The company’s sales growth will probably slow in the first two quarters of this year, Qiu said. Baidu forecast first-quarter revenue of 5.9 billion yuan to 6.1 billion yuan, about in line with analysts’ estimates. Net income in the three months ended December rose to 2.8 billion yuan, matching the average of 11 analyst estimates compiled by Bloomberg. The profit increase was the smallest since the first quarter of 2009, according to data compiled by Bloomberg. yesterday said first-quarter profit excluding some items will probably be 50 cents to 55 cents a share. The average of five estimates on that basis was 77 cents, according to data compiled by Bloomberg. Labor and bandwidth costs are rising as the Beijing-based company grows and traffic increases, it said.

Baidu Mobile

Baidu intends to add more staff this year as it develops new products, particularly for mobile users. The company may also make more acquisitions following purchases including an online travel company and a stake in a video website.

“Our key strategic focus in 2013 is mobile,” Chief Financial Officer Jennifer Li said on a conference call today. Any acquisitions “would follow our overall strategy,” she said.

Baidu’s daily query market share fell 8 percentage points to 79 percent within a month of the introduction of Qihoo’s rival engine, Citigroup Inc. said in an Oct. 31 report, citing its own research and iResearch data.

Before it's here, it's on the Bloomberg Terminal.