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Baidu.com profit jumps 42 percent, shares plunge

Baidu.com profit jumps 42 percent, shares plunge

Baidu Inc., China's leading search engine, said yesterday that quarterly profit jumped 42 percent but its shares dived after warning revenue might temporarily be hurt as it switches to a new advertising system. Income for the quarter ending Sept. 30 was 492.9 million yuan (US$72.2 million), or 14.14 yuan (US$2.07) per share, the Beijing-based company said. Revenue rose 39.1 percent from the same period of 2008 to 1.3 billion yuan (US$187.3 million).
The company cautioned that it expects a "temporary negative impact" on fourth-quarter revenue as it completes the transition to its new Phoenix Nest online advertising system and phases out an older system. That sent Baidu shares plunging 13 percent in after-hours trading on the U.S.-based Nasdaq market. "With 70 percent of customers already using Phoenix Nest, we believe this is the right time to complete the switch to the new system," said chairman and CEO Robin Li in a statement.
"We are confident that Phoenix Nest will deliver tremendous benefits to our users, customers and Baidu." Chinese Web services have continued to report revenue growth this year as a government stimulus plan helps to buoy consumer spending despite the global economic slowdown.
China has the world's biggest population of Internet users, with 338 million people online as of the end of June, according to the country's government-sanctioned Internet research group. The figure, already larger than the entire U.S. population, is still growing at double-digit annual rates. Baidu has some 60 percent of China's search market, compared with less than 30 percent for the No. 2 competitor, Google Inc., according to Analysys International, a Beijing research firm.