To: Bill Harmond who wrote (30696 ) 10/31/2006 3:45:43 PM From: Bill Harmond Read Replies (1) | Respond to 31-Oct-06 14:13 ET In Play Baidu.com: Earnings Preview (87.63 -8.36) -Update : Today after the close BIDU is scheduled to report Q3 results, with analysts expecting EPS of $0.28 on revs of $30.15 mln. On 10/16 Thomas Weisel said their Beijing checks suggest that the renewal rate among Baidu's customers has been as high as 90-95%, compared to 85-90% for Google (GOOG) and around 80% for Yahoo (YHOO). They say this is an encouraging sign of customer acceptance of search advertising as a product category. The firm says while they remain watchful of Baidu's execution in this fast growing market, especially related to its channel strategy, they believe the number of new customer additions will continue to increase during 3Q and into 4Q. They estimate the co is tracking toward mid-30% sequential growth for 3Q, modestly above the high end of its revenue guidance of 25-29% q/q, and are expecting similar revenue guidance for 4Q at the 25-29% range, driven by volume growth and in part by stronger seasonality... As mentioned at 10:19 Piper Jaffray said they have learned that there is the potential of some increased risk for Baidu's Q3 performance. The firm said some of their most recent contacts suggest that the change in pricing during the quarter may have caused some drop off in a number of customers and hence the top line may be weaker than expected. They note that channel information from China is sometimes imprecise but their conclusion is that there is some increased risk for this afternoon's earning release. They do not believe the Beijing distributor issue is the main cause of any potential weakness. If the quarter is indeed somewhat weaker than expected, then the firm could see Q4 numbers to be lowered as the guidance may be less than the current expectations. The firm does believe that even if the above scenario is true, the long term opportunity for Baidu remains solid and as a such, long-term holders may in fact find any major weakness in stock as a buying opportunity.
