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Baidu profit doubles in record quarter

By Julianne Pepitone, staff reporter

NEW YORK (CNNMoney.com) -- While Google struggles with the Chinese market, local search giant Baidu is soaring to new heights. Baidu said Wednesday that its earnings doubled in the most recent quarter as its sales hit a record high.

Baidu reported net income of 837.4 million yuan ($123.6 million) for the quarter ended June 30, up 119% from a year earlier. Sales rose 74% to 1.9 billion yuan ($282.3 million).

Investors are taking note: Baidu now has a market capitalization of $25.5 billion -- comfortably ahead of Yahoo (YHOO, Fortune 500) and edging close to eBay (EBAY, Fortune 500).

Baidu (BIDU) split its stock 10 to 1 in May, just weeks after the company said that its profit had more than doubled since January. That's when rival Google (GOOG, Fortune 500) first announced that it was considering leaving China. In March, Google moved its servers out of mainland China and said it would stop censoring its search results in the country.

As a result, Baidu got a significant boost in the Chinese Internet search market. At the end of last year, Google had 36% of market share and Baidu had about 58%. But in the first quarter alone, Baidu gained an additional 6 percentage points of the market.

The company said its total online active marketing customers grew to 254,000, a 25% rise from 2009.

Baidu CEO Robin Li was upbeat about the company's ability to keep growing its customer base, noting the massive growth potential of the market in China, where nearly 70% of the country is still offline.

"We are just getting started," he said during a conference call. In the future, "Baidu will be come ever more central to China's Internet ecosystem."

But earlier this month, Google said it had renewed its license with the Chinese government and will be allowed to continue operating in the country -- though the search giant did not make any concessions regarding censorship.

It remains to be seen what effect the Google/China détente will have on Baidu's newly improved market share.

Meanwhile, Baidu's U.S. rivals have posted disappointing results. Earlier this month Google reported quarterly profit that rose from its year-ago results but missed Wall Street forecasts, while Yahoo's (YHOO, Fortune 500) sales missed estimates. To top of page

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