BEIJING, July 23 /Xinhua-PRNewswire/ -- Baidu.com, Inc. (Nasdaq: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the second quarter ended June 30, 2008. (1)

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(1): This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB 6.8591 to USD 1.00, the effective noon buying rate as of June 30, 2008 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.

Second Quarter 2008 Highlights

-- Total revenues in the second quarter of 2008 increased to RMB802.6 million (US$117.0 million), representing a 100.0 % increase from the corresponding period in 2007.

-- Operating profit in the second quarter of 2008 increased to RMB276.3 million (US$40.3 million), representing a 114.3 % increase from the corresponding period in 2007.

-- Net income in the second quarter of 2008 increased to RMB265.0 million (US$38.6 million), representing an 86.7 % increase from the corresponding period in 2007.

-- Diluted earnings per share ('EPS') for the second quarter of 2008 were RMB7.62 (US$1.11); diluted EPS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2008 were RMB8.46 (US$1.23). Costs and expenses related to Baidu's Japan operations, incurred in both Japan and China, in the second quarter of 2008 were RMB29.5 million (US$4.3 million), which reduced diluted EPS by RMB0.85 (US$0.12).

-- The number of active online marketing customers during the second quarter grew to over 181,000, an increase of 12.4 % from the previous quarter.

'This quarter saw impressive growth for Baidu,' said Robin Li, Baidu's chairman and chief executive officer. 'Our ability to make such progress was due to the appreciation of paid search by our loyal small and medium sized enterprise customers as well as a growing appreciation of search engine marketing by large enterprises in China. The scalability of our business, aided by increasing numbers of large enterprise customers, helped Baidu post record results this quarter, despite some impact from the devastating earthquake this past May.'

Jennifer Li, Baidu's chief financial officer, said, 'In the second quarter of 2008, we were able to produce steady increases in both the number of active online marketing customers and revenues per active online marketing customer. We are also pleased to report that our operating margin improved from previous quarters reflecting the scalability of our search business.'

In order to better serve customers' needs, Baidu recently launched 'My Marketing Center', which is a customized platform integrating industry information, market trends and business and industry news and reports to aid existing customers in their sales and marketing efforts. The platform combines Baidu's vast resources in online information search and aggregation to help customers make better use of search marketing tools to improve customer targeting, increase sales and enhance brand impact. From the inception of the company, Baidu's objective has been to provide the best way for people to find information, My Marketing Center tailors this objective to serve the Chinese enterprises that participate in China's vast and dynamic online business community.

Second Quarter 2008 Results

Baidu reported total revenues of RMB802.6 million (US$117.0 million) for the second quarter ended June 30, 2008, representing a 100.0 % increase from the corresponding period in 2007.

Online marketing revenues for the second quarter were RMB802.2 million (US$117.0 million), representing a 100.2 % increase from the second quarter of 2007. Growth was mainly driven by increases in both the number of active online marketing customers and revenue per customer. Baidu had more than 181,000 active online marketing customers in the second quarter of 2008, representing a sequential increase of 12.4% and an increase of 41.4% from the corresponding period in 2007. Revenue per active online marketing customer for the second quarter increased to approximately RMB4,400 (US$641), a sequential increase of 22.2% and an increase of 41.9% from the corresponding period in 2007.

Traffic acquisition costs (TAC) as a component of cost of revenues were RMB101.7 million (US$14.8 million), representing 12.7% of total revenues, compared to 11.2 % in the corresponding period in 2007. The increase in TAC as a percentage of total revenues primarily reflects the continued growth of revenue contribution from Baidu Union members.

Bandwidth costs as a component of cost of revenues were RMB43.0 million (US$6.3 million), representing 5.4% of total revenues, compared to 7.1% in the corresponding period in 2007. Depreciation costs as a component of cost of revenues were RMB57.8 million (US$8.4 million), representing 7.2% of total revenues, compared to 8.5% in the corresponding period in 2007.

Selling, general and administrative expenses were RMB174.2 million (US$25.4 million), representing an increase of 85.9% from the corresponding period in 2007, primarily due to expansion of the direct sales force and an increase in customer service staff.

Research and development expenses were RMB71.1 million (US$10.4 million), representing a 123.7 % increase from the corresponding period in 2007, primarily due to an increase in research and development staff.

Share-based compensation expenses, which were allocated to related operating cost and expense line items, increased in aggregate by 229.9% to RMB29.3 million (US$4.3 million) in the second quarter of 2008 from RMB8.9 million in the corresponding period in 2007. The increase in share-based compensation reflects a change in estimated forfeiture rate and increased grants to employees.

Operating profit was RMB276.3 million (US$40.3 million), representing a 114.3% increase from the corresponding period in 2007. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB305.6 million (US$44.6 million) for the second quarter of 2008, a 121.7% increase from the corresponding period in 2007.

Adjusted EBITDA (non-GAAP), which is defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non- operating income and share-based compensation expenses, were RMB376.8 million (US$54.9 million) for the second quarter of 2008, representing a 110.0 % increase from the corresponding period in 2007.

Income tax expense was RMB28.6 million (US$4.2 million), compared to an income tax expense of RMB1.8 million in the second quarter of 2007. The increase in tax expenses over last year is due to higher tax rates applicable to some PRC-based subsidiaries as their tax holidays either expired or partially elapsed.

Net income was RMB265.0 million (US$38.6 million), representing an 86.7% increase from the corresponding period in 2007.