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Baidu first-quarter profit misses Wall Street targets

An employee walks past the Baidu company signage outside its headquarters in Beijing, July 26, 2011. REUTERS/Soo Hoo Zheyang
An employee walks past the Baidu company signage outside its headquarters in Beijing, July 26, 2011. REUTERS/Soo Hoo Zheyang

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Baidu Inc, China's largest search engine, posted its slowest profit growth in more than four years, missing Wall Street targets as higher traffic acquisition costs ate into profit margins and the company consolidated results from its money-losing online video unit.

Shares of Baidu, which have fallen about 12 percent since the start of the year, were down more than 6 percent at $85.80 in after hours trading on Thursday.

Revenue in the first quarter rose 40 percent to $961 million, short of the $969.3 million expected by analysts polled by Thomson Reuters I/B/E/S.

Net income in the three months ended March 31 increased 8.5 percent year-on-year to $328.9 million, or 95 cents per American Depositary Share, short of the $1.03 per ADS analysts had expected.

Baidu's softer results this quarter were due to the consolidation of its online video unit, iQiyi, to its overall business. Analysts said they do not envision iQiyi being profitable in the near future given the high costs of the online video sector. Baidu also had to pay more for traffic acquisition due to competition from Qihoo 360 Technology's search engine.

For the second quarter, Baidu estimated revenue of $1.187 billion to $1.216 billion. Analysts polled by Thomson Reuters I/B/E/S had an average forecast of $1.2 billion.

(Reporting by Alexei Oreskovic in San Francisco and Melanie Lee in Shanghai; Editing by Richard Chang)

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