Chinese internet search provider Baidu (Nasdaq: BIDU) continued its winning earning ways with another impressive report. The company increased many of its key numbers by 40-50% in the year-over-year quarter. The stock continued to rise after the news. (Thinking about adding a technology exposure to your portfolio? Read Technology Sector Funds.)

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Earnings And Revenue Robust

Baidu saw its fourth-quarter revenue increase by 39.8 percent to $184.7 million. Net income was $62.7 million, an increase of 48%. Diluted earnings per share were $1.80 for the quarter. The full implementation of Phoenix Nest, similar to Google (Nasdaq: GOOG) Ad Words, helped boost results beyond expectations. Baidu increased its active online marketing customers by 13.2 percent over the same quarter last year to 223,000. The Phoenix Nest transition to what management had deemed its premium advertising platform was a key objective of the past year.

Full Year And Beyond
The full year's numbers were similar to the quarter's: Net income was $217.6 million, a 41.7 percent increase from a year earlier. Diluted EPS was $6.26 on revenue of $651.6 million. The outlook for next quarter pegs revenue at a 48-52 percent increase over last year.

Often called the "Chinese Google", Baidu has been touted as the beneficiary of Google's troubles with censorship in China. More than that, the supposed market share of Google in China is actually closer to only 10-15 percent rather than the 36% often quoted.

Baidu doesn't just dominate its foreign competitors, it also wins out over its local rivals. Sina (Nasdaq: SINA) and Sohu (Nasdaq: SOHU), two prominent internet display ad companies, don't have Baidu's search emphasis. Baidu is able to leverage this into more concentrated leads for advertising revenue, much as Google does over its competitors in the U.S.

Dominant But Narrow?
Baidu's crushing search business in China hardly means these other internet companies aren't worthwhile. Sina and Sohu still have solid online advertising platforms. Tencent (OTCBB: TCEHY), an intriguing company with popular instant messaging, is even developing its own search engine.

Sohu, which is doing well but without the outsized profits of Baidu, is in the lucrative online gaming space through its 74 percent stake in Changyou (Nasdaq: CYOU). The online gaming market is well-developed in China, something not yet seen to the same extent in the U.S. Sina also has its admirers as a recent upgrade shows.

The Minor Negatives
A negative factor for Baidu, which would only potentially impact it down the line, is its lack of innovation. Thus far, the company has been tremendous at executing and performing in search. As this black hole portal, it pulls enormous business into its vortex. But these other Chinese internet companies are staking out important areas that should only grow in importance in the future.

The other negative is the stock price. With a recent price of more than $485, Baidu is selling at roughly 75 times earnings. The earnings growth rate of 40-50 percent is phenomenal, but the air can get a little thin with that kind of multiple, where even a small event can be of seismic importance to the stock price.

Bottom Line
Investors should know that Baidu is a great company, though, and not let the minor negatives deflect them from the stock. Wait for a significant pullback in the stock price and multiple, and then be ready to pounce. (Strategic acquisition is becoming a part of doing business. To learn more, refer to M&A Competition Is Cutthroat For Acquirers.)

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