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Net Names Revived in China

BEIJING -- Heading into what looks to be a strong earnings season, investors are warming up to China's tech names that lost ground this summer.

Internet portal Sohu (SOHU - Get Report) kicked things off last week by beating expectations with a 29% revenue gain.

On Tuesday after the market closes in New York, search engine Baidu (BIDU - Get Report) is expected to deliver sales improvements of similar heft.

Just in the past week, a handful of high-profile names have vaulted on rosy expectations for the third quarter.

Between Oct. 23 and Oct. 30, shares of Sohu popped 12.3%, Baidu rose 9.9%, and Tom Online (TOMO) jumped 16.2%.

On the wireless front, the market has now had time to digest a slew of earnings warnings related to the regulatory overhaul in China.

In fact, Sohu's wireless-services business fared better than expected, though the company chalked that up to its own execution rather than any easing of the new rules.

Taking a long-term view, it's worth noting that Chinese policymakers are constantly fine-tuning the rules, and regulatory changes are "part of the landscape of doing business in China," says Andrew Lee, a Shanghai-based Internet and wireless consultant.

That said, analysts are still shying away from wireless services.

They're far more enthusiastic about advertising plays, which are benefiting from the ongoing shift of ad dollars from print to the Internet, plus a corporate appetite for promotions tied to the Beijing 2008 Olympics.

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