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From the Survey: Baidu Inc.
Baidu Inc. (BIDU) is a leading Chinese-language Internet search provider. The word “Baidu” originated in a more than 800-year old poem from the Song Dynasty. “That poem compares the search for a retreating beauty amid chaotic glamour with the search for one’s dream while confronted by life’s many obstacles. ‘…hundreds and thousands of times, for her I searched in chaos, suddenly, I turned by chance, to where the lights were waning, and there she stood.’ Baidu, whose literal meaning is hundreds of times, represents the persistent search for the ideal.” This persistence will likely come in handy considering the depth and complexity of the Chinese language. For example, there are 38 different ways of saying “I”. Thus, given the language, it is clear that only a superior search engine will provide meaningful results.
The company’s main focus is on algorithmic, enterprise, pay for performance, news, MP3, and image searches. Its primary revenue stream is derived from online marketing. It has been referred to as the Chinese Google (GOOG), one of its main competitors. Other key competitors include companies like Yahoo (YHOO) and Microsoft (MSFT - Free Analyst Report), the owner of Bing.com. One feather in Baidu’s cap is the home-team advantage in regard to dealing with the Chinese government. That entity has been trying to censor the results of web searches, and while Baidu probably considers that just part of doing business, some of its competitors have been unwilling to comply with those requests, which may prove to be detrimental to their success in the region.
The Chinese-based company was established by Robin Li and Eric Xu in 2000. It went public in August of 2005. Lead underwriters for the initial public offering were Goldman Sachs (GS) and Credit Suisse First Boston (CS). Baidu conducts its operations in China principally through Baidu Online Network Technology (Beijing) Co. More recently, the company launched a Japanese search service at www.baidu.jp. Additionally, it offers Baidu Hi, an instant messaging service (similar to Gchat) and Baidu Youa, an e-commerce platform. At this point, Baidu has a seemingly scalable platform that should prove beneficial in the near and long term.
Indeed, the company’s earnings growth prospects over the coming 3- to 5-year time frame are attractive. But, investors may want to be patient, since the stock skyrocketed since the beginning of 2009. Thus, interested investors with a long-term strategy may want to wait for a better entry point. Still, all told, Baidu offers a nice stake in the Chinese marketplace, and may well appeal to investors looking for global diversification.