Baidu: Still a Strong Stock, Despite Increased Competition
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Baidu (NASDAQ: BIDU) remains one of the best options for stockholders interested in maintaining a hold in the tech industry. You don't have to take my word for it. Baidu will very soon be reporting its quarterly results, and there are a number of reasons why it remains a stock to watch.
What makes Baidu a particularly interesting stock to keep on your radar is its continued and speedy growth. The company has yet to disappoint and there is no reason why expansion cannot continue unabated. Baidu has only once fallen short of analyst expectations, since it came into being.
Although Baidu has competitors in the form of Google (NASDAQ: GOOG) and Sohu.com (NASDAQ: SOHU), among others, these companies are far from reaching the same level of market value that Baidu has, thus far, managed to achieve in China.
Believe it or not, there is still a lot of room for growth for the Chinese search engine. Even though competitors are attempting to take its slice of the pie, the actual number of people using the internet in China increases everyday. This means that even if other search engines capture the commitment of some web crawlers, there are more clamoring to the ever-popular Baidu.
In other news, there are rumors floating around that Baidu and Foxconn (a manufacturer of iPads and iPhones) are engaged in secret meetings related to producing a Baidu-branded phone. The question on the minds of stockholders, then, is whether or not this is a good time to buy Baidu stock for the long-term. A Baidu phone would take some time, not only for development but for proper marketing. Needless to say, however, the possibilities are enormous for the collaboration.
An important consideration to take into account here, is that Baidu is not cornering the Chinese market simply because it is the best. Its success may be more due to the well publicized exodus of Google from the country, as well as Baidu's disregard for copyright laws. Baidu was able to capitalize in already existing technologies. This begs the question, then, if the company is ready to design its own smartphone, and if that phone can make a truly relevant splash in the market. Currently, Baidu is not even the most popular search engine for mobile phones in China.
In order to be a meaningful force in the mobile phone market, Baidu will have to team up with a more relevant smartphone developer. If it can find a trusted partner and can create a phone without violating copyright laws, the international sales possibilites are, again, enormous. However, it will start with China, Baidu's home, and a market that is unaccustomed to see the search-engine giant in the cell phone arena. China's response would go a long way in predicting sales beyond the world's largest country.
On the downside, Rakuten, Japan's biggest e-commerce company, said it will terminate Rakuten.cn, a company launched alongside Baidu. This will have negative consequences for the company. Baidu may now find it a lot harder to challenge rivals such as Alibaba.com without its helping hand.
Let's look into what Baidu's competitors are up to at the moment. Rumor has it that Sohu plans to team up with Tencent and Qiyi in order to purchase the rights to broadcast popular shows. Being able to show these popular shows is an important part of being a successful player in the online video arena in China. However, smaller players like Sohu, Tencent, and Qiyi, are seldom able to purchase these rights on their own. If this is more than rumor, and if the deal goes through, then Sohu will have a foot up in the Chinese market, although it is unlikely that this company will become a serious threat to Baidu's dominance for a long time to come.
Google, the worldwide search engine phenomenon and second place rival to Baidu in China, plans to get ahead in the tech industry by introducing a rival to Dropbox. The new service, a "cloud storage" offering called Google Drive, will allow people to store their documents and photos online in a place where they will always have access to them. From the beginning, consumers will have the option of either getting a premium paid package or using the free option. The free service gives consumers 5 Gigabytes free storage, while the paid service differs according to the amount of money consumers pay monthly.
Tech users are excited about the new prospect, except for those in China. The service has already been blocked by "The Great Firewall of China" and remains inaccessible to users there. It's unfortunate that Google will not be able to make headway into the Chinese market, as the new service is a promising advancement for the American giant. The news, however, is beneficial to Baidu, as it offers the homegrown search engine some government-backed freedom to maintain its dominance.
Yahoo! (NASDAQ: YHOO) appears to be having difficulty maintaining its foothold in the Asian market, specifically in Japan. Consequently, Yahoo! has decided to sell its stake in Yahoo! Japan. Yahoo! reached this decision for two reasons. Firstly, it will allow the company to free up money for shareholders. Secondly, it will allow the company to simplify its ownership structure.
Baidu and other major competitors such as SINA may soon be facing a new competitor in the market in the form of The People's Daily which will soon be listing its online business on the stock exchange. The People's Daily is the mouthpiece of the communist party and this development has the potential to be a genuine threat to other companies in the industry.
Baidu will be tasked with facing the new government-backed competitor. But, unless the government takes large-scale action, Baidu should remain the country's most used search engine. With millions joining the internet age every day in China, look for Baidu to keep growing until something drastic comes to cut it down.
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