Has Baidu Pressed the Correct Recovery Button?
Subhadeep is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Things have not been looking up lately for Chinese internet search giant Baidu (NASDAQ: BIDU), the company that seemed too-big-to-fail on home turf just a short while ago. At the same time, when you are looking to cash in on an opportunity, Baidu’s shares, if purchased in modest quantities, might be a very good long term option. Here’s why…
As everyone is aware by now, the Street was not kind to Baidu’s share value, as it fell sharply, post the news that rival Qihoo 360 Technology’s (NYSE: QIHU) proprietary search engine had already eaten into a considerable portion of the former’s core business. That seems to have taught Baidu to stop being complacent, which it had every right to be, considering the fact that almost 80% of China’s search engine market in terms of revenue, is controlled by Baidu, with Google (NASDAQ: GOOG) pulling out of the Chinese market following government restrictions. But, here’s the catch. That 80% comprises the desktop and laptop search engine segment, not the mobile phone and tablet-based search functionality, where the company has a modest share of around 35%. And now on top of that, the Qihoo 360 move happened, denting Baidu’s hopes of its possible mobile-based search engine dominance even further. As it is, the situation was complicated by the presence of peer Tencent Holdings, which had roughly a 16% market share in mobile browsing in China in the first quarter of this year, according to data released by Baidu itself.
But, having said all that, the good thing is that this is one company that is simply not going to take it all lying down. Baidu’s reaction has been pretty sharp which is evident from its launch of the Baidu Explorer, the new mobile browser that’s claimed to be around 20% faster than existing mobile browsers, including Google’s Chrome and Apple’s Safari. The software does boast of a few unique features, including the ability to watch videos even without a media player, and the capability to run as many as 100,000 web-based applications through the browser itself, eliminating the need to install any additional software. Baidu even backed up its launch with plans to invest in a cloud-computing center, further details of which are still awaited.
Baidu’s probably doing the right thing with its ‘nip them in the bud’ attitude. After all, the stakes are pretty high as well. The most prolific internet-based market worldwide, China is undergoing a distinct shift as the number of people who surf the net using their smartphones and tablet computers has grown at almost double the rate as that of the entire market. With the abundance of inexpensive smartphones flooding the Chinese market, Baidu knows which area to focus on right now. And once the novelty factor about Qihoo 360’s browser wears off, Baidu might just be back where it belongs – at the very top.
subhadeeptech has no positions in the stocks mentioned above. The Motley Fool owns shares of Baidu and Google. Motley Fool newsletter services recommend Baidu and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
