Remember the Google China Crisis? When Google threatened to quit China, their share price nose-dived whilst Baidu, the contender rocketed to record highs. That was back in January.
Skip forward a few months and Google are still in China, with little noise as to whether they will stay or go. Google’s share price started to recover this week, adding almost $40 a share since Monday. Baidu on the other hand suffered an analyst downgrade because Google are still in town.
Why is this important?
Well, Google’s share price pre-Christmas was at a record high of $630 per share. The higher the share price, the more Google can do, like buy companies and innovate. It also means they can continue to pour money into lesser performing areas like the Nexus One.
Baidu, on the other hand, was not doing so well before the Google announcement. Suffering from a string of analyst downgrades before Christmas, Baidu was struggling to show the profitability potential from their no. 2 position in China.
Then, the China news broke. Google share price plummeted over $100 a share, losing almost $15bn in market cap as a result. The flip side was a leap in Baidu share price rocketing them to an all time high of $525. The potential loss of Google in the China market was set for Baidu’s massive gain.
But, skip forward almost three months and Google are still in town. An analyst downgrade on Baidu stock was made purely on the reason that Google don’t look to be leaving anytime soon. The UBS analysts believe Google has a “50% likelihood of leaving China.”
So, for the time being Baidu won’t be stealing Google’s crown.
What? Baidu is no. 2 in China? Who is no. 1?
Baidu is no. 1 in China, Google is no. 2. This is not something new. I don't know why Jamie Riddell refers to Google as wearing the “crown” in China.
Has anyone checked the share price of Baidu today or recently? Baidu is at an all time high. Since we all love Google so much, check their charts for BIDU http://www.google.com/finance?client=ig&q=BIDU
The analysts can downgrade BIDU all they want, but if so, they should do it because of over-speculation, not because of the prospect of Google staying in the China market. China's search market is more than big enough for 2 players, particularly innovative companies who understand the local market. Cooperation with relevant authorities and local knowledge is Baidu's advantage (Disclosure: I own BIDU, and I say these things from the standpoint of an investor, not from the standpoint of a citizen concerned with freedom of information or privacy, though I am)