June 22 (Bloomberg) -- Baidu Inc., owner of the most popular search engine in China, is considering acquisitions to extend its lead in the world’s largest market for Internet users, Chief Financial Officer Jennifer Li said.
“People approach us and we get to look at a lot of things,” Li said in a June 19 interview from Baidu’s Beijing headquarters, declining to identify targets. “Internet is at an early stage of its development. It’s dynamic, and we need to stay ahead.”
The company is stepping up efforts in electronic commerce and mobile-Internet services in China, which has more than 300 million Web users. Baidu aims to widen its lead over Google Inc. in the country by boosting online searches for wireless phones, and its electronic-commerce business could develop into a rival for Alibaba Group Holdings Ltd.
“If they now start thinking about making acquisitions, it makes very good sense,” said Eric Wen, an analyst at Mainfirst Securities Hong Kong Ltd. who has a neutral rating on Baidu shares. The company is likely to buy Web businesses outside of the search market, he said. Baidu also may seek additional investments in Japan, where it started operations last year, Wen said.
Google, Taobao
Baidu faces rising competition in its main business, with Google forging a partnership with the country’s biggest wireless-phone company, China Mobile Ltd. Alibaba’s Taobao site also is encroaching on the search-engine market.
Taobao, Alibaba’s consumer trading site, offers an ad channel for small businesses in China, potentially forcing advertisers to choose between Baidu and Taobao, according to an April report from Morgan Stanley.
Any acquisitions won’t distract Baidu from focusing on its main search business, Li said.
There is “huge potential” to increase customers at Baidu, which had about 300,000 advertisers as of last year, Li said. The company will focus on offering Internet search services to the 40 million small and medium-sized businesses in China, said Li, who joined Baidu last year from GMAC LLC, the U.S. auto and home lender.
Baidu’s American depositary receipts fell $19.58, or 6.6 percent, to $278.02 today on the Nasdaq Stock Market. The shares have more than doubled this year, outpacing a 32 percent increase by Google, the world’s biggest search engine.
Google Deals
Google, based in Mountain View, California, gained exclusive rights to process Web queries for customers of China Mobile, which accounts for more than two-thirds of the country’s mobile-phone users. Last month, Baidu agreed to provide online search services for China Telecom Corp., which has less than 10 percent as many customers as China Mobile.
Baidu accounted for 62.2 percent of China’s paid-search market last year, an increase from 59.3 percent in 2007, according to research firm Analysys International. Google’s market share grew at a faster pace, to 27.8 percent from 23.4 percent, the Beijing-based company said.
Alibaba, whose biggest shareholder is Yahoo! Inc., will increase investments at Taobao to 5 billion yuan ($731 million) over five years, the Hangzhou, China-based company said in October. Taobao, which doesn’t charge users commissions on merchandise sales, is seeking to boost advertising revenue by allowing vendors to bid for the right to associate their products with keyword searches, Alibaba Chief Financial Officer Joseph Tsai said in February.
In September, Baidu bought an 8.3 percent stake in UiTV, a Chinese provider of Internet television services, for $15 million. Baidu may pursue investments in overseas companies, according to Li.
Baidu’s first-quarter profit rose 24 percent to 181.1 million yuan, beating analysts’ estimates, after the company added paid-search customers.
China had 316 million Web users at the end of March, the official Xinhua News Agency reported in April, citing Xi Guohua, vice minister of industry and information technology. The country overtook the U.S. in Internet users last year.
