Baidu Bubble Bleeding Badly

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Rampant speculation that drove up shares of the Chinese search engine has dwindled as investors take profits.

How much is a company with second quarter revenue of $7.9 million USD worth? For a while, the answer was $4.7 billion dollars. Baidu’s market capitalization has dropped since its debut in early August, a Dow Jones report notes.

With a recent close of $79 per share on Nasdaq, and a market cap of $2.4 billion, Baidu probably still has some room to fall before finding a value more in line with its current financial figures. And from there, Baidu may have room to rise.

Yahoo, Google, and MSN all see tremendous potential for the search advertising market in China. As its economy grows a middle class, anathema to the country’s 20th century Communist history, there will be demand for computers and related products and services.

Search engine marketing could be so valuable that its future in China has led Google to lure a Microsoft executive away to head up its China operations. Microsoft has taken offense and sued over Dr. Kai-Fu Lee’s alleged violation of a non-compete clause. Google has fought back with a countersuit in California, where the legal system tends to favor right-to-work over non-compete agreements.

Until that gets resolved, Baidu will see its value rise and fall, depending on its performance and how much investors approve or disapprove.

David Utter is a staff writer for WebProNews covering technology and business. Email him here.

Baidu Bubble Bleeding Badly
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