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Baidu eyes buying its way into more mobile screens in China

People talk in front of a Baidu's company logo at Baidu's headquarters in Beijing January 16, 2014. REUTERS/Jason Lee
People talk in front of a Baidu's company logo at Baidu's headquarters in Beijing January 16, 2014. REUTERS/Jason Lee

By Alexei Oreskovic and Paul Carsten

SAN FRANCISCO/BEIJING (Reuters) - Chinese Internet company Baidu Inc is poised to make more acquisitions this year to entice smartphone users to tap into its services, a strategy that will put it on a collision course with bigger rivals like Tencent Holdings Ltd.

The biggest Internet search engine company in China saw mobile revenues grow last year to exceed, for the first time, a fifth of its total revenue as a $2.5 billion buying spree boosted mobile products.

Chief Executive Robin Li wants to raise this stake, even at the expense of profit growth this year.

"Whenever there is the opportunity to do an acquisition to buy us either time or resources or talent we will be open for that," Li told a briefing on Thursday after Baidu announced fourth-quarter revenues had soared by more than half year-on-year, exceeding its own forecasts.

Baidu has been racing to catch up to Tencent, owner of the wildly popular messaging app WeChat, and e-commerce behemoth Alibaba Group Holding Ltd, in the race to dominate screen space in China, the world's largest smartphone market where more than 80 percent of all Internet users access the web through mobile devices.

Both Tencent and Alibaba have spent big on acquisitions and are likely to continue to do so, intensifying the competition for any potential takeover target. This year could see Internet companies spending a record amount in dollar terms for buyouts, Citibank analyst Muzhi Li said in a recent report.

Baidu, with a war chest exceeding $7 billion as of last September, is well placed for any purchases. This year, the company to wants to focus on gaming, music and social media, Li said, in addition to expanding location-based services, including combining its map software with recently acquired group-buying business Nuomi.

By comparison, Tencent's cash and equivalents at the end of September were lower at $5.9 billion.

PUSHING FURTHER INTO MOBILE

Baidu's investment-heavy strategy included the $1.9 billion purchase of app store 91 Wireless in August and Nuomi, a website similar to GroupOn Inc. That contributed to operating profits dropping to 29 percent of revenue in the fourth quarter from 53 percent in the previous quarter.

The company still gets the vast majority of its mobile revenues from Baidu search, but Li said he hoped to increase revenue from other mobile services.

Baidu projected revenue in the first quarter of this year will range between 9.24 billion and 9.52 billion yuan ($1.53-$1.57 billion).

Analysts polled by Thomson Reuters I/B/E/S were looking for first-quarter revenue of 8.697 billion yuan.

Shares of Baidu jumped more than 6 percent in after-hours trade on Wednesday to $184.10 after it announced its 2013 earnings.

It said revenue in the fourth quarter increased 50.3 percent to 9.523 billion yuan, exceeding the 9.319 billion yuan expected by analysts.

Earnings per share were slightly lower at 7.90 yuan per share in the fourth quarter, versus the average analyst expectation of 8.19 yuan.

(Editing by Miral Fahmy)

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