Chinese Internet search engine company Baidu.com announced Tuesday that it has won investment from eight US investors, led by venture capital firm Draper Fisher Jurvetson and Google. Baidu did not disclose the exact amount of the deal or the stakes of the various investors.
The company said the capital will be used to upgrade technologies and build brand profiles.
According to US reports, Google spent US$10 million on the deal.
Baidu President Robin Li said that he and partner Eric Xu remain the biggest shareholders in Baidu.
The biggest benefit for Baidu from the Google investment will be a boost to its initial public offering (IPO) on NASDAQ, where Google is expected to hold its own keenly anticipated IPO this year.
He said Google's investment and its IPO would not have much impact on Baidu's public offering.
"Google is a leader in the global Internet industry and its investment will help investors appreciate the value of a search engine provider like Baidu," said Li.
This year, prices of almost all Chinese Internet stocks on NASDAQ fell on US investors' worries about an overheating Chinese economy and the financial performance of major companies such as Sohu.com and Netease.com, especially their wireless value-added services.
Lu Sun, an analyst with Lehman Brothers in Hong Kong, agreed that the investment from Google would help Baidu elevate its profile among global investors.
Li said Baidu would increase business cooperation with Google in the future, but he declined to comment on the possibility of selling his company to Google. He added that the partnership with Google would enable Baidu to build a virtual entry barrier for any other search engine provider in the Chinese market.
For Google, which previously faced a substantial challenge from Baidu in China, the deal will help it ease competition and gain a firmer foothold in the market.
"This is perhaps a preliminary equity alliance that may signal further cooperation in the future," said Sun of Lehman Brothers.
Henry Yang, president of Shanghai iResearch Co. Ltd., an Internet market research house, agreed that the investment would help the US giant test the waters in the Chinese market.
"This will give Google a chance to see the operations of Baidu and then decide if it is better to acquire Baidu or develop the market by itself," said Yang.
Last November, US Internet giant Yahoo! acquired Hong Kong-based 3721 Network Software Co. Ltd. for US$120 million. The Hong Kong company controls Chinese search engine provider Beijing 3721.
IResearch expects the search engine market in China to grow from last year's 500 million yuan (US$60 million) to 840 million yuan (US$101 million) this year.
(China Daily June 16, 2004)
