New | Baidu seen to be lagging rivals in mergers and acquisitions activity
Ahead of mainland search engine firm Baidu's annual results announcement in the United States today, market watchers are asking whether the company has missed the boat by lagging behind rivals Alibaba and Tencent in mergers and acquisitions.
Alibaba and Tencent have proactively spent cash to strengthen their footholds as users migrate from personal computers to smartphones.
To keep users on their apps and not their rivals', they have acquired or invested in fields including social networking, digital content, online-to-offline and location-based services, mobile advertising-related technology, online travel, gaming and logistics network coverage.
By comparison, Baidu has adopted a more conservative approach to spending in preparing for the mobile internet era.
"I think it is possible that Baidu will drop out of the first-tier of internet firms and join Xiaomi in the second tier," said Liu Xingliang, the chairman of internet data analysis firm Hongmai Software. "The market valuation of Baidu already has a big difference with the other two."
Even with Alibaba shares close to an all-time low since its New York listing last year following a widely reported dispute with Beijing and a quarterly report that missed market expectations, the e-commerce giant was still worth US$217.3 billion yesterday.
Hong Kong-listed Tencent has a market capitalisation of US$159.7 billion, while Nasdaq-traded Baidu is worth US$77 billion.
Privately owned mainland smartphone maker Xiaomi is valued at more than US$45 billion, according to its latest round of fundraising in December.
"Baidu made some efforts too, for example it bought application store 91 Wireless for US$1.9 billion in 2013," Liu said. "But Baidu needs to do more to make up its missed lesson.
"I believe Baidu still has a chance because it is a technology-strong company. But once you are lagging behind it is not easy to catch up."
Lucy Zhang, an analyst with internet consultancy iResearch, said Baidu's expansion strategy was more steady and reliable. "Returns from mobile internet business are unclear and the investment today might not match the returns tomorrow," she said.
A research report by Bocom forecast Baidu's fourth-quarter revenue would reach 14.1 billion yuan (HK$17.76 billion), up 4 per cent year on year. It estimated gross margin would fall to 59 per cent, from 62.5 per cent in the third quarter, "due to increased content cost and traffic acquisition cost".
