Baidu Inc (ADR) (NASDAQ:BIDU) deviates from the strategy followed by other internet leaders by slowing down its acquisition spree rather than joining companies like Tencent and Alibaba, who are aggressively entering into deals. It has been the busiest time for China’s internet sector with almost every major company acquiring a start-up and making deals, says a report from SCMP.
Baidu set the valuation bar last year
Last year, Baidu Inc (ADR) (NASDAQ:BIDU) claimed the largest acquisition for US$1.9 billion taking over mobile applications platform 91 Wireless, which is a subsidiary of online games developer NetDragon Websoft. According to Alicia Yap, the head of China investment research at Barclays, the higher valuation set by Baidu turned out to be positive for the market sentiments, and set a high bar for valuation in acquisition.
Baidu Inc (ADR) (NASDAQ:BIDU) is, however, in no mood to keep the acquisition trend going after making other important acquisitions last year, such as video platform PPS, group-buying site Nuomi and Beijing Huanxiang Zongheng, the online literature business of games company Perfect World.
During the announcement of the fourth quarter results, chief executive of Baidu Inc (ADR) (NASDAQ:BIDU) Robin Li Yanhong accepted the company’s divergent acquisition strategy.
“We have kind of a different style when looking at [investment] opportunities. We tend to take a controlling interest in acquisitions so that the real synergy can be realised and tighter integration can be implemented,” said Li.
Rivals on acquisition spree
On the other hand, Tencent, which is the Asia’s largest listed internet company, acquired stakes in integrated logistics operator China South City back in January; Dianping, the restaurant review site in February and online retail service provider JD.com last month. Alibaba was also aggressively following its acquisition strategy in the first quarter, acquiring more stakes in drug-data firm Citic 21CN, online mapping provider AutoNavi; film and television show producer ChinaVision Media; Tango a mobile mapping firm; Lyft a ride sharing service and Intime Retail, department store chain operator.
Instead of acquisitions, the internet giant would focus on efforts to boost its mobile and cloud-computing businesses. The investment will also be targeted towards location-based search service, consumer products and international expansion.
