Baidu (BIDU) Eyes More Acquisitions

Baidu Inc (BIDU), the biggest Internet search engine company in China, is prepared to make more acquisitions this year to attract smartphone users to use its services, reports Reuters.

The company stole headlines this week, when it spiked more than 10% after earnings. The catalyst for the surge in Baidu’s share price was growth in mobile revenues, which last year surpassed for the first time a fifth of the company’s total revenues.

After spending $2.5 billion in mobile products last year, Bidu’s CEO Robin Li says he wants to continue to invest in mobile offerings, 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 Q4 earnings that beat the Street’s consensus with revenues soaring by more than half on a year-on-year basis. Baidu’s total revenues for the quarter rose 50.3%, exceeding its own forecast.

With a $7 billion cash pile, Bidu is well positioned for any acquisition. The strategy however, will put Li on a collision course with bigger rivals like Tencent Holdings Ltd, owner of the wildly popular mobile text and voice messaging service WeChat, and e-commerce giant Alibaba Group Holding, in the race to dominate China’s smartphone market, which is the world’s largest with more than 80% of all Internet users accessing the web via mobile devices.

Despite some obvious challenges, Baidu’s long-term prospects will remain sound, as long as the company keeps investing in building a mobile ecosystem. Last year Baidu acquired mobile app store 91 Wireless, which is China’s most popular third-party store for smartphone apps and has a large mobile distribution footprint. With that acquisition, Baidu now logs about 80 million app installs every day.

In other Baidu news: Morgan Stanley (MS) downgraded this morning the ticker to Equal Weight from Overweight, noting lower than expected margins due to increased investments. Price target was cut to $179.50 from $185.40. Stifel meanwhile, upgraded the shares to Buy based on the co.’s rapidly growing mobile search segment.

Shares of Baidu are up more than 3 percent to $178 in pre-market trading on Thursday.

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