Is Yahoo (YHOO) COO Rosensweig's visit to China a sign of something brewing?

|
Includes: NTES, SINA, SNDA, SOHU
by: Ezra Marbach

Maybe. But first, let's discuss what we DO know. This morning, China online game operator and developer, Shanda Interactive (ticker: SNDA), formed a strategic agreement with privately-held China search engine, IPO-bound Baidu.com. More here:


Details of the agreement between Shanda and Baidu:

  • Shanda will embed Baidu's search tools in its user platform.
  • Baidu will leverage its search platform to help introduce Shanda's interactive entertainment content offerings to a broader audience.
  • The companies are also exploring cross
    marketing opportunities.

Quick thought: And, in other news, Yahoo (ticker: YHOO) President Daniel Rosensweig is in town (Beijing, of course! This IS the China Stock Blog). And the rumors are heating up again.

There has been speculation for some time that Yahoo will buy Sina.com (ticker: SINA). These rumors grew louder weeks after Shanda's acquiring a 19.5% stake in Sina, which seemed to be a precursor to an acquisition. However, as time passed with no agreement, and Sina demonstrating an apparent lack of interest in linking up with Shanda, the rumors began regaining momentum.

And now the COO of Yahoo is visiting Beijing. And the rumors of Yahoo buying Sina are again in full force. Analysts continue to suggest that such a combination is unlikely because Sina is a disseminator of news in China. Having a foreign company like Yahoo in control of Sina would probably not sit well with a Chinese government that still holds a tight grip on the news media.

Of course, Yahoo is desperate. It is running third in the Chinese Internet search market behind Baidu and Google (ticker: GOOG). And despite a number of acquisitions, Yahoo is still playing catch-up. So who knows what concessions it would be willing to make in order to receive government approval for an acquisition of Sina. Apparently, both Google and Yahoo already cooperate with the government and practice some form of self-censorship. So taking that a step further might ultimately be in the company's best interests.

As Chairman and CEO Terry Semel said in Yahoo's latest conference call announcing Q4 2004 results:

....by following our principle of buy, build, or partner, we....strengthened our presence in China through the acquisition of 3721, the launch of ESO and our joint auctions platform with Sena (sp. Sina). However, we have a lot more work to do.

(Quotes are from the CCBN StreetEvents transcript.)

Semel's comments lead one to believe that more China acquisitions could be in Yahoo's future. But the likelihood is slim that the target will be Sina, even though they already work together in jointly operating online auction company, 1pai.