Yahoo!'s silence on China (YHOO 2Q05 conf call)

Yahoo! (ticker: YHOO) reported Q2 2005 results yesterday. Take a look at CFO Sue Decker's quick references to Yahoo!'s China operations on management's Q2 earnings results conference call (followed by a comment):

....we continue to acquire and invest in companies. To this end we spent approximately $122 million in Q2. The acquisition component of this spending was for DialPad, Flicker, TeRespondo and the completion of the earn out on 3721.

....we plan to continue to invest in opportunities to gain market share internationally.

(Quotes are from the CCBN StreetEvents transcript.)

Comment: In case you missed the China reference, 3721 is a search company Yahoo acquired for $120 million in November 2003.

So why no discussion of either Yahoo!'s search or online auction efforts in China? Let's review why Yahoo!'s continued silence is troubling:

• Yahoo! China CEO's resignation. In early July, Zhou Hongyi, President of Yahoo! China announced he
  will resign his post on August 31st.

• The Baidu (proposed ticker: BIDU) factor. Baidu, Yahoo's biggest competitor in the Chinese Internet search market is about to become flush with cash from an IPO on the Nasdaq.

• The Google (ticker: GOOG) factor. Google continues to make strides in China by recently opening an office on the Mainland. And, of course, there was Google CEO Eric Schmidt's visit to China in late June that fueled speculation the search company is discussing a Baidu acquisition.

• More competition from Sina (ticker: SINA) and SOHU (ticker: SOHU). In the last couple of months Sina entered the Internet search business and SOHU launched an upgraded version of its search engine.

• Yahoo! COO Daniel Rosensweig's trip to China. Did we ever hear any news about his trip? Not that we know of.

• Market opportunity. China's Internet market is big and growing.
  China recently surpassed 100 million Internet users and is
  expected to reach 124 million by the end of 2005. Soon enough China's Internet population will surpass that
  of the United States which currently has 200 million users.

• Everyone else is talking about China. Motorola (ticker: MOT), Intel (ticker: INTC), Kraft (ticker: KFT), Avon (ticker: AVP), Mattel (ticker: MAT), Eaton (ticker: ETN), Hasbro (ticker: HAS), General Electric (ticker: GE), First Data (ticker: FDC), Marriott (ticker: MAR), YUM! Brands (ticker: YUM) and more......

Final thought: Is Yahoo! remaining mum because it is struggling? Might Yahoo! be considering an acquisition of leading Internet search company and IPO candidate Baidu -- a move that would undoubtedly make them the biggest player in the China search market?

YHOO chart.

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