Baidu (BIDU) plans to enter the smartphone market with the launch of a new and cheap phone.
This will essentially be the first low cost smartphone that we have seen to date. The emergence of this phone could really shake up the Chinese mobile phone market. The phone will give its users access to a variety of Baidu applications as well as giving its users 100 GB free storage space on its Baidu Cloud system. Baidu is cooperating with Foxconn International Holdings Ltd. and China Unicom Ltd. in the creation of this phone, but the phone itself will be launched under a separate brand and will be priced under CNY 1,000 (about $160).
The phone is meant to be a rival to Android, at least in the Chinese market, and it would seem that at the price it will be sold at it may just succeed in overtaking the popular OS.
Although Baidu has over 78% of the online search engine traffic under its belt, only 35% of mobile users use Baidu for internet searches. The entry into the smart phone market could bring that second number up to near the first number, and make Baidu a leader across the board in internet searching. There are reports that the company is negotiating with a large number of brands to put out other handsets powered by Baidu Cloud, which will hopefully mean that it will be able to increase the amount of mobile traffic through its search engine. It seems to me that Baidu is moving toward becoming a platform company that will offer services across a broad range of devices. This plan could work and it could work very well. A number of mobile device manufacturers who want to get into the mobile phone market in China may be tempted by the presence of an existing and dedicated OS, especially one put out by a giant like Baidu.
Baidu released an operating system called Baidu Yi last year which ran on a smartphone invented by Dell (DELL), but because the phone did not quite measure up to its competitors, and because it was quite expensive, it simply did not catch on. It seems now that Baidu prefers to try its own software out. The company hopes that the release of the cheaper phone will make all of the difference. HTC, a Taiwanese manufacturer of smartphones, recently announced that it would release a phone for CNY 1,999 (about $316). Although HTC is popular, the new Baidu phone will still be cheaper.
Google (GOOG) is a serious competitor of Baidu's, but in the Chinese market many of the Android phones on sale do not include Google applications. This means that there is an opening for Baidu to exploit. At this point in time we still need to confirm whether or not Baidu plans to cut all ties with Google and Android with the new phone, but it does seem that a large portion of Google's applications will not be included in the new model.
The final details about this new phone should be released very soon. I for one am very excited to see what this means for the future of the company. Breaking into the smartphone market is certainly one of the more sensible things to do at the present time, but we have yet to see what the quality of the Baidu cloud phone will be like and whether or not it will be a serious competitor for the smart phones already in existence. If it proves successful, the face of the mobile phone market may change significantly over the coming months.
Despite the extremely good chance that this new phone will make a substantial difference to Baidu stock, the company has been experiencing an extended loss and was down by 66% last week, mostly due to Europe fears and a lower than expected guidance issued by companies from various sectors.
Intel (INTC) is a new force that is in the process of entering the smartphone market. About a month ago, Intel started making it clear that it is serious about designing chips that cannot be ignored by industry leaders such as Apple. The technology in its chips is of ever advancing technology and it seems that very shortly the company will find a way to win Apple from its chief rival ARM (ARMH) once and for all. Should the company be successful, then the future looks bright. However, if its entrance to the market goes unnoticed a lot of money would have been spent for nothing. Intel and Baidu's entry into the smartphone market begs the question of how many more giants the market can hold without dropping a few.
Although Google has been lauded as one of the best long term stocks along with Apple (AAPL), at least in comparison to Facebook, it is still facing a lot of competition. Apple, specifically, is trying to knock Google out of the market and the collaborative relationship that the two companies have had for so long may soon be coming to an end. Most recently, unsubstantiated rumors arose regarding Google Maps in iPhones. In short, it appears that Apple may soon be using its own technology that will rival Google's at a whole new level.
Yahoo! (YHOO) simply can't seem to get things right at the moment. Having already gone through a number of CEOs over the last few years it just lost its most recent one, due to an inaccuracy in his resume that the company failed to pick up on. In addition to this, a number of directors form the company have also stepped down due to the fact that they missed the inaccuracy. Although Yahoo! Is still a very popular site that is visited often it has been struggling a lot in terms of revenue and stocks of late.
Baidu could be a monster if its phone sells well. The price is already appealing, the rest of the equation is in the actual phone's technology and usability. If Chinese smartphone users start to like it, Baidu could see a boom like we have never seen before. Stay tuned.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
