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Baidu (BIDU) recently announced it would be increasingly focused on
acquisitions. A recent Bloomberg article summarizes the strategy
and it states:

" Baidu Inc. , owner of China's most-used search-engine, will consider making acquisitions as the company aims to offer new services to users at a faster pace, Chief Executive Officer Robin Li said. "In most cases, I would say I prefer buy to build," Li said in a conference call with analysts today after Baidu reported earnings. The Beijing-based company will consider both acquisitions and in-house development to offer a wider range of services, he said, without giving details of potential targets."

Since Baidu did not hint at what type of companies it would seek to acquire, the best way to look for clues might be to consider the past moves of Google (GOOG). Since Baidu is considered to be the "Google of China" and because it has added services and emulated some of Google's moves in the past, it could be poised to do the same in the future. Google has acquired video-sharing site, "YouTube", mobile phone maker "Motorola Mobility", and many others. In fact, one website states that Google has been acquiring an average of more than one company per week since 2010. Since 2001, Google has made about 114 acquisitions. While Baidu is not likely to be that acquisitive, it does make sense for the company to buy other strategic assets and technologies going forward. With that in mind, here are some companies that could be interesting targets for Baidu to act on:

Research in Motion Ltd. (RIMM) actually could be a very interesting target for Baidu, if it were to follow the same strategy that led to Google buying Motorola Mobility not long ago. Buying RIM would allow Baidu and China to gain valuable technology and patents, plus it would create a possible "Baidu Smartphone" that could be put into the hands of millions of Chinese consumers. While I have seen a number of companies be considered as potential suitors for RIM, I have not seen Baidu amongst the names listed, but the more I think about it, the more sense it seems to make for both companies. Baidu is seeking to gain further traction into mobile and RIM needs to gain access to new markets and consumers. RIM is looking for a way out of its current fortunes and a deal with Baidu could be a way to address the problems it has now. It has a current market capitalization of just about $3.81 billion, but since it also has cash of nearly $2 billion, the enterprise value is just around $1.87 billion. By contrast, Baidu has a market capitalization of about $43 billion which means it would be extremely well-positioned to afford a buyout of RIM. Baidu could issue a mere fraction of its current market value in stock to buy RIM, and become much more than a search engine and advertising company. If a smartphone offering is a strategy that Baidu wants to pursue, Nokia (NOK) could also be a target, although with a market capitalization of nearly $8 billion, it would cost significantly more than RIM.

Here are some key points for RIMM:
Current share price: $7.38
The 52 week range is $6.56 to $33.54
Earnings estimates for 2013: a loss of $1.50 per share
Earnings estimates for 2014: a loss of 61 cents per share
Annual dividend: none

Sina Corp. (SINA) could make sense for Baidu if it wanted to offer the news, weather and blogging websites that Sina owns and operates in China. Sina owns one of China's most popular blogging sites called Weibo.com. In terms of the balance sheet, this company has about $648 million in cash and just around $2.2 million in debt. It has about $489 million in revenues which would be a nice addition to Baidu's approximate annual revenues of nearly $2.88 billion. While this might not be the most exciting acquisition target for Baidu to consider, it would be a more conservative way to add revenues and expand the services it provides on the Internet. This company would make sense for Baidu if it wanted to further develop Internet content capabilities.

Here are some key points for SINA:
Current share price: $48.45
The 52 week range is $43.12 to $114.89
Earnings estimates for 2012: 16 cents per share
Earnings estimates for 2013: $1.18 per share
Annual dividend: none

Renren (RENN) could makes sense as an acquisition target if Baidu wanted to pursue a social networking strategy as Google has done with Google Plus. Renren is know as the "Facebook (FB) of China" which was a great thing before Facebook went public, but the IPO's weak performance seems to have dragged Renren shares down as well. Renren now trades close to the 52-week low, with a market capitalization of just around $1.51 billion but it also has just over a $1 billion in cash and no long-term debt, which would make it an attractive and easy takeover target for Baidu. By owning the leading search engine and the most popular social networking company in China, Baidu could begin to create an "ecosphere" which is a strategy that has helped to make Apple (AAPL) so successful. When you consider that (another search engine company) Yahoo (YHOO) once tried to buy Facebook, and that Google is pursuing the social networking space, it makes sense to consider that Baidu might also find it attractive.

Here are some key points for RENN:
Current share price: $3.88
The 52 week range is $3.21 to $11.26
Earnings estimates for 2012: a loss of 14 cents per share
Earnings estimates for 2013: a loss of 8 cents per share
Annual dividend: none

Baidu, Inc. is a leading Internet and search engine company in China. It has been a top growth stock for many years, but in order to maintain that edge, it may need to acquire other companies. Baidu has about $2.86 billion in cash and just around $455 million in debt, which puts it in a position to buy quite a few companies either buy using cash or stock.

Here are some key points for BIDU:
Current share price: $123.70
The 52 week range is $99.71 to $161.90
Earnings estimates for 2012: $4.65 per share
Earnings estimates for 2013: $6.29 per share
Annual dividend: none

Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Source: Baidu Is Seeking Acquisitions: 3 Takeover Target Ideas