June 15, 2004

Robin Li, Baidu's chief executive, confirmed reports that Google was among a group of foreign investors included in a recent overseas fund-raising by the privately held Chinese company.

But Li would not say how much was raised or how many shares the investors held.

Expanding its reach overseas, Internet search company Google Inc. has taken a minority stake in a leading Chinese-language search company, Baidu.com Inc., the Chinese company said Tuesday.

"Google does not have a controlling stake," Li told journalists in a conference call from the company's headquarters in Beijing.

Phone calls to Google were not immediately returned. Privately-held Google is planning to list its shares on the Nasdaq Stock Exchange later this year. Industry and Chinese media reports have said Baidu is also planning to list its shares on the Nasdaq. Li refused comment on share listing plans. "My board has not authorized me to disclose any such information," he said.

Baidu is China's biggest independent Internet search engine and is one of Google's strongest rivals in China. Its music search tool is considered one of the country's best.

But it faces growing competition both from other Chinese search engines, such as Sohu.com, and from foreign giants like Google and Yahoo, which has an alliance with Beijing 3721 via a Hong Kong partner of the Chinese Internet service provider.

"From Google's perspective, it saw Yahoo acquiring 3721 and may have felt prompted to make a move," said Duncan Clark, managing director of the BDA China Ltd. consultancy in Beijing.

"Increasingly, they're going head-to-head in China," he said. Li said Baidu was hoping its alliance with the California-based search engine giant would help improve the Chinese company's technology, build up its brand name and expand its market share.

"We're both competitors and partners," he said. "Baidu has a better understanding of the Chinese market, and we hope to reinforce that advantage with the money raised overseas."

Google's investment in Baidu does not include management, Li said. "Google is a strategic investor. We don't have cooperation in operations at this stage," he said. "We keep our independence in management. Google does not have a seat on our board."

China's government strives to control online access to information and Web sites it deems politically sensitive or otherwise unacceptable. Yet, use of the Internet has continued to climb as the country embraces computers and other high-tech accessories.

Google is hugely popular among China's more than 80 million Internet users because of its wide-ranging search capacity. It has a Chinese-language search site, and launched its AdWords online advertising in Chinese in February, seeking to expand its own market share in the fast-growing market.

Most of Baidu's revenues come from companies that pay to be listed on its site.

Li said that for now, Baidu does not plan to build its own English-language Web site, although it might consider Korean and Japanese in the future.

"China is a huge market. For now, we'll concentrate on expanding here," Li said.

In Chinese, Baidu means "a hundred times," a phrase taken from a Song dynasty love poem. Li, who attended university in the United States and worked in Internet-related jobs before returning home, founded the company in 1999.

According to reports in the Wall Street Journal and other U.S. newspapers, Google helped lead Baidu's recent fund-raising round with venture fund Draper Fisher Jurvetson ePlanet Ventures.

Li denied that the fund-raising had brought in $10 million, as reported, but refused to give a figure.

Source: Seattle PI.com

        

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