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Baidu soars, Google falls on expected China search market shakeout

March 15, 2010 | 11:07 am

Expectations that Google Inc. will withdraw from China over government censorship issues are hitting the Internet giant’s stock Monday -- and driving some investors into shares of Baidu Inc., which already is the dominant Web search engine in China.

Google’s shares were down $19.59, or 3.4%, to $559.95 at about 10:55 a.m. PDT, after weekend reports that the Mountain View, Calif., company was nearing a decision to shutter its Chinese-language search operations. That would end a months-long feud with the government over censorship requirements.

Beijing-based Baidu, meanwhile, has jumped $18.78, or 3.4%, to $569.02 on Nasdaq, continuing a surge that has lifted the stock 38% year to date. Google, by contrast, is down 9.7% this year.

Baidu, which has about 60% of the fast-growing Chinese search market, presumably would be the big winner if No. 2 Google departed.

In 2009 Baidu earned $217 million, or $6.26 a share, on revenue of $652 million. Google earned $6.52 billion, or $20.41 a share, on revenue of $23.65 billion.

With Baidu shares nearing $570 the stock’s price-to-earnings ratio is 91 based on 2009 earnings per share; Google’s P/E is about 27 based on last year’s earnings.

Baidu's biggest U.S. shareholders at the end of last year included Marsico Capital Management, Fidelity Investments and T. Rowe Price Associates. Fidelity also was the single biggest institutional holder of Google shares.

-- Tom Petruno