UBS AG owns about 5.8% of Baidu

Form SC 13G filing

Analysts: Pacific Crest upgrades to outperform

Weinstein expects revenue of $67.5 million
and EPS of 69 cents, lower than the average
$76.9 million and 71 cents.

Projects 100% revenue growth or more for the
next two years, driven by growth in
advertisers as Baidu penetrates more markets
and increases spending per advertiser.
Thinks Google China's entry into music, which
has fueled new competitive concerns, are
probably overdone.

Broadband service to reach 95% of villages

Currently at 92%. Some central and Eastern provinces will
have 100% township/village coverage by 2008 end. Of the
73 million new Internet users added last year, 40% were
from rural areas.

3% extra coverage is almost 30 million users just from extra
coverage (assuming a base of about 1 billion). There will
also be new users in the already covered areas.

China org report

Analysts: Piper reiterates Baidu buy at $439

Doesn't expect anything to change on the music download
scene, since licensed stuff is going to be a small share,
and a previous lawsuit on the way Baidu links to
unlicensed stuff was defeated. Also believes music searches
make up about 10-15% of Baidu's traffic.

Basically the report reaffirms the status quo.

Analysts: Goldman's $310 target

Goldman reiterated this sometime ago. In
the light of new data, GDP figures and
Yuan appreciation, let us check the
model out again. Here is Goldman's
original analysis:

In a scenario where China’s economy in
2013 is half the size of the US economy
today (as our economists forecast), and
where Baidu’s market cap in 2013 is half
as large as Google’s US-attributable
market cap today, we estimate that
owning Baidu stock for five years will
generate an attractive IRR of about 25%
per year. However, we believe structural
differences between developed world and
China search environments could reduce
this IRR to a mid-teens rate, given the
presence of Google as a cash-rich rival,
the existence of low cost-to-seller
marketplaces in China, and the dependence
on salespeople to drive search customer
additions.

In 2007, China's GDP was at 3.43 trillion, and
US GDP at 13.485 trillion (2.2% rise from 06).
Assuming an average GDP growth rate of
10%, and an average Yuan rise of 10%,
China's GDP will be 1/2 that of today's US
GDP in 3.55 years. This comes from
log(13.485/2/3.43) / log(1.10 * 1.10)

Google's current market cap is around
$160 billion, with half of its revenue from
the US. Its US-related market cap is $80
billion, and for an economy half that size,
that translates to $40 billion.

Per this model, Baidu should be a $40
billion company in 3.55 years. So what
should be its value today?

That calculation depends on what rate
of return you can get on other
investments. For a AAA rated bond,
let us assume a rate of 4%, and for a
junk bond, a rate of 9%.

If you believe Baidu's growth story for
the next 4 years is as credible as a AAA
rated bond, then its current market
cap should be $33.64 billion.
(40 b / 1.04-raised-to-3.55)

If you believe Baidu's growth story for
the next 4 years is as credible as a
junk-rated bond, then its current market
cap should be $29.45 billion.
(40 b / 1.09-raised-to-3.55).

Interestingly enough, Goldman based
its final target price not on the model
they describe, but on a traditional
P/E metric, comparing a startup,
Baidu, to an established company,
Google.

The main risk in the model is
assuming search ads as a share of
the total economy will be about the
same for the US and China. One
could argue Internet penetration
is much lower in China and so
search ads have less reach. On the
other hand, one could argue Internet
penetration is significantly higher in
regions contributing most to the
GDP, and so online ads have a
significant influence on the meatiest
part of the economy.

IFPI files another lawsuit against Baidu

Sony, Warner, and Universal filed suit against
"Deep Linking" on Baidu's music channels.
The suit was filed in Beijing No.1
Intermediate People's court. The above 3,
and Golden Label, filed another suit against
Sohu for substantially same reasons, in the
same court.

Roughly 9% of Baidu's traffic comes from
MP3 search. It is unclear how much of that
belongs to the above 3 companies. Baidu
has agreements with China's biggest record
label - Rock - and with EMI.

Analysts: Impact of Microsoft/Yahoo deal on Baidu

Citi, Goldman Sachs and BNP Paribas weigh
in on what if Microsoft buys not just Yahoo
(as per their current offer), but also
Yahoo's assets in China (its stake in
Alibaba), and decides to pull MSN's
contract with Baidu.

Jason Brueschke of Citi, who
did a survey in March 07 and found
most online advertisers were thinking
of switching to Google from Baidu,
thinks the biggest loser from the
Microsoft/Yahoo deal is Baidu. Goldman
Sachs is more circumspect, saying
Baidu's revenue loss would be in the
very low single digits. BNP Paribas
says there would be no significant
impact.

The CNN/Dow newswire report