Chinese Internet search giant Baidu (BIDU) has seen its share price drop by around $30 since mid-April. However, with some big announcements recently, Baidu has already seen an increase of around $6. Interestingly enough, this increase has come on the back of work already done by Google (GOOG).
The big news is Baidu’s new low cost smart phone. Baidu plans to keep the cost of its smart phone very low by using its cloud platform. Since Google’s search engine is very poor in China due to high censorship that causes poor load times, Baidu will be able to capitalize on the fact that Android uses Google’s search.
Instead of using a slow, unreliable search engine, Baidu is banking on consumers desire to use Baidu, thus switching to its smart phone. Since Android places the Google search engine front and center, a Baidu phone that replaces Google’s engine with its own could convert an extremely large portion of customers, especially due to the large smart phone market in China.
The irony of the situation is that Baidu in essence replicated Google’s search engine, and its new cloud operating system is in essence a variation of the Android operating system. Thus, by mainly not being Google, it can bank on securing a large portion of the smart phone market. Since this market in China is similar to the one here in the United States, securing fast and strong search capabilities early will be the key to securing huge profits in the future.To continue reading, click here.