Another Craze: Baidu

Remember 1999? Remember December of 1999? Remember that there
is a company called VA Linux Systems (LNUX)? In December 1999 VA
Linux IPO got into the market and surged an astonishing 627%. That is
still a record.

That was 1999 - the Golden year of Tech investors -- a year which allowed
every Tom, Dick and Harry to think that they were smart. This is 2004
and the same kind of hysteria is coming back to investors -- as far as
search engines are concerned.

On Friday, in an otherwise lackadaisical market, shares of the Chinese
Web search-engine operator Baidu.com vaulted 354% in the IPO market's
biggest splash in at least 5 years. Baidu.com (BIDU) opened at $66, more
than double its $27 price, climbed, stabilized and then rallied anew before
plateauing a 2nd time and ending its historic opening day at $122.54. With
about 32.3 million shares outstanding, a company with $8 million in
revenue in its most recent quarter is carrying a market cap of more than
$4 billion! With a rise of 354%, Baidu.com's first-day gain ranks 18th in
history and ranks as the best performance ever by an overseas deal.

At its offer price of $27, Baidu boasted a market capitalization of $898
million, about 42 times its trailing net revenue of $21.6 million. And that
was before the stock surged past $120. For comparison, Google (GOOG)
is valued at a trailing revenue multiple of 19 times and Yahoo (YHOO) is
valued at a multiple of 11 times.

Google owns about 2.6% of the company. As cited in Baidu's IPO
prospectus, the number of Internet search users in China is projected to
grow from 115 million in 2005 to 187 million in 2007. In the 3-months
ending June 30, Baidu said its estimated revenue was $8.4 million, up
53% from the prior quarter, with net income of $1.5 million, up 384%
from the prior quarter.

Is it Good to buy the stock? There is no doubt a long term risk in it. Some
people would surely profit at least in short term, but it is too much of risk,
if you are a small investor and money does not come too easily to you. If
you have too much of money, you may play the risk with some part of it.