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Ad Firms Fret Over Google's Future in China

Wednesday, 13 Jan 2010 11:32 AM

Google Inc.'s potential withdrawal from China over censorship and cyber attacks shocked investors and analysts, who fear the Web search leader's strategic plans may be threatened.

Several analysts, in reports issued on Wednesday, noted that Google draws between $300 million and $600 million in revenue from China, or less than 5 percent of its sales.

The bigger concerns, they said, are Google's prospects down the road, given the size of China's market and the potential for advertising sales there.

"For investors this is clearly a negative," Broadpoint AmTech analyst Benjamin Schachter said in a research note. "The obvious concern is that China's growth has been solid and its market potential is enormous."

Early on Wednesday, such concerns pushed investors toward Chinese search engine Baidu Inc., which leads Google in China's search market with more than 60 percent share. Shares of Baidu jumped 12 percent to $432 in early trading, while Google shares slipped 2 percent to $579.

"While we commend Google's management for 'doing the right thing' on important issues of human rights and online censorship, the company's inability to participate in China's growth will be seen as a long-term negative, and therefore cause a valuation discount in the stock," Jefferies analyst Youssef Squali said in a note.

Goldman Sachs analyst James Mitchell said Baidu could pick up two-thirds of Google's revenue if Google exits, potentially adding 25 percent to Baidu's 2010 revenue run rate. He added that China's Tencent Holdings may also benefit.

China's policy of filtering and restricting access to Web sites has been a frequent source of tension with the United States and tech companies, such as Google and Yahoo Inc.

Google's announcement late Tuesday that it was considering a withdrawal from China came after what it said were attacks from China on human rights activists using its Gmail service and on dozens of companies.

Google suggested the recent intrusions were more than isolated hacker attacks. Some 20 other companies also were attacked by unknown assailants based in China, said Google.

China has said it does not sponsor hacking.

© 2017 Thomson/Reuters. All rights reserved.

   
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Google Inc.'s potential withdrawal from China over censorship and cyber attacks shocked investors and analysts, who fear the Web search leader's strategic plans may be threatened. Several analysts, in reports issued on Wednesday, noted that Google draws between $300...
US,TEC,Google,China
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2010-32-13
Wednesday, 13 Jan 2010 11:32 AM
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