Friday, August 05, 2005

Party like it's 1999

Today’s IPO of Chinese search engine, Baidu.com (BIDU), brings back fond memories of those wonderful days before the dot-com crash.

In case you hadn’t noticed amid today’s down market – fueled by fears of rising wages – BIDU’s 4.04 million share offering spiked 354% on its opening day. While this is a far cry from
TheGlobe.com’s 600% first-day pop back in November 1998, at $122.54 for each of its 32.5 million shares, the stock market values BIDU at $3.98 billion.

Each dollar of BIDU’s $1.2 million in estimated 2005 profit is worth $3,319, a mere 38 times Google’s $87 price/earnings ratio. To put this in perspective, Google, with $4.5 billion in sales and $968 million in profit, has a stock market capitalization of $81 billion. If the stock market valued Google at BIDU’s P/E ratio, Google’s stock market capitalization would hit about $3.1 trillion – a not unimpressive figure.

BIDU is China’s most popular search engine with a 44.7% market share, according to Internet research firm iResearch. Google is in second place in China with 30.1% of the market. BIDU’s 2004 revenues totaled $13.4 million and $5.2 million in its most recent quarter (during which it earned $303,000). In 2004, BIDU generated 91% of its revenue from auction-based, pay-for-performance advertising.

Some major Silicon Valley players are toasting BIDU’s bubblelicious valuation. Draper Fisher Jurvetson’s 8.2 million shares are now worth over $1 billion. And Google’s 2.6% of BIDU is worth a cool $103 million.

Tonight they’re gonna party like it’s 1999!

1 Comments:

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