Is Baidu Sleeping With the Bing Enemy?

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China's leading search engine is teaming up with the world's largest software company to beef up its English-language queries.

Microsoft's (Nasdaq: MSFT  ) Bing will begin serving up results to the roughly 10 million search requests in English that are entered daily on Baidu (Nasdaq: BIDU  ) .

The deal makes sense in theory. Baidu is the undisputed champ of Chinese-language search, accounting for more than three quarters of the country's search traffic. Expanding into Japan -- home to another character-driven language -- a few years ago hasn't been easy. It will probably take even longer before it masters Western searches.

Baidu still needs to be careful here. As a hometown fave, Baidu's decision to lean on Bing for English searches will validate the foreign provider. We all saw what happened when Yahoo! turned to a then-upstart Google (Nasdaq: GOOG  ) to fuel its searches a decade ago. Yahoo! dumped Big G as its search technology in 2004, but the damage was already done. The Google brand had arrived.

Microsoft has been opportunistic lately, offering up billions to power Yahoo!'s searches and Nokia's (Nasdaq: NOK  ) smartphones. However, both of those companies were grappling with meandering market share and uninspiring top-line growth. Baidu is on top of the world. Revenue and earnings soared 88% and 123%, respectively, in its latest quarter. It has blown past Wall Street's quarterly profit targets with ease over the past two years. It also doesn't need the money, though the financial details of this arrangement are not being disclosed.

In short, Baidu has more to lose than gain here. In the eyes of China, Bing will become the search engine of choice for English queries. This may dent Google's fading market share at first, but won't it ultimately build up Bing as Baidu's biggest threat as Microsoft beefs up its Chinese-language search?

Be careful with Mr. Softy, Baidu. History hasn't been kind to the outsourcers in this space.

Is Microsoft a friend or foe to Baidu? Share your thoughts in the comment box below.

The Motley Fool owns shares of Google, Yahoo!, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Baidu, Yahoo!, and Google, as well as creating a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz has only been to China once, but he relishes admiring its dot-com revolution from afar. He does not own shares in any of the stocks in this article. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 05, 2011, at 1:47 PM, techy46 wrote:

    Google is the light shining brightest before it goes out!

  • Report this Comment On July 05, 2011, at 9:55 PM, don1941t wrote:

    Apples and Oranges - Latin based languages and content vs. ideogrammatic languages and concepts. Search appears the same on the surface. But just as parsing a sentence and parsing a coded program are different so are these search engines. I see this as a synergistic combination where both parties will benefit.

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