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Baidu Takes Nuomi Off Of Renren's Hands

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Baidu (NASDAQ: BIDU  ) won't have to share Nuomi with Renren (NYSE: RENN  ) anymore. Renren announced on Thursday night that it sold its remaining stake in the group-buying site to Baidu for an undisclosed sum. 

Baidu originally paid roughly $160 million to acquire a 59% stake in Nuomi this past summer, and it didn't seem as if it would be the search giant's final bite.

"There is market speculation that Baidu may buy the whole unit if its business improves," Oberweis Asset Management senior analyst Jeff Papp told Bloomberg in October.

So did Nuomi's business improve so quickly, or did Baidu just get tired of having so much cash sitting on its balance sheet? Baidu's been a serial acquirer in recent quarters. It snapped up a leading mobile apps marketplace provider, and has beefed up its presence in online video, travel, and e-commerce. 

If you think that Baidu's buying spree has made a dent in its balance sheet, think again. Baidu closed out its most recent quarter with more than $7 billion in cash and cash equivalents on its balance sheet. Baidu's very profitable, with ridiculous margins for its flagship search business. It can't seem to spend the money it's making fast enough to flesh out its dot-com empire. 

Nuomi likely isn't profitable just yet. Renren wouldn't have given it up if that were the case. Renren had big dreams of being China's social networking website of choice, but growth has shifted into reverse lately: Revenue declined both sequentially and year-over-year in Renren's latest quarter. A 36% top-line growth spurt at Nuomi was the silver lining in Renren's report, but that didn't stop it from handing off a majority stake to Baidu for a pittance during the actual period. 

It's easy to see why Baidu wants some skin in group-buying sites. Vipshop (NYSE: VIPS  )  was one of the market's biggest winners last year, soaring 368% in 2013. Vipshop is profitable. It's also growing a lot faster than Nuomi. However, one has to believe that Nuomi's reach will expand with Baidu now as its lone owner. It can push the flash-sale provider across its growing portfolio of properties.

Baidu knows what it's doing, and with more than $7 billion still burning a hole in its pocket it's a safe bet that this isn't the last purchase that it makes in 2014.

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  • Report this Comment On January 28, 2014, at 12:00 PM, Decoy0527 wrote:

    Now it's time for Renn to just merge into Bidu or other companies with more scale. Consolidation is coming to China internet -- the quicker the better for Renn to be bought out.

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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Related Tickers

9/3/2015 4:00 PM
BIDU $149.08 Up +0.93 +0.63%
Baidu CAPS Rating: ****
RENN $2.92 Down -0.11 -3.63%
Renren Inc. CAPS Rating: *
VIPS $17.78 Up +0.49 +2.83%