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Can Baidu's CEO Bounce Back?

Rick Munarriz
July 3, 2013

It's been a rough 12 months for Baidu (NASDAQ: BIDU) investors, and the same can be said about CEO Robin Li's reputation.

Forbes is out with its annual list of China's top CEOs. Li topped the list last year. This time around he is falling all the way to 40.


The survey -- ranking CEO performance relative to compensation -- was naturally not going to play well given Baidu's falling share price and narrowing profit margins.

The leading Chinese search engine has seen its stock fall 20% over the past year. Most Chinese growth stocks have moved higher over the past year. This provides a sharp contrast to past years when Baidu marched higher even when Chinese stocks were out of favor.

Qihoo 360 (NYSE: QIHU) changed the search landscape when it moved to offer an in-house solution last summer. A T.H. Capital report shows Qihoo 360 commanding nearly 15% of the market. Baidu is still the undisputed top dog with 70% of the market, but it feels vulnerable for the first time since Google (NASDAQ: GOOG) decided to stage a partial retreat out of the world's most populous nation a couple of years ago.

Baidu has turned to acquisitions and initiatives outside of search to help boost growth, but naturally these areas don't offer the same chunky profit margins that Google and Baidu have enjoyed over the years by specializing in paid search.

Investors are seeing the margin contraction at both Google and Baidu.

Baidu is seen growing its earnings this year by just 4% despite a 36% projected top-line pop. Google's disparity between the top and bottom lines isn't as severe, but profitability is expected to grow less than half as quickl