The latest issue of an intellectual property dispute related to Baidu.com Inc. has highlighted the volatile valuations commanded by China's Nasdaq-listed Internet stocks. Various media reports have referred to this in their analysis.

Published: 18 Sep 2005

The latest issue of an intellectual property dispute related to Baidu.com Inc. has highlighted the volatile valuations commanded by China's Nasdaq-listed Internet stocks. Various media reports have referred to this in their analysis.

MarketWatch stated in its report: "Baidu.com Inc.'s unfavorable ruling
in an intellectual property dispute in Beijing, on top of several
contradictory analyst reports, roiled the Chinese Internet sector last
week. Investors can expect continued instability in Baidu's stock price,
as additional legal details are brought to light and the market digests
the long term impact of high-profile analyst reports on institutional
support of Chinese Internet equities." Baidu, known as the Chinese
Google, lost nearly a third of its market value earlier this week after
two of the investment banks that managed the company's initial public
offering said the stock price was overblown.

Also, record companies have sued Baidu.com Inc. for copyright
infringement, alleging the Chinese Internet search engine has been
illegally providing links to free digital music downloads. As per the
information available, Universal Music Group, EMI Group Plc and Warner
Music Group Corp. filed their suits in July in Beijing to stop Baidu
from providing those links, while Sony BMG Music Entertainment filed its
suit earlier this month. "If the pending lawsuits brought by four music
industry heavyweights also go against Baidu, investors will likely see
the search company lose ground to rival Google Inc. in the weeks ahead,"
according to media.

According to MSN Money, given a rapturous welcome by US investors when
it listed last month, Baidu surged again last week, but on Wednesday
"China's Google" saw its stock fall 28.4 per cent after analysts at two
investment banks that managed its IPO said it was overvalued. The report
added that the $32.27 drop to $81.32 was Baidu's biggest one-day loss.
The company is now trading far below a peak of $154 achieved shortly
after its listing - although still far above its $27 offer price.

According to the Morgan Stanley team, "Chinese Internet companies that
focus on creating consumer value have the highest potential to create
shareholder value," which explains their overweight rating of travel
firm Ctrip.com International Ltd., stated MarketWatch. "Ctrip will
benefit from its growing influence in the market as both an online and
offline seller of airline-hotel packages that are overwhelmingly popular
with Chinese travelers, particularly in the run up to the Oct. 1
National Day holiday," said the report.