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Will we ever see a SINA Weibo IPO?

One of the biggest growth stories out of China right now is SINA Corporation’s (NASDAQ:SINA) Twitter-like micro-blogging site, Weibo. Rumors surfaced during Q2 2010, that SINA might spin off Weibo (pronounced Way-Bwah) with a $100 million investment from search giant Baidu.com, Inc. (NASDAQ:BIDU) and B2B giant Alibaba. Such a move would turn Weibo into an independent company and likely fill the company’s coffers on the strength of a speculative IPO.

The odds of that happening seem scant, though. SINA’s counting on Weibo to fuel the company’s growth. Known predominantly as a Web portal company similar to Yahoo! Inc. (NASDAQ:YHOO), SINA’s been focusing on transforming itself into a social networking site that can tap into a network of outside app developers.

“Weibo is the best opportunity for Sina to transform into an Internet platform,” Ma Yuan, a Beijing-based analyst with Bocom International Holdings Co, told PeopleDaily.com last week. “It is becoming the next killer application on the Internet and mobile phones.”

It’s undeniable, though, that a Weibo IPO would draw lots of attention – and probably lots of dollars. With an estimated 120 million users, Weibo still trails Twitter by some 50 million accounts, but the size of China’s Internet market leaves ample room for growth.

SINA’s shares have priced in a $2 billion valuation on Weibo, according to Goldman Sachs analyst Catherine Leung. In Leung’s mind, that valuation’s steep, as Goldman downgraded SINA’s shares from Buy to Neutral.

I’m not sure I agree. The recent news that Twitter raised capital on valuations around $9 billion makes SINA’s stock look attractive.

Weibo currently dominates China’s micro-blogging industry controlling 87 percent of the market share in the niche. It operates much like Twitter, allowing users to post to the site online or via text message. Posts are limited to 140 characters, as they are on Twitter, but Chinese characters typically allow users to express more with fewer characters. Weibo’s also made significant improvements on Twitter’s model by allowing users to post replies to Weibo “tweets” and upload video and images.

SINA acts surprised when pressed on rumors that Weibo might spin off and IPO on its own. Pen Shaobin, VP of SINA and GM at SINA Weibo, denied rumors that Baidu and Alibaba are looking to invest in Weibo: “It is pure rumor,” he was quoted as saying on DoNews.com.

Interestingly, there was no mention or denial of an IPO in Weibo’s future, but I just don’t see it happening. It’d be like Apple spilling off its iPad division. Weibo’s too integral to SINA’s future to be sold off for a lump sum when the future gains look so promising. Don’t set aside cash waiting for a Weibo IPO, buy SINA shares instead. You’ll probably be better off.

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Look for pop in Baidu stock on Facebook news (BIDU)

Executives from China’s leading search engine, Baidu.com, Inc. (NASDAQ:BIDU), are reportedly in talks with Facebook over a partnership. Several of Baidu’s brass were in the Silicon Valley yesterday, according to Business Insider. This comes on the heels of Facebook CEO Mark Zuckerberg’s visit to China in December, and it could lead to game-changing news for Baidu and Facebook.

A marriage makes perfect sense. Baidu’s social networking efforts haven’t exactly taken off, and Facebook’s currently blocked in the People’s Republic (a country that happens to be home to the world’s largest Internet population). A partnership could lead to lots of extra zeros for both companies’ bottom lines.

What a possible marriage might look like, though, is up for debate. “It would probably take the form of a joint venture for China to launch a China-specific, sanitized version of Facebook that would have limited if any linkages and data sharing with the global, ex-China Facebook,” writes the Insider’s Bill Bishop.

I’m all for keeping my information out of the hands of the Chinese government, but I’d also like to see something a bit more creative out of a Facebook-Baidu deal.

In the U.S., Facebook’s already partnered with Microsoft’s search engine, Bing. Type in a keyword or phase in Facebook’s search bar, and you can hit “See more results” to browse through Facebook profiles, Facebook Places, Facebook Apps and – at the very bottom of the screen – native search results from Bing. It’s not exactly prime real estate on Facebook, but the sheer amount of traffic on Facebook probably leads to significant click-throughs.

The more interesting aspect of a partnership between Facebook and Baidu might be how Baidu could integrate its search with social networking. Why not use Facebook Connect so that a user’s friends could see exactly what they’ve been searching for on Baidu lately? Or how about integrating status updates with search results and news pages, so that you can see your friends’ comments on the keywords you’re searching for?

The possibilities for a ground-breaking partnership (one that might even make Google nervous) are limitless. And the news that the two companies are even holding talks could be enough to lead to a short-term pop in Baidu’s stock price. If a partnership does get announced, I expect Baidu’s shares will soar.

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Facebook’s sales up 100+ percent to $1.5 billion over past year

While Twitter struggles to develop an advertising model that can sustain the site, Facebook, Inc. appears well on its way to justifying its $43 billion market cap. Advertising sales are well ahead of the company’s targets, and they’ll more than double last year’s numbers on revenues of about $2 billion, according to Bloomberg.

All signs point to an imminent IPO, although Facebook CEO Mark Zuckerberg evaded the question during a recent interview on 60 minutes. “Are you ever going to have the IPO? Ever?” Leslie Stahl asked the 26-year-old. “It’s like you can’t let go.”

“You know, maybe,” Zuckerberg replied. “I don’t think it’s letting go. Here’s the way that I think about it. A lot of people who… build startups or companies think that selling the company or going public is this end point. You win when you go public. That’s just not how I see it.”

Facebook’s private market cap has grown so large, there are only two tech company’s in the world that are close according to Investor Business Daily’s 34-company Internet-Content group. That would be Google Inc. (NASDAQ:GOOG), with a massive market cap of $189 billion and the Chinese search engine company Baidu.com, Inc. (ADR) (NASDAQ:BIDU) at $34 billion.

Investors have been so excited about getting a piece of the Facebook pie that cottage LLC’s have sprung up around the private company giving high-net-worth individuals the ability to invest in Facebook before its IPO. It’s a sign that the market’s ready. Zuckerberg just needs to give the thumbs up.

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Top seven largest Chinese tech stocks of 2010

Tencent Holdings Ltd. (HKG:0700) has knocked Apple, Inc. (NASDAQ:AAPL) off its perch to become the world’s best-performing technology company, according to Businessweek.com. Boasting China’s largest market cap for a tech company on the strength of its free instant messaging platform Tencent QQ, or, simply, QQ, Tencent commands more cash than even Baidu.com, Inc. (ADR) (NASDAQ:BIDU).

Over the past 12 years, QQ has helped grow Tencent from from an instant messaging business into a sort of Wal-Mart of services for China’s Web user. The company makes online games, provides Internet dating services and online storage. Most of its income, though, comes from the premium services it provides for its QQ users. For a modest monthly fee, you can add things like avatars, games, music, virtual pets and more to your IM account, and since Tencent has more than 636 million users, those modest fees have started piling up as monumental mounds of cash. We all know, too, that growth in China’s Internet market shows no signs of slowing.

Here’s a run-down of four other Chinese tech stocks you might want to consider investing in:

1) Baidu.com, Inc. (ADR) (NASDAQ:BIDU). The most popular search engine company in China, Baidu is the seventh most-visited Web site on the Internet. Available in China at baidu.com, they’ve also recently branched out into Japan with their domain baidu.jp. The company’s stock isn’t cheap, though, as it trades at a P/E ratio of 81 (compared to Google’s P/E of 24).

2) NetEase.com, Inc. (ADR) (NASDAQ:NTES). The owner of a popular Chinese Web portal, NetEase’s 163.com is the sixth most-visited site in China, which gives it more traffic than American heavyweights like ESPN, Craigslist and CNN. One of the company’s most successful products is its online role-playing game Fantasy Westward Journey.

3) SINA Corporation (NASDAQ:SINA). A news and blogging site that caters to a wide audience in China, sina.com and its subdomains attract some 3 billion page views per day. The company’s $4.3 billion market cap makes it the fourth-largest tech company in China.

4) Sohu.com, Inc. (NASDAQ:SOHU). A search engine and online gaming company, Sohu.com often falls under the giant shadow cast by Baidu, but the company’s still got a market cap of $2.5 billion, and it trades at a much more reasonable P/E ratio than Baidu (20 vs. Baidu’s 81). Sohu was ranked by Fortune as the world’s 12th fastest-growing company in 2010.

Other Chinese tech stocks to keep an eye on:

Youku.com, Inc. (ADR) (NYSE:YOKU). The Chinese version of YouTube.com, Youku.com is (like its American counterpart) yet to make a profit, but that hasn’t stopped them from an IPO on American exchanges. Over time, Youku’s focus has shifted exclusively from user-generated videos to professionally-produced videos, which it licenses from more than 1,500 content partners. Call it the Chinese equivalent of Netflix, Inc. (NASDAQ:NFLX).

Shanda Interactive Entertainment Ltd. (ADR) (NASDAQ:SNDA). China’s leading publisher of online games (and a major online and paper-bound book publisher), Shanda claims to have more than 1.2 million users playing its online games at any given time – and that’s based on numbers from 2005! The company’s trading at a P/E ratio of 20.4.

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