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Beijing Blocks Google’s Web Search Service

Thursday, 29 Jul 2010 | 6:26 PM ET

In the aftermarket shares of Google dropped about 2% after the company said people in mainland China were being blocked from using its Internet search engine.

The company posted a notice Thursday about the new barrier without any other details. The development seems somewhat surprising considering about two weeks ago Beijing renewed Google's license to operate on the mainland.

Tense Times

As you likely know Google and Beijing have been playing a game of cat and mouse since January when the Internet Search giant decided to end its four-year practice of omitting search results that the Chinese government considered subversive or pornographic.

Google made the decision after blaming Chinese computer hackers for an attack it said was aimed at stealing the company's technology and e-mail information from human rights activists.

In recent months, Google has been automatically rerouting search requests from the mainland to its Hong Kong service. But search requests at Google.cn from within mainland China now require an extra click that then takes the user to the Hong Kong site, which isn't subject to Beijing's censorship rules.

Impact & Ripple

Piper Jaffray analyst Gene Munster doesn't think this new development will have much impact on the bottom line. "Google’s total revenue from China is about $300 million, he says. "That’s small for a $26 billion company."

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But psychologically it’s a different story. "It's important for investors to know that Google has some access to the big growth in China," he adds.

And ultimately he thinks the whole drama is a lot of tempest in a pot of tea. Munster believes "the Chinese government wants Google to stay because if they shut down Google it will create social unrest."

In other words ultimately they find a way to work it all out. And in case you're wondering Munster has an ‘Outperform' rating on the stock and says that won't change. "It's trading at 13 times and growing at 15% next year, despite all the things going on in China it's still a world class company."


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Trader disclosure: On July 29, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Kelly owns (BP) puts; Jon Najarian owns (GLD) puts; Jon Najarian owns (AAPL) call spreads; Jon Najarian owns (MSFT) and short calls; Jon Najarian owns (COP) and short calls; Jon Najarian owns (RRC) and short calls; Jon Najarian owns (MSFT) and short calls; Jon Najarian owns (SYMC) and short calls; Jon Najarian owns (RIMM) and short calls; Jon Najarian owns (IACI) and short calls; Jon Najarian owns (LVS) and short calls; Jon Najarian owns (MGM) and short calls; Jon Najarian owns (XOM) and short calls; Jon Najarian owns (MOS) and short calls; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman owns (AAPL); Finerman owns (BAC); Finerman’s firm owns (BAC); Finerman owns (BP); Finerman’s firm owns (BP); Finerman owns (C); Finerman owns (CVS); Finerman’s firm owns (CVS); Finerman owns (FLS); Finerman’s firm owns (FLS); Finerman’s firm owns (GLW); Finerman owns (JPM); Finerman’s firm owns (JPM); Finerman’s firm owns (KFT); Finerman’s firm owns (PLCE); Finerman’s firm owns (RIMM); Finerman’s firm owns (SKS); Grasso owns (ASTM), (ABK), (BAC), (BA), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST); Scaramucci owns (APL), (PFE), (MO), (BUD), (KFT), (RAI)

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Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
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Stuart Frankel & Co and it’s partners are short (KEG)

For Anthony Scaramucci
SkyBridge Capital owns (APL)
SkyBridge Capital owns (PFE)
SkyBridge Capital owns (MO)
SkyBridge Capital owns (BUD)
SkyBridge Capital owns (KFT)
SkyBridge Capital owns (RAI)

For Brian Kelly
Accounts managed by Kanundrum Capital own (BAK)
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Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own Swiss Francs
Accounts managed by Kanundrum Capital are short (GLD)
Accounts managed by Kanundrum Capital are short (XME)
Accounts managed by Kanundrum Capital are short (SLX)
Accounts managed by Kanundrum Capital are short (RKH)
Accounts managed by Kanundrum Capital are short (XLK)

For Peter Boockvar
Boockvar owns Euros

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Piper Jaffray makes a market in (AAPL), (AMZN), (GOOG), (IACI), (YHOO)

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