When It Comes to Baidu, It's All 'China' to Me

I don't get it. I really don't.

Receptionist at Baidu.com office
Receptionist at Baidu.com office

I've been following the unfolding drama between Google and China over the past few months along with everyone else, wondering how this diplomatic, technologic game of chicken would ultimately end, and while it appears an end might in fact be near, it certainly doesn't explain the enormous run in Baidu shares .

Talk about a bubble!

Look, Google leaving China is a big deal. It sends a big message. It points to some big problems. It paints a big, bad picture of American tech companies trying to crack the Chinese market and coming up short. What it doesn't paint is a big loss for Google, and it certainly doesn't paint a big potential gain for Baidu. You wouldn't know it by these companies' stocks. I can see Google taking a hit of 1, 2, even 3 percent on the news, once a final decision on its plans in China have been made and the company pulls out.

But look at Baidu.

This was a $415 stock in late January, and it has skyrocketed ever since. This company has added billions in market cap on the Google drama alone. It's up another 7 percent today. But why? Baidu already owns the Chinese market. It's the country's version of Google. It does in China what Google does here already. It controls better than 70 percent of the Chinese market. And it did so not in a vacuum. Google has been in China since 2006, trying desperately to gain traction in the marketplace.

To no avail.

And yet, with word that Google is 99.9 percent sure that it's pulling out of China, somehow, this is good for another 7 percent pop in Baidu shares. Think about it this way: if Microsoft all of a sudden announced plans to pull the plug on Bing, do you think that news would translate into a 7 percent pop in Google shares today? A 25 percent jump in Google shares over the next two months? I doubt it.

But that's the comparison.

We've seen companies miss earnings by a penny or two and their shares get crushed. We throw around words like "oversold." Looking at Baidu today, indeed Baidu over the past several weeks, and it's rare we get a chance to say a company is "overbought." But that's what this looks like. You'd have thought we all would have learned our lessons from the bubble years, and how not to take a single data point and blow it out into some lynchpin of a miraculous story that gets completely blown out of proportion. That appears to be happening all over again.

Wow, you just gotta wonder how long this Baidu blow-out, based solely on a distant competitor's possible plans to abandon a market in which it hasn't been able to really compete, can possibly last.

I don't get this at all.