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Why Baidu Stock's On A Tear, Up 57% Since July 1

Dee Gill

If you have any doubts about the importance of smartphones and tablets to whatever technology investment you hold, take a look at what’s happened to shares of China’s Google-like (GOOG) company Baidu (BIDU) lately.

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Baidu shares had been in a slump for more than a year. Competitors like Qihoo 360 Technology (QIHU), Sohu.com (SOHU) and Alibaba were encroaching on its Internet search traffic, and numerous attempts to monetize Baidu searches on mobile devices hadn’t gone well. The mobile numbers were considered particularly disappointing, as the fastest traffic growth for Internet related companies comes from smartphones and tablets, not PCs.

Baidu’s rally followed a series of events that led more investors to believe it could, at last, build and monetize mobile traffic. It started in mid-July, when Baidu announced plans to buy 91 Wireless Websoft, which will make Baidu the biggest mobile game and app and game distributor in China. Baidu has a strong balance sheet, and investors were happy to see it spend $1.9 billion on something to drive mobile revenue. Moreover, second quarter earnings announced later in the month offered another nice mobile surprise: more than 10% of Baidu’s revenue came from mobile devices, up from undisclosed levels in the past. The events resulted in several new buy recommendations for Baidu shares, including at least one from an analyst that moved from underperform to buy.

A variety of U.S. tech companies also are racing to make their business models work with smartphones and tablets, and their shareholders often feel the effects of their successes or failures on the platform. Facebook (FB) shares are up 67% since July largely because its earnings report then showed mobile revenues at 41% of total sales, up from 30% the previous quarter. Groupon’s (GRPN) share price has doubled since its earnings release in May, at least in part because it showed that mobile users make up more than half its sales now.

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On the other hand, chip maker Intel (INTC) has missed the U.S. market rally in large part because it allowed Qualcomm (QCOM) to make the chips for mobile devices while it stuck with PCs.

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So the next time your technology company reports earnings, listen for the word “mobile” in the ensuing commentary. It might be a clue to whether good times or trouble are ahead.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

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