Baidu.com, Inc. (BIDU): Another Example of Short-Term Stupidity

The problem, from the market’s perspective, is that those kinds of adoption rates won’t happen overnight. But long-term investors know that given a decade or so — that’s what it really means to be a long-term investor — there’s a pretty good chance Internet penetration will increase and that Baidu is focused on keeping its No. 1 spot.

Speaking of staying ahead of the pack
The other knock on Baidu lately is that expenses have been exceeding revenue increases. While this would normally be troublesome, I think we should be cutting the company some slack.

As we saw when Larry Page took over at Google, these companies need to invest heavily in the future right now to put distance between themselves and the competition. That’s especially true for Baidu, which has been facing pressure lately from Qihoo 360 Technology Co Ltd (NYSE:QIHU). Now is exactly when Baidu should be spending money to create a moat, while it has over $5 billion in cash compared to Qihoo’s $350 million.

And I find it interesting that while analysts voice concerns about a switch to mobile, the company spent 70% more on research and development last quarter to help address the issue. That, plus the fact that Google has already shown mobile searches can compliment those on desktops, should give investors reason to breathe easy.

An unknown future
Of course, I don’t have a crystal ball. I can’t predict if Baidu will execute mobile perfectly, and I don’t know that it will be impervious from a continued attack by Qihoo. And God knows that if Baidu ends up having played financial shenanigans like some other Chinese companies, all bets are off.

That being said, I feel rather certain that the company’s recent poor stock performance has more to do with short-term investors wanting appreciation now rather than dire long-term concerns.

The article Another Example of Short-Term Stupidity originally appeared on Fool.com and is written by Brian Stoffel.

Fool contributor Brian Stoffel owns shares of Google and Baidu. The Motley Fool recommends and owns shares of Baidu and Google.

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