) surged 4.7% on Friday after the social networking Internet
platform provider agreed to sell a majority stake in its group
buying platform Nuomi to
), the largest search engine provider in China.
The reported sale (for 160 million in newly-issued shares in
Nuomi) is expected to be mutually beneficial for Renren and
Baidu. Shares surged 12.0% in intra-day trading on Friday.
Renren has been bearing the brunt of increased operating
expenses to support its Nuomi business that has affected its
overall profitability. Therefore, sharing the losses will not
only improve Renren's financial position but also enable it to
concentrate on its core social networking business.
In the second quarter, Nuomi contributed 12.4% of Renren's
revenues, which increased 69.4% on a year-over-year basis.
Nuomi's active paying users increased 44.2% from the year-ago
period. The company's operating expenses increased 32.6% from the
year-ago period, primarily driven by Nuomi's employee related
For Baidu, the strategic investment in Nuomi is expected to
strengthen its existing mobile location-based services (LBS) and
maps services. Nuomi's platform is expected to broaden Baidu's
operations as well as its customer base.
Very recently, Baidu acquired the 91 Wireless app store
business from Netdragon Websoft to strengthen its mobile Internet
business. These acquisitions are expected to help the company
gain traction in the mobile Internet business.
The company has $5.55 billion in cash and cash equivalents at
the end of the June quarter and generated $522.2 million in cash
for the period ended Jun 30, 2013. The strong cash position
enables the company to go for further acquisitions to boost
growth and help it to compete with its peers such as
AutoNavi Holdings Ltd
Currently, both Renren and Baidu carry a Zacks Rank #3
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RENREN INC-ADR (RENN): Free Stock Analysis
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