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Google's Lee says acquisitions are an option in China

Google Inc, the most-used Internet search engine, may buy companies in China to catch up with Baidu.com Inc (百度) in the world's second-largest online market.

"We are in principle open to using mergers and acquisitions as a way to grow our talent base, technology and portfolio," Kai-Fu Lee (李開復), president of Google China, said in an interview in Beijing on Wednesday.

Google hired Lee from Microsoft Corp in July to help catch Beijing-based Baidu.com, whose 56.6 percent share of China's Internet search market last year was almost twice that of the Mountain View, California-based company, according to iResearch Inc. In January, Google released a version of its search tool excluding information censored by the Communist Party to satisfy regulators in a nation with 111 million Internet users.

"Google will look to acquire companies with good sales channels because it is already strong in R&D," said Lily Jap, an analyst with Nomura International (H.K.) Ltd. It may favor companies that would bring new advertising clients in China, she said.

Lee and Google Chief Executive Officer Eric Schmidt on Wednesday unveiled a Chinese name for the Mountain View, California-based the company: "Gu Ge," meaning "a harvesting song." Google plans to have 100 engineers at its research and development center in Beijing by July, up from about 70 now, Lee said. Schmidt said the center will eventually have "thousands of people," declining to give a timeframe.

Searches on the google.cn site for "Tiananmen Square" return no mention of student protests crushed by the government in 1989. The local site also doesn't offer users e-mail or Web log services. Yahoo! Inc has been condemned twice by human rights group Reporters Without Borders for giving Chinese authorities data later used to convict dissidents.

"A fifth of the world's population is in China and a large portion of that will eventually be Internet users," Schmidt said. He fended off criticism of self-censorship, saying Google "made a decision to respect the local law and culture."

Search industry revenue in China will rise to 3.62 billion yuan (US$452 million) in 2006 and 5.62 billion yuan the following year, Shanghai-based market researcher iResearch estimates.

By comparison, sales of search-linked ads in the US may reach US$6.9 billion this year and US$8.7 billion in 2007, according to Merrill Lynch & Co.
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