Bookkeeping: Restarting Baidu.com (BIDU)

For you technical traders out there, you know the "fill the gap" theory. I just went back on Baidu.com (BIDU) to see how long it has been since it was this low - it was April 2007. Ironically there was a gap in the chart created at the time, in the $110s that I assume people thought would never be filled. Well, it has.

This was a $425 stock at the beginning of the year, and $375 as late as May 2008. Heck it was $195 four days ago. Whodda thunk that gap would get filled?

We'll begin more modestly here, with a 1.8% stake in the $115s. Yes there are issues surrounding this name that we've laid out, but I don't see it turning into the Chinese version of Lycos....

• Baidu.com has been the star of China's Internet world. But now the search engine dubbed "China's Google" is scrambling to rescue its reputation after state TV accused it of letting unlicensed suppliers of medical products pay for higher rankings on its results page -- without alerting users. Baidu says it has suspended thousands of merchants from its paid-search service but says it broke no law.
• It is a big setback for Baidu, which enjoyed a long winning streak after its 2002 launch, with profits up 91 percent in the latest quarter and a 60 percent market share, far ahead of Google Inc.'s Chinese site.
• CEO Robin Li said Baidu is trying to reassure users by requiring customers selling medical, beauty and health food products to show they are licensed in their fields before they can return to the paid-search service. But he stressed that was not required by law and said search engines could not be expected to vouch for information on the Internet.
• "We are doing this because we care. It is important to us. We want to be a responsible corporate citizen," Li said Wednesday in a conference call with financial analysts. Still, he said, "if I had to speculate, our traffic will be negatively affected in the short term."
• Little-known outside China, Baidu -- pronounced "by doo" -- is one of the world's most-visited Web sites because of its dominance among China's vast population of 253 million Internet users, who celebrate a Chinese company that has faced down foreign rivals to become a leader.
• Google and Baidu's Chinese rivals show paid listings in a separate box, while Baidu lists all results together, with the word "promotion" in small Chinese characters at the end of sponsored items. (now this will change) "One of the things CCTV has implicitly said is that because Baidu does not clearly differentiate between what is sponsored and what is natural, the consumer runs the risk of being confused," Brueschke said. "If there is a muddling of that distinction, has Baidu somehow contributed to consumers' purchasing products that harmed them?"
• Li, the CEO, said Baidu plans to change its display to make sure results are clearly labeled. "We thought it was clear," he said. "But we do hear from the media from time to time that they are confused about paid and non-paid results. So we are working on a better system to address this issue."

2 year chart below - notice that gap in late April 2007.

(click to enlarge)
Long Baidu.com in fund; no personal position