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Baidu shares tumble as analysts doubt its current valuation
New York: Shares of Baidu, the Chinese search engine, tumbled 23 percent Wednesday after two Wall Street analysts said the stock was worth a fraction of its current valuations.

Baidu shares had rocketed 353 percent in its IPO six weeks ago, hitting a high of US$153.98 on August 8. It tumbled US$32.27 on Wednesday to close at $81.32. About 16.6 million shares traded hands, three times the average volume since Baidu's August 5 IPO.

Both Safa Rashtchy, an analyst with Piper Jaffray, and Anthony Noto, with Goldman Sachs, predicted the American Depositary Shares would "underperform" the market. And both set price targets far below the current market value.

The public offering was one of the highest-profile debuts since the Internet bubble burst in April 2000. The shares opened on Nasdaq at US$66 and closed at US$122.54, valuing the company at about US$3.96 billion based on 32.5 million shares outstanding.

In his analysis, Noto set a price target at US$27, exactly where the stock was priced for its IPO, and said the current valuation dampened his otherwise bullish view of the company. Rashtchy set his price target at US$45 and said the current valuation of the stock was unsustainable. He pointed out that the stock, prior to Wednesday's trading, was priced at 123 times 2006 EBITDA (earnings before interest, taxes, depreciation, and amortization). That compared poorly with peer stocks, which trade in the range of 12 to 26 times earnings.

Both analysts were still very bullish on the market opportunity in China. Piper Jaffray estimates the sponsored search market in China, currently estimated to be US$134mn, will grow to US$1bn by 2010. And Baidu is clearly the market leader.

The search engine, registered in the Cayman Islands, is China's most popular search engine with a 44.7 percent market share, according to Internet research firm iResearch. Google, which owns 2.6 percent of Baidu, is No. 2 in the country with 30.1 percent share.

The negative ratings on Baidu have broader implications for Chinese companies as they steer towards public offerings in the United States or seek partnerships with Western companies. When Baidu soared in its debut, so did the stocks of other Chinese Internet companies. And on Wednesday, as it fell, the other companies fell, too.
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Wal-Mart faces lawsuit over sweat-shop operations overseas
Los Angeles: A lawsuit filed in the American State of California on Tuesday accuses Wal-Mart Stores Inc. of failing to monitor labor conditions at overseas factories that allegedly maintained sweatshop conditions. As per the suit, the acts violate Wal-Mart's own code of conduct, which prohibits such acts by overseas suppliers.

The suit charges that southern Californi grocery workers were harmed because Wal-Mart's low prices, made possible by alleged substandard overseas factories, force competing grocery chains to cut wages and benefits.

A Wal-Mart spokesperson said the company had not seen the lawsuit but had started to research the issues it raises.

The lawsuit was filed in Los Angeles Superior Court under California's Unfair Business Practices Act. The court action was organized by the Washington, D.C.-based International Labor Rights Fund, which also helped organize a lawsuit in the 1990s against Unocal Corp. alleging human rights violations during the construction of a pipeline in Southeast Asia.

Wal-Mart's public claims that it complies with foreign labor laws persuaded California consumers to patronize the chain to the detriment of workers at competing stores, the suit states.
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