Monday, January 18, 2010

Google Takes On China: Bloomberg Mobile story

http://mobile.bloomberg.com/apps/news?pid=2065101&sid=aREgM8FvboOM

Google Says It’s in Talks With China on Search Engine (Update2)

By Mark Lee

Jan. 18 (Bloomberg) -- Google Inc. said it has begun talks with the Chinese government about the company’s plan to stop censoring results from its search engine, after saying it may quit the country because of cyber attacks.

Google will hold more talks with Chinese authorities “in the coming days,” it said in an e-mailed response to questions today.

The operator of the world’s most-popular search engine last week said it plans to operate an unfiltered search-engine service in China -- a move that may lead to the company closing down its offices in the country -- pending talks with the government. The Mountain View, California-based Internet company said its computer system faced a series of “highly sophisticated” attacks that originated in China.

“The key swing factor is the negotiation between Google and the Chinese government,” Credit Suisse Group AG analysts Wallace Cheung and Sharon Jing wrote in a report today. “Next week will be crucial for resolution of the issue,” said the analysts.

An exit from China would leave Google, whose revenue growth slowed during the U.S. recession, on the sidelines of the world’s biggest Internet market by users. The number of Chinese Web users will grow to 840 million, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. That’s up from 396 million last year.

Google said Jan. 12 in a blog posting that it had been subjected to cyber attacks that originated from China and had targeted Chinese human rights campaigners’ Gmail e-mail accounts. It wanted to reach an agreement with the Chinese government to allow unfiltered Internet searches, and would be removing restrictions in coming weeks, the company added.

China said it welcomed global Internet companies provided they obey laws that restrict their content.

The Chinese service started by Google in 2006 limits search results to comply with the Chinese government’s rules to restrict access to information censors deem inappropriate. Its Google.cn Chinese-language site is still operating in compliance with local regulations, Google said in today’s statement.

Local online operator Baidu Inc. will pick up “the lion’s share” of Google’s search business should the U.S. company leave, Nomura Holdings Inc. analyst Jin Yoon wrote in a Jan. 13 report. Tencent Holdings Ltd., operator of China’s biggest online chat service, and Sohu.com Inc. also will gain, Yoon said.

Google’s China operations may be “officially terminated” in February, leading the government to block the company’s main site, Credit Suisse’s Cheung and Jing wrote.

“Post Google’s China shut down, China government is likely to frequently block the Google.com Web site,” they wrote, without saying who gave them the information. “Without stable Web site access, Google will likely lose traffic and even revenue” to Baidu and other search-engine providers.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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