"We are in principle open to using mergers and acquisitions as a way to grow our talent base, technology and portfolio as well as to accelerate our market presence," Kai-Fu Lee, president of Google China, said in an interview in Beijing yesterday.

Google CEO Eric Schmidt (L), president of Google China Kaifu Lee (C) and Google China's business development chief Zhou Shaoning sit in front of the new Chinese language Google brand name, right, at a press conference in Beijing Wednesday April 12, 2006. [AP Photo]

Google, seeking to surpass Baidu.com Inc. as China's most- used search engine, opened its Beijing office in May and released a version of its search tool in January. Baidu had a 56.6 percent share of the market in 2005, compared with Google's 32.8 percent, according to Shanghai-based iResearch Inc. China has 111 million Internet users, trailing only the U.S.

Mountain View, California-based Google is seeking to tap revenue from China's search industry, which iResearch estimates will reach 3.62 billion yuan ($452 million) in 2006 and 5.62 billion yuan the following year. By comparison, sales of search- linked ads in the U.S. may reach $6.9 billion this year and $8.7 billion in 2007, according to Merrill Lynch & Co.

Eric Schmidt, CEO of Google (2nd L), Kaifu Lee, Vice President of Google China (L), and Johnny Chou, President of Google China (R), unveil the new Chinese-language Google brand name at a press conference in Beijing Wednersday April 12, 2006. The new brand name 'Gu Ge' or 'Valley Song,' draws on Chinese rural traditions to describe a fruitful and rewarding experience, according to Google. [AP Photo]

Lee and Google Chief Executive Officer Eric Schmidt yesterday unveiled a Chinese name for the company: "Gu Ge," meaning "a harvesting song." The renaming is part of an effort to attract Chinese speakers worldwide, Schmidt said.

Shares of Google declined 0.7 percent to $408.95 on the New York time in Nasdaq Stock Market composite trading on April 12. They've more than doubled in the past year.

Expansion

"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 about cooperating with Chinese authorities, saying the company had to comply with the nation's censorship laws.

"We have made a decision to respect the local law and culture," Schmidt said. "It's not an option for us to broadly make available information that's illegal. We don't have a choice but to follow the law."

As part of an expansion in China, Google plans to have 100 engineers at its research and development center in Beijing by July, up from about 70 now, Lee said. Most of the 30 are still in university and will join as they graduate, he said.

"Eventually this will have thousands of people," said Schmidt, without giving a time frame.

The Beijing research center, in the Tsinghua Science Park near Beijing Tsinghua University, may become Google's biggest outside the U.S., and may overtake its European facility in Zurich, Schmidt said.

Baidu, Ganji

Google's focus on China was illustrated in its hiring of Taiwan-born Lee from Redmond, Washington-based Microsoft Corp., the world's largest software maker and a rival to Google in search. Google overcame a legal challenge from Microsoft to retain Lee, who is leading efforts to increase market share.

Trailing in market share is an unusual position for Google. The company had 42 percent of the U.S. search market in February and is gaining on competitors. Yahoo! Inc.'s share dropped to 28 percent from 31 percent and Microsoft Corp.'s MSN dropped to 14 percent from 16 percent, according to researcher ComScore Networks Inc.

Google owns about 2 percent of Baidu.com and is a partner with Ganji.com, using its Internet-content provider license. Sunnyvale, California-based Yahoo has a market share of less than 5 percent in China.

Global Products

Google has no "current acquisition plans" for Ganji or Baidu, Lee said.

The engineers at the facility in Beijing will help develop products for the Chinese market as well as globally, Schmidt said. One possible project in China would be to make Chinese books available online or to use translation software to produce English versions, he said.

"In a market that's expanding this quickly, the way you win is with innovation," said Schmidt. "An innovator could come in and quickly change all the dynamics and that could be done by us or to us."

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