BEIJING – Baidu, China’s most popular search engine, has retained an underwriter and entered its silent period in preparation for an initial public offering on Nasdaq this fall, according to several industry insiders in China.

The IPO, which would be the first for a stand-alone search engine in China, is one of the most anticipated for a Chinese company and could represent the beginning of a “fifth wave” of Nasdaq listings for Chinese Internet/technology plays, following the Internet major portals (Sina, Sohu, and Netease), the wireless value-added service providers (Linktone and Kongzhong), the travel booking web sites (C-Trip and eLong), and the job search sites (51job, with Zhaopin.com likely to follow).

Baidu spokespersons offered no comment on reports of an impending listing, which have appeared in the Chinese press all week. But Baidu management has turned down interview requests from Red Herring and other media: while avoiding the phrase “silent period,” a company spokesperson said that CEO Robin Li and CFO Shawn Wang were “not talking to the press,” and did not deny reports in the Beijing Evening News that Baidu has retained Goldman Sachs as its underwriter.

“We’ve heard that it’s Goldman from multiple sources,” said Paul Waide, founding editor of Shanghai-based research firm Pacific Epoch.

The Beijing Evening News quotes an anonymous source saying that Goldman and Baidu are still far apart on valuation, with the latter looking for a market cap of $1 billion while the likely underwriter puts the company’s value at closer to a third of that.

Baidu, whose investors include Draper Fisher Jurvetson, IDG, Peninsula Capital, and Integrity Partners, has not released revenue numbers, but sources close to the company report that the company is in the black.

Google: Investor, competitor

Henry Yang, CEO of Shanghai-based Internet research company iResearch, says that Baidu’s success is based largely on the “performance-based model of its paid search business, and the transparency of its pricing system.” Baidu charges paid search customers about .30 renminbi—less than $0.04—per click-through, and paid search brings in approximately 70 percent of the company’s revenues, Baidu CEO Robin Li told Red Herring in an interview on October 20, 2004. Generic, non query-sensitive text links account for another 15 to 20 percent, said Mr. Li, with search solutions for enterprises making up the balance.

“Robin Li basically wrote Factiva,” said Mr. Waide, referring to the Dow Jones-Reuters news search service. “He has patents on search technology going back to the mid-90s.” Mr. Li, who graduated from Peking University and earned a masters degree in computer science from the State University of New York at Buffalo, joined Dow Jones and later Infoseek before returning to China during the Internet bubble.

Mr. Li co-founded Baidu with former Chief Strategy Officer Eric Xu, who recently left the company for undisclosed reasons according to a Baidu spokesperson. Initially, Baidu provided search services behind the scenes for major Chinese web portals, including Sohu.com. “I actually offered Robin Li a job running Sohu’s search service,” said Charles Zhang, founder and CEO of Sohu. “He turned me down. I admire his courage and determination,” said Mr. Zhang. Mr. Li launched Baidu as a free-standing search web site along the lines of Google in September 2001; Sohu recently launched its own stand-alone search engine, SoGou.com.

Last year, Google made an investment in Baidu’s Series C round, leading a group of investors who bought a roughly 10 percent stake for a valuation rumored to be just over $100 million. Google, which iResearch ranks as the No. 2 search engine in China by frequency of use, has 30.1 percent market share behind Baidu’s 44.7 percent.

“The question I have is how the strategic relationship with Google is going to pan out,” said Mr. Waide. Mr. Li described the relationship as one of “co-petition.” “The investment opens a better channel for communication between Google and Baidu. Even if we compete, we can still share experiences, and educate the market together.”

Baidu, which takes its name from a 12th-century Song dynasty poem about searching for a beautiful woman amidst the teeming masses, believes that it has advantages in search given the peculiarities of the Chinese language. “All the major search engines work in a similar way in terms of basic infrastructure, but in China there are thousands of details to tailor for local use,” said Mr. Li. “There are no spaces between words, and no clear definitions for what constitutes a word. You need to be able to parse sentences into words.” Baidu employs language specialists who study language-specific features, said Mr. Li.

The search contest in China is shaping up into a three-way race between Baidu, Google, and Yahoo, the third major search player in China. Yahoo ramped up its presence in the market with the acquisition in 2004 of 3721, which offers a search technology especially popular with novice Chinese Internet users, allowing them to input Chinese characters directly into a browser address bar, hit return, and retrieve search results.

Mr. Li says that loyal users and his own staffers are already using “Baidu” as a verb, the way many already do with Google. The coinage may not have become universal, but Baidu is already a powerful presence in China: “My team members, who spend all day on the Internet, use Baidu first, then Google—and nothing else,” said Mr. Waide.