Is It Time to Sell Qihoo 360 Technology Co Ltd (QIHU)?

Page 1 of 2

On Jan. 24, the Chinese government finally admitted it: It doesn’t like Qihoo 360 Technology Co Ltd (NYSE:QIHU).

In its official warning, Beijing listed six “acts of unfair competition” that the company must stop, or it might face sanctions or even a shut down. Although that may seem unlikely, Qihoo has hurt the whole Chinese tech economy more than any other company in recent memory. Here’s why the government stepped in, and what it means for Qihoo’s future as a business and investment.

Qihoo 360 Technology6 “Acts of Unfair Competition”
The Chinese government dealt a huge blow to Qihoo. By warning that it must stop its “acts of unfair competition” in the desktop browser space, the government reprimanded Qihoo for abusing its power as an anti-virus security suite. Here are the six tactics that the government denounces:

  1. Making its security suite difficult to uninstall.
  2. Preventing users from installing competitors’ software by noting (fake) incompatibility.
  3. Warning users that their non-Qihoo browser is unsafe.
  4. Tricking users to install Qihoo’s 360 Browser through default settings.
  5. Forcing security updates to change users’ browser and homepage settings.
  6. Tricking users into downloading the 360 Browser as an official patch from Microsoft Corporation (NASDAQ:MSFT) .

As if out of the twilight zone, the Chinese government warning mirrored last year’s complaints by Digital Due Diligence — an American firm! Of course, I doubt Beijing really meant to acknowledge an American perspective. Rather, the pro-domestic-business government was saying that Qihoo really pushed the limits. And it better stop soon, or else Beijing might step in. At that point, who knows? China might shut down Qihoo.

Could this be the end of Qihoo?
To be honest, I’m hard-pressed to think of a case where the Chinese government has shut down a whole corporation. And I doubt that the government would do something like that; Qihoo has done wonders for China.

First off, Qihoo search has crushed Google Inc (NASDAQ:GOOG) in China. Since Qihoo’s foray into the space last summer, Google’s search market share dropped from 16.2% to 5%; in the process, Qihoo captured 10.4% and the overall market share of Chinese search companies has increased, too.

Qihoo has also dented Microsoft’s dominance in the browser space, according to iResearch China. Right now, roughly 300 million Chinese users have Qihoo’s 360 Browser (though how often it’s used is debatable). How? Qihoo just took Internet Explorer’s logo and made it green, thereby tricking users to think the 360 Browser was from Microsoft. Although Beijing’s new warning may put an end to this, the government hasn’t talked about the situation since Qihoo stole Microsoft’s intellectual property over a year ago. All in all, the whole ordeal shows that China will let its domestic companies run amok even if you have cooperated with Chinese Internet rules and let the government monitor, say, Skype calls. At the end of the day, China is domestic-first.

And that’s the crux of the problem: Qihoo is hurting Chinese tech companies, too. The warning detailed that the browser deemed “unsafe” by Qihoo was that of Sohu.com Inc. (NASDAQ:SOHU)‘s Sogou . Now, it’s unlikely that Qihoo only attacked Sohu. The company probably did the same with Internet Explorer, but Sohu was explicitly pointed out because it’s Chinese.

If Qihoo doesn’t cease and desist from hurting other Chinese tech players, I’m not sure what might happen. But, there is a first time for everything and investors should be wary for any signs that China may shut down Qihoo and put them in the red.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!