A Chinese Stock Legend in the Making: Qihoo 360 Technology Co Ltd (QIHU)

In order to tackle Baidu, Qihoo 360 is making its own power play with an agreement with Sohu.com Inc. (NASDAQ:SOHU).  What’s bizarre about this potential arrangement is Qihoo 360’s prior attacks on Sohu services, deeming them “unsafe“, so presumably these indiscretions will be overlooked in favor of a broader agreement.  Personal animosity is playing a key role in the arrangement, but whether Qihoo 360 and Sohu together have sufficient mojo to challenge Baidu in search remains to be seen.  The likelihood is that Baidu will simply flick them aside given its dominance.  Despite this, Baidu has already launched an offensive by going after Qihoo 360’s PC security business, with “Baidu PC Faster,” although in the recent conference call there was no mention as to how this sector was performing for it.

Then there is Microsoft Corporation (NASDAQ:MSFT).  Microsoft offers free Desktop antiviral software and directly competes with Qihoo 360 in the PC environment.  If imitation is the highest form of flattery, then Qihoo 360 has it in spades.  One of the citations received from the Chinese government was implying its anti-viral software was an official Microsoft patch.  Then there is the browser mimicry; a quick visit to the Qihoo 360’s home page shows a prominent green Internet Explorer icon, which is in fact its own browser, not Microsoft’s.  If that’s not enough, whatever warnings the company has been given by the Chinese government to change the icon have not been heeded…

Outcome

It’s an odd one this. Qihoo 360 has done the hard part in establishing its dominance in the area of internet and mobile security. The problem is that this power looks to have gone straight to the head.  And up until recently, these actions have gone largely unpunished.  Whether the Chinese government will let it continue to do so is up for debate.  A more likely outcome is a slap on the wrist and a hefty fine (at least until the next time).  How much pressure is been excerpted from the outside, and how much the Chinese government will want to act on that pressure, is another story.  Certainly, none of this has hurt the stock’s price yet.  What will really set the cat amongst the pigeons is if the stock goes on to exceed its IPO highs, then it will be hard to ignore and the story will only become larger.

The article A Chinese Stock Legend in the Making originally appeared on Fool.com and is written by Declan Fallon.

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