China's Internet Sector Is Buzzing

 | May 09, 2013 | 3:25 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

sohu

,

bidu

,

qihu

The Chinese Internet space has been on fire of late.

There's an interesting rumor out today from Marbridge Daily that Sohu (SOHU) might be close to agreeing to sell its Sogou search engine to Baidu (BIDU), Qihoo 360 (QIHU) or Tencent.

A year ago, it seemed like Baidu had a lock on the Chinese search market. Google (GOOG) had abandoned the market a few years earlier, and Chinese netizens had nowhere to turn but to Baidu. It did a solid job in search.

However, starting about a year ago, Qihoo 360 dared to challenge Baidu's monopoly by getting into search. It has climbed to about 12% market share, and that has done wonders for Qihoo's stock price. Last year, when Citron Research was pushing allegations of fraud, Qihoo was trading around $15. The stock is now close to $40.

Qihoo's success is likely emboldening Tencent and Alibaba to also get into the search space. It's incredibly profitable, and since Baidu is at such a high share, there's ample margin for these bigger players to come in and get a piece.

Sogou has had decent but small share in search in China for some time. As one of these bigger players looks to come in to the space, it would make most sense to purchase Sogou and then look to build on that as a starting point.

According to the rumors from today, Qihoo has offered $1.4 billion to acquire Sogou. Yet Baidu has apparently offered even more. Apparently, Sohu's management and board is divided over which company to go with.

Sohu is mainly known for its portal business, where it sells ads. At present, its market cap is $2.1 billion. So any acquisition in the $1.4 billion range would be very significant for the company and its stock.

Chinese rumors are plentiful, so there's no way of knowing if this will happen. However, keep your eyes open.

Any kind of deal like this would be very significant for the space.

Columnist Conversations

Tim C., GDXJ certainly ranks high in the "buy low" department, but I think that's about it. The relative perf...
While Google (GOOG) has moved in sympathy with the overall market's "V" recovery rally off of last week's low,...
Just got off this interview for TheStreet with Dunkin Donuts' CEO. Interesting stuff learned. Big takeaway: t...
Big spread in the small cap index. With RUT up 22.40 to 1111.90, the expiring Weekly (10/24)1140-1160 call spr...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.