Qihoo Raises Stake in PSafe - Analyst Blog

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Chinese Internet services and security software provider Qihoo 360 ( QIHU ) recently announced its decision to increase its stake in Brazilian cloud-based online security company PSafe Technologia, for $25.0 million.

PSafe is a Brazilian antivirus service provider company. PSafe is a part of the Rio de Janiero-based firm Grupo Xango and was co-founded by a former employee of Microsoft ( MSFT ), Marco De Mello.

As per TechCrunch, PSafe has 20 million average monthly users and 30 million installs. Its competitors include names like AVG ( AVG ), McAfee, Symantec ( SYMC ) and Avast ( AVST ). PSafe intends to build an app, content and game store within its product, which seems very much in line with Qihoo's business model.

With a goal to become the biggest name in the global security service industry, Qihoo has begun its expansion activities in certain less-developed countries like Brazil, India, Russia and South Africa where it has identified growth prospects.

Qihoo 360's exact stake in PSafe was not made public. However, with this increase it is believed to have become the largest investor in PSafe, followed by Redpoint.

Back in 2010, Qihoo had tried to enter into an association with PSafe by making a small investment and providing it with a license. This would have enabled PSafe to use Qihoo's antivirus cloud-scanning technology in Latin America. The association did not last long since Qihoo was skeptical about PSafe's prospects.

The current investment by Qihoo is a reflection of the growing ambitions of Chinese Internet companies in the international arena. They are no longer satisfied just to compete in the domestic online business while contending with government censorship and website blocking.

Qihoo has been growing very strongly in the recent past. The company posted third-quarter revenues of $187.7 million, representing an increase of 124% from $84.0 million in the year-ago quarter and 24% from $151.7 million in the prior quarter. The strong year-over-year growth in revenues was mainly due to continued momentum in both online advertising and Internet value-added services.

Qihoo's management seemed happy with the progress the company has been making in search monetization and they firmly believe that this will be one of the main catalysts driving growth, going forward.

However, with competition becoming more intense in the near future, we believe that Qihoo's prospects might be dampened if it fails to expand and innovate in tandem with changing market demand.

Currently, Qihoo has a Zacks Rank #2 (Buy). Other stocks worth consideration in the technology sector include Digital River Inc ( DRIV ) with a Zacks Rank #1 (Strong Buy), and Channeladvisor Corp ( ECOM ) and Demandware Inc ( DWRE ), both with a Zacks Rank #2.



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AVG , DRIV , DWRE , ECOM , MSFT

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