Baidu.com, Inc. (BIDU) and Qihoo 360 Technology Co Ltd (QIHU): The War Is On

In addition, Qihoo has confirmed that it is in early talks with Sohu.com Inc (NASDAQ:SOHU) to buy its Sogou search engine, in a deal estimated to be worth up to $1.4 billion. The acquisition would boost Qihoo’s share of China’s search market to around 25%, making it a more formidable adversary to Baidu.com, Inc. (NASDAQ:BIDU). The talks are still preliminary, and Qihoo is trying to figure out whether it can fully integrate Sogou. Sohu.com has confirmed that it has been exploring options for Sogou, and one of the solutions might be a comprehensive strategic partnership.

Bottom line

As the war between Baidu and Qihoo 360 Technology Co Ltd (NYSE:QIHU) heats up, I am certain that there will be no clear winner, at least not in the next several years. Both companies can benefit from China’s rising search and mobile market. There is certainly room for both, and Baidu.com, Inc. (NASDAQ:BIDU) and Qihoo are good long-term investments.

In the last few years, Qihoo 360 Technology Co Ltd (NYSE:QIHU)’s share price has advanced, while Baidu is still far from its 2011 highs. This is the consequence of Qihoo’s fast growth, while Baidu.com, Inc. (NASDAQ:BIDU)’s growth has in fact slowed down significantly. And this is especially true for Baidu’s earnings growth. But the earnings growth slowdown is mostly the consequence of higher spending, which will lead to more convincing long-term growth for the company.

It will be interesting to see how they will respond to each other’s moves in the future, and how those efforts translate into the most important things investors are interested in – top and bottom line growth and rise in their respective values. Further margin declines and growth slowdown would be major red flags, if these trends last longer than they are expected.

The article Baidu and Qihoo: The War Is On originally appeared on Fool.com and is written by Dusan Jovanic.

Dusan Jovanic has no position in any stocks mentioned. The Motley Fool recommends Baidu and Sohu.com Inc (NASDAQ:SOHU). The Motley Fool owns shares of Baidu.com, Inc. (NASDAQ:BIDU). Dusan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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