I would expect a 15% drop instantly, just my opinion. SOHU has $1.06B in cash, not including receivables. They have about $500M in short term liabilities, minimal LT debt, and their cash flow from operations ranges from $40M-$100M/quarter.
Seems like they don't need any liquidity and a $1.4B deal in cash and stock seems like a poor utilization of capital (or return on assets).
I would think that by owning Sogou, it helps drive traffic and revenue to their gaming/advertising/media and other revenue streams.
Alexa states that Qihoo's portal (not search engine) is the 13th most popular site in China. But in terms of search engines, Qihoo's search engine is ranked 50th in China, Sogou is ranked 18th. If you look at Qihoo's search engine, you will see that their traffic plateaued at 50th place, far from a real threat to BIDU. That's like comparing GOOGLE in the US to NBC New's website (ranked 50th in the US).