Qihoo Slips With Baidu as Web Ads Trail: China Overnight
By Belinda Cao - Apr 12, 2013 6:21 PM ET.
Qihoo 360 Technology Co. (QIHU), the Chinese Internet company whose search engine debut drove shares to a record, is falling along with rival Baidu Inc. (BIDU) on concern advertising spending isn’t keeping pace with economic growth.
Qihoo, a Beijing-based software developer that introduced a search engine in August, has retreated 13 percent from an all- time high reached March 5 in New York, while Baidu, owner of China’s most-used search tool, has slid 0.8 percent. Qihoo’s 30- day correlation with shares of Beijing-based Baidu rose to 0.44 last week, the highest since Aug. 6 and compared with negative 0.28 Feb. 26, when their movements were most divergent.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in the U.S. has slumped 9.3 percent this year on concern the economy’s emergence from a seven-quarter slowdown will be hampered by government curbs to the property market. While both companies dominate China’s search market, they reported slowing sales growth in 2012, and Qihoo said in March operating margin will “see the bottom” in the first quarter due to the cost of expanding its business to mobile Internet.
“The outlook for first-quarter ad revenue isn’t optimistic because the rebound in business ad spending has been lagging behind the macroeconomic recovery,” Henry Guo, an analyst at research firm ABR Investment Strategy LLC, which focuses on technology and media companies, said by phone from San Francisco April 12. “Baidu and Qihoo will move generally in the same direction unless Qihoo’s market share can rise significantly in the short term. We don’t think that is likely to happen.”