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Qihoo 360's JVC to Publish Cross Fire 2 Game in China

Zacks Equity Research

Qihoo 360 Technology Co. Ltd. QIHU recently announced that its joint venture (JVC), Oriental Shiny Star Limited has formed a five-year license agreement with Korean game developer, Smilegate Entertainment.

The JVC is owned mostly by System Link Corporation Limited which is a 50-50 joint venture between Qihoo 360 and The9 Limited NCTY. Per the aforementioned deal, the JVC will be the exclusive publisher of Cross Fire 2, the sequel to the popular PC game Cross Fire in China.

The JVC will obtain the exclusive license by making upfront payment of $50 million to Smilegate. In addition, the entity will also shell out another $450 million as the developer gradually achieves the development and operation milestones. This payment will also include royalty charges with regard to future sales.

Cross Fire, a free-to-play first-person-shooter game had been widely successful in China. In 2013, the game held the first position in the free-to-play games category. Cross Fire was developed by Smilegate and published by Tencent Holdings. It had garnered nearly $1 billion in revenues in 2013.

This time around, Smilegate has included some new features to enhance the gaming experience. Cross Fire 2 has been developed using a new game engine and will also feature PVE game mode in addition to the conventional PVP mode.

We believe that this exclusive publishing agreement will aid Qihoo significantly, thereby further strengthening its position as the undisputed leader in the Chinese Internet market.

Qihoo carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader tech space include MeetMe MEET and Synacor, Inc. SYNC. Both these stocks sport a Zacks Rank #1 (Strong Buy).

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