China’s Qihoo 360 in talks to buy Sohu’s search engine

China's Qihoo 360 Technology Co Ltd, a leading provider of internet security products and the country's second-largest search engine after Baidu, is reported to be in preliminary talks to buy Sohu.com Inc's search engine unit Sogou Inc to help it to compete with Baidu Inc, the country's largest web browser provider.

Although financial details of the deal have not been disclosed, analysts estimate the value of Sogou at approximately $1.2-1.4 billion.

Neither Qihoo nor Soho has confirmed the deal.

''From time to time, the company has been, and continues to be, exploring various potential investment and strategic alliance opportunities. No agreement has been reached with respect to a significant transaction in such nature,'' Qihoo said in a statement.

Citing Qihoo's chief financial officer Alex Xu, Bloomberg reported that the deal is likely to be a cash-and-stock transaction. The US-listed company's cash position was around $301 million as at the end of March.

According to Bloomberg data, Sogou has a web browser share of 5.5 per cent in China with the no. 3 position, while Qihoo has around 9 per cent.

Analysts believe that it makes strategic sense for Qihoo to pursue this deal as the combination of Qihoo and Sogou will create a stronger rival for Baidu which controls over 80-per cent of China's search engine queries.

Beijing-based Sohu is a popular internet brand which run online media destination sohu.com, interactive search engine sougou.com, games portal 17173.com, real estate website focus.en, alumni club chnaren.com and other websites.

Sohu also offers wireless value-added services such as news, information, music, ringtone and picture content sent over mobile phones.

Commenting on the media reports, Sohu said in a statement that in recent months the company has been exploring options for its subsidiary Sogou Inc and continues to hold ''preliminary discussions with several potential strategic investors and partners.''

''No particular strategic partner or transaction has been selected, nor has any decision been made to proceed with a significant transaction of any kind with respect to Sogou,'' the company's co-president and chief financial officer Carol Yu said.

Earlier in May, Soho had said that its focus is on online media and entertainment.

Qihoo, also Beijing-based, is a leading internet technology platform company. It company had about 411 million monthly users as at the end of March 2012.

The company provides comprehensive internet and mobile security options to protect computers, smartphones and tablets against malware and malicious websites, besides providing web browsers and application store. Its brands include 360 Safe Guard, 360 Mobile Safe, 360 Browsers and 360 Mobile Assistant.

Qihoo's free cloud-based internet security technologies are well accepted in the market and the company is gearing up to provide a wide range of products and services from third parties, such as web games, online video, E-commerce, travel and other applications.

Earlier this week, rival Baidu struck a deal to buy smartphone applications distributor 91 Wireless Websoft Ltd from NetDragon Websoft Inc for $1.9 billion aiming to strengthen its presence in the country's fast growing mobile internet market. (See: Baidu to buy mobile apps store 91 Wireless Websoft for $1.9 bn)