Qihoo 360 Technology Inks Strategic Deal with Coolpad - Analyst Blog

China's second-largest online search engine, Qihoo 360 Technology Co. (QIHU) announced that it will form a joint venture with Coolpad Group Ltd. to manufacture mobile devices for the local market.

Qihoo will shell out $409.05 million and acquire a 45% stake in the new entity. The new entity will focus on building handsets that will mostly be distributed online.

Qihoo will be the provider of key mobile services for Coolpad's smartphones. Per the agreement, this will include security, app store and search.

Smartphones produced under the joint venture (JV) will be marketed under Coolpad's existing brand, Dazen. Recently, Chinese pop star Han Geng uploaded a photo of a Coolpad Dazen X7 smartphone on his official Weibo account. The most startling thing about the smartphone was that it seemed to be made out of glass entirely. According to reports, this handset will be rolled out in 2015 with a hefty price tag of around $807.

The JV will bring together Qihoo's strong competence in mobile app development, online marketing and Coolpad's extesive knowhow in smartphone design, production, supply chain management and after-market services.

Qihoo is following the steps of Chinese technology companies like Baidu Inc. (BIDU), the largest Internet search provider in the country, which are increasing their investment in the mobile space. In the past, Qihoo has made numerous efforts to enter the smartphone market, but it is yet to taste success in the ferociously competitive industry.

The number of smartphone users in China is on the rise. According to the China Internet Network Information Center, the country had 632 million Internet users as of June. Of these, 83% were reported to use mobile phones to gain access to the web.

Qihoo currently has a Zacks Rank #4 (Sell).

Better-ranked stocks in this industry include Geeknet, Inc. (GKNT), Mercadolibre, Inc. (MELI) and Overstock.com Solutions, Inc. (OSTK). While Geeknet sports a Zacks Rank #1 (Strong Buy), Mercadolibre and Overstock.com carry a Zacks Rank #2 (Buy).

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