Amid all the recent talk about security due to high-profile breaches at some big-name web firms, 2 of the nation’s top Web security software makers, high-flyer Qihoo 360 (NYSE: QIHU) and laggard NetQin (NYSE: NQ), are seeing some sharp reversals of fortune as investors take a second look at these stocks. We’ll start with Qihoo, clearly the larger and more aggressive of the 2, which has started the new year by announcing a plan to buy back up to $50 million in company shares. (company announcement; Chinese article) The timing of the plan is interesting, as the markets have been relatively quiet in recent weeks compared with the summer and fall when many other US-listed Chinese firms announced similar buy-backs. But a quick look at Qihoo shares reveals its stock is down around 30 percent from its mid-November high, which roughly corresponds to when a small research house named Citron came out with a report saying Qihoo’s user figures were grossly exaggerating and that its stock, then trading in the $20 range, should be valued closer to $5 per share. (previous post) Qihoo denied the claims, prompting Citron to issue another similar report weeks later. Investors seemed to shrug off the initial report, but the recent fall in its price to below $15, which seems to have prompted the buyback, clearly has the company worried that people may finally be waking up to the reality that Qihoo does indeed seem to be prone to exaggeration based on past actions, though obviously I can’t comment on the accuracy of Citron’s claims. Stay tuned for more downward pressure on its shares this year. Meantime, NetQin, a smaller security software firm whose shares have languished since their IPO last May, got a nice boost on Wall Street after announcing a deal to provide software to Motorola Mobility. (company announcement) Its shares rose 16 percent after the news came out, and indeed such a deal shows the company may still have some potential even after reports emerged last year of conflicts with China’s 3 big telcos. Even so, the company’s shares, which now trade at around $6.20, are still down by about half from their IPO level of $11.50, so they still have a ways to go.
Bottom line: Qihoo shares will come under pressure this year as doubts remain about its credibility, while rival NetQin could get a lift following a new agreement with Motorola.
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