The cyber security company saw a net loss of 190 million yuan in Q1, compared to a profit of 220 million yuan in the same period of 2022.
Photo by Kuang Da
By LI Biao
Chinese cyber security company Qihoo 360 released its 2022 and Q1 2023 financial reports on Saturday. The report makes a grim reading for investors.
In Q1 2023, Qihoo recorded revenue of 2 billion yuan (US$290 million), down 22 percent year on year. It saw a net loss of 190 million yuan, compared to a profit of 220 million yuan in the same period of 2022.
In 2022, Qihoo 360's total revenue was 9.5 billion yuan, down 12.6 percent. The net loss of 2.2 billion yuan was the first since it went public in 2018.
Since the end of 2022, there has been a significant change in shareholder structure. Founder and CEO ZHOU Hongyi and a company controlled by him remain the top shareholders, but the other eight of the top ten reduced their holdings.
The online-security venture blamed its troubles on EV maker Hozon, in which it invested and lost about half a billion yuan, and Opera, a Norwegian browser company sold at a loss, also of around half a billion yuan.
Zhou once said that smart cars would be the most common smart terminals after computers and phones, and the ‘Internet of Vehicles’ was the next opportunity. The network security of smart cars and the security of car networking will become an important factor in Qihoo 360’s business.
In October last year, when Hozon Auto reported sales of 18,000, only 10,000 were actually insured. The missing 8,184 units were likely all sold to car businesses like rental companies, car-hailing companies and local governments.
Hozon CEO ZHANG Yong has stated that selling to car companies is a good way to get a brand into the market, but while sales to car companies can be a short-term solution, it does not contribute much to Hozon's recognition among customers.
Opera is one of the world's major browsers. repurchased 47 million shares from a subsidiary of Qihoo 360, or 20.6 percent of the company and Zhou resigned from the board in October.
Since last year, Qihoo 360 has reduced new investments and is trying to wriggle out of previous investments. In December, Qihoo 360 announced plans to sell all its shares in Tencent Music for US$163 million.
Of its four major business sectors, only the security business increased last year. Advertising, which contributed the most revenue in the past, has declined for years but still accounts for more than 50 percent. Security brings in less than 20 percent at present.
Qihoo 360 stock is at a long-term low. The stock plunged earlier this month when the firm announced that Zhou and his wife HU Huan were divorcing and that he would give her a 6.25 percent share of the company. Before the divorce, Hu had no shares in Qihoo 360. The marriage ended on friendly terms, and their separation will not affect the company's operations, the company said.
Zhou has talked a lot about generative AI and large models, and the company's stock price has doubled since the beginning of the year, but the position remains unattractive. Its large model is still generations behind OpenAI and products are still being tested internally, with no plan to commercialize any time soon.
Qihoo 360 Search is the second-largest search engine in China, behind Baidu. The company has enough data to train AIGC technology and enough money to buy computing power. It may also seek partners to help speed up development and narrow the technology gap.
The firm’s AI research institute has been investing in AI-generated content technology, but it is currently for internal use only and there remains a big gap with the technology level of GPT 3.
