Tencent splashes US$115M on Kingsoft's security know-how

Tencent Holdings is looking to build on its online games and instant messaging businesses by augmenting it with security offerings following its newly acquired stake in software developer Kingsoft Corporation.

The Chinese Internet giant released a press statement Wednesday announcing that Kingsoft's founder and executive director, Pak Kwan Kau, and non-executive director, Cheung Shuen Lung, will transfer a total of 15.68 percent of company shares to Tencent as part of a HK$892 million (US$114.5 million) transaction.

Additionally, Tencent will also make an undisclosed investment in Kingsoft Internet Security Software, an Internet security services provider which is a subsidiary of Kingsoft Corporation, the company noted.

"Through the establishment of long-term strategic partnerships, the two companies will join hands to provide trustworthy Internet security solutions for their users," Tencent said in its statement. "[We] will also explore further collaboration in Internet application software and online game markets."

A separate report by news agency Bloomberg on Thursday said the purchase builds on Tencent's leadership in China's online games and instant messaging markets as the Shenzhen-based company increases its spending on services including computer security and e-commerce. The transaction was expected to be finalized yesterday, it noted.

Citing a Morgan Stanley report, Reuters added that Kingsoft and Tencent together account for more than 20 percent of the Chinese market for security software, second only to Qihoo 360 Technology. According to the report, the deal was deemed "positive" for Tencent.

"Online security has become more important in China," Morgan Stanley said.

Tencent's acquisition of Kingsoft shares was not its foray into the security market. Last December, the Chinese company partnered Russian security vendor Kaspersky Lab to integrate the latter's mobile antivirus technology into its QQ security expert product. The two will also work jointly on mobile security products and initiatives to further improve on existing technologies, according to an earlier report.