Kingsoft confirms shares sale talks

Chinese security company confirms it is in early-stage discussions with interested parties regarding possible investments, but declines to name Baidu and Tencent as those involved despite speculation.

Chinese Internet security firm Kingsoft has confirmed it is in early-stage talks with independent third-parties to sell the company's shares, but declined to identify the interested parties.

It issued a statement Tuesday saying: "The company is now in preliminary discussions with independent third-parties relating to a possible disposal. If materialized, the possible disposal may or may not constitute a notifiable transaction for the company."

"However, as at the date of this announcement, no definitive agreement has been reached and therefore the possible disposal may or may not materialize." The publicly-traded Kingsoft also cautioned investors to "exercise extreme caution".

Speaking to ZDNet Asia Wednesday, a Kingsoft spokesperson said the stateement was made because of market rumours. Reiterating points in the announcement, she said the deal is still in its "early stage" and the impact of any agreement is unknown.

The spokesperson added if the agreement is confirmed and the deal is significant, Kingsoft will inform the market. The company was unable to share if the involved parties were from the domestic Internet industry.

Rumors from China circulated on Monday saying Internet search giant Baidu is planning to enter the Internet security arena by signing a deal with Kingsoft. Sohu IT's report Monday cited an unnamed insider from Baidu who said the search company, Kingsoft and Tencent have reached an agreement to target the local security industry.

The report said besides using Internet search to drive installations of Kingsoft's security software, Baidu will be launching its own antivirus software or reboot its Baidu Security Guard software, which it debuted two years ago.

When contacted, Baidu declined to comment on this story.

Analyst: Baidu-Kingsoft deal to impact Qihoo
Zhang Xi, an analyst at Chinese research firm iResearch, told ZDNet Asia Wednesday if the Baidu-Tencent-Kingsoft deal is confirmed, it will bring benefit to both Baidu and Kingsoft in the competition against market leader Qihoo 360.

For Baidu, an alliance with Kingsoft means it is able to protect its core Internet search business while entering the online security scene which has been the territory of Qihoo, Zhang said. She added that even though Kingsoft is the second-ranked security player after Qihoo, it still has authority in the industry and most companies will find it an ally.

Qihoo started encroaching into the domain of Baidu and Tencent when it launched its own browser and search engine last year . The analyst said Qihoo managed to gain 10 percent of China's search market within a month of launching its service.