Zhou 祎 rhetoric: will be more extreme in the Internet model

Qihoo 360 released its unaudited financial results for the first quarter of fiscal year 2014 and the year ended December 31, as at March 10. Earnings showed that Qihoo 360 total revenue in the quarter of 431.2 million U.S. dollars, in the fourth quarter of 2013, 221.6 million U.S. dollars, a year-on-year increase of 94.6%; net profit of 76.8 million U.S. dollars, 2013 fourth quarter to 16.6 million U.S. dollars, a year-on-year increase of 362.7%.

After the release of the earnings, Qihoo 360 chairman and CEO Zhou, co-CFO Jue and Xu Zuori and other executives attended the subsequent earnings conference call, read the earnings points and answer the analyst questions.

The following analysis is the main part of the question and answer session:

Morgan Stanley analyst: What strategy does Qihoo adopt to develop mobile phone business? What is the strategy for partnering with cool? In the long run, what are the advantages of Qihoo in making mobile phones and what are the differences with other companies?

Zhou: The biggest difference between hardware and software is that you don't want people to know what it looks like until the hardware is released, because the hardware doesn't change the version as easily as the software.

We think there is a very big opportunity to do mobile phones, although China's first wave of smartphone popularity has been completed, but we think that there is a very big opportunity to do mobile phones, because the young mainstream people probably every other year to change the mobile phone, and at present many mobile phones in the real function and technology still do not good enough, Including the current thousand-yuan mobile phone, in fact, basically not what craft. Including the internet phone model we talked about, the future of selling mobile phones must not be a business, mobile phones will become a link between users and us, the hardware will be more and more profitable, but even so, the market leader in hardware manufacturing is trying to make as much profit as possible.

We're going to do even more in the Internet model, of course, the Qihoo itself is doing security and optimization started, so before the release of mobile phones, we will first release a new operating system, the operating system will make the phone really safe, it will make the phone faster and more power saving.

I'm sorry I can't disclose more details about our phone products, but I'm sure we'll be able to kill the phones we see in the market right now.

Morgan Stanley analyst: How much time does Zhou spend on mobile phone projects? How much of the company's resources are invested in smart-phone-related projects?

Zhou: I personally have one-third to half of the time will be on the mobile phone and related intelligent hardware business. At present, the company has formed a new team in Shenzhen, Qihoo invested mainly in software resources and designers, cool sent a lot of hardware and supply chain resources, as well as communications engineers. We are mainly in front of building operating systems and mobile phones, so the current Qihoo investment is mainly human resources, the future of mobile phones will also contribute to the user resources.

Credit Suisse analyst: Qihoo has been providing medical search advertising services since February, what is the progress of the project? How is The advertiser's feedback? How many advertisers are there? What is the strategy for Qihoo to search for market share in the mobile end?

Xu Zuori: Through cooperation with partners, Qihoo launched the medical search advertising business since early February, but because it is just before the Lunar New Year, so the number of working days in February is not much, but now from the advertiser feedback, it is good, their demand in this area is very large. In order to be able to the quality of service and competitors to form a difference, we have a very strict selection and filtration work to ensure that the promotion of products and services are true and reliable. Although this part of the business has not yet made a significant contribution to the company's revenue, but the company believes that this business is a very important part of the search market, the future will be to promote the growth of the company. There are no figures on the number of advertisers and there is no intention of disclosing this figure at this stage.

Zhou: Our mobile strategy is simple. The first is that this year the company plans to use marketing activities to build brand and awareness of mobile services, rather than a PC search, just use the browser to promote; On the phone, the user's app must be based on brand awareness, so we changed our name this year. The second is on the mobile search line, we no longer need so much information search, more is to live the service to obtain, therefore all our manpower is in the transformation, does this direction; we recently launched the "Peripheral number" service, users can find a variety of services nearby, we are no longer limited to search on the PC search. Third, we will put the resources on the wireless, whether it is a security defender, mobile phone assistants or free internet access, a unified arrangement to increase the referral and promotion of search.

Days Hao Capital analyst Hou Xiao Days: The company last year did a lot of mobile end business attempt, for example, hand ring, router, and the first 4K mobile phone, and Huawei's cooperation, and now with the cool faction, although the introduction of each product and cooperation to promote the company's progress, but not enough to change the tiger on the mobile side of the competitive position, This is a crucial year, what strategy will the Qihoo take on the mobile side? How to establish the competitive position of Qihoo on the mobile side?

Zhou: First, I don't quite agree with you, Qihoo has been working together in a very loose way a few years ago, when it was not done for a variety of reasons, and the current routers, children's watches and the upcoming IP Camera (webcam) associated with smart home security are very good from the user's reflection. I still believe that the next five years, the combination of IoT and smart phones, from wearable to smart home to car networking, I think is a very big opportunity. Qihoo has invested and invested in these areas over the past two years, and the market has begun to heat up to see our progress in this part of the business.

Second, the mobile phone, bat are competing to do the application store, they spent a lot of power to make people feel that our App store is not the first, but from a variety of games and applications of the distribution, the Qihoo App Store in China is still a well-deserved lead. Of course, it's not enough to rely on app stores and security guards this year, so this year on a wireless basis, we're going to highlight more mobile-end products on top of both products. For example, recently the company's two product growth is very good, one is free internet, yesterday just online iOS version 360 free WiFi, the product in the Apple App Store's download ranking has now risen to second; now this product has done less than six months, the user has more than 100 million. There is also a period of time before the release of free call products, growth is also very fast. Qihoo has spent a lot of time in the Internet of things over the past two years, and in the wireless business, the company will have more product matrices.

Citigroup analyst Zhong: What is the number of users of corporate security solutions? What types of users are they? What are the seasonal characteristics of this part of the business? What is the trend of future growth?

Xu Zuori: We launched the Enterprise security Solutions business from the four quarter last year, starting very well, when revenue to 20 million dollars. While this is the first time the business has contributed to revenue, we have started to nurture customer relationships in the past. We launched a free corporate security solution a year or two ago, with users mainly from China's government agencies, state-owned enterprises, universities and research institutions. After we introduced the fee version, some users to pay users, now it seems that the transformation is relatively smooth. We believe that the market has great potential because the corporate safety market is undergoing a drastic change as a result of government regulatory measures. On the other hand, the corporate security market is very seasonal, the revenue is mainly from the second half, the first quarter of the number has been reflected. On the whole, with the improvement of enterprise network security awareness and the strengthening of control measures, the potential for future growth is still great.

Lottery business, since March 1, the network lottery business suspended, the company's related business has been suspended. It is not known when the online lottery business can resume. The Company believes that this regulatory change will not affect the company's performance this year, as other business growth is enough to compensate for this part of the business suspension.

BofA Merrill Lynch analyst Liang Weiliang: What is Qihoo's recruitment plan for this year? What areas have increased the number of employees?

Zhou: Company over the past two years due to the rapid development of business, there are already 6,000 employees, now see a lot can be optimized space, so the future number of employees will not be too much increase. The next step is to move employees from traditional businesses to new business units, such as mobile terminals and IoT hardware. Second, in the field of mobile phones and smart hardware, we do not do everything ourselves, but build a very large ecosystem; like routers, cameras and future hardware are made by companies we invest in, they use 360 of the brand, 360 will help them cloud services, unified 360 accounts, Help them to do the user promotion, these are by the outside independent Company undertakes, therefore in the staff number aspect does not increase too much.

JPMorgan analyst Yao Orange: in Qihoo's internet of things strategy, which product has the most potential? Which product can improve the company's brand awareness and connect all other products? In this respect, what is the market strategy of Qihoo?

Zhou: This inconvenient to say too thin, because the internet of things everyone is exploring. I do not agree with a smart home is to use mobile phone at home to control the light bulb. Tomorrow I will go to Shanghai to release a connecting kit, the company will help many home appliances manufacturers to realize the intelligence and connectivity of electrical appliances. But Qihoo itself is at the core of security, we redefine security, no longer define security as cyberspace, computer or cell phone security. Through the Internet of things, we can continue to provide security services in three areas, such as children's Watch is to ensure that the children in thousands, we do 360 smart cameras because China will enter the elderly society, many people at home for the elderly, children can take care of the old man through this camera, We are also interested in the safe driving service in the future. Therefore, the strange tiger does the internet of Things is the security as the core, to ensure the safety of each user and his or her family.

Barclays Capital analyst Ye Yihua: How big is China's current enterprise-level security services market? How big is the company's market share? What are the company's competitors? What are the synergies between the company's other services and the sales of the enterprise's security business? In addition, what is the business model of business security? Is it a pre-authorization plus maintenance fee?

Zhou: The company began to prepare for the three-year enterprise security business, the two-year enterprise security market has become particularly large, there are several reasons. First, as we all know, there is a great deal of cyber attacks between countries, and the Chinese government is attaching more and more importance to the network protection of governmental institutions and enterprises. In the past, companies have only installed an anti-virus software to protect against viruses, not special attention; So the market is taking off.

Second, the Chinese government has a new policy, that is, the products that involve the major safety of the country and enterprise, the chance of the foreign products being chosen is less and more, which gives the domestic manufacturers very big opportunity.

Third, in all domestic manufacturers, the company is the most competitive, there are two reasons, one is the company before entering enterprise-class products, security products are free, the release of the free version of the 360 security software, many enterprises, CIOs and chief technology officers in the enterprise internal use of the company's products, The company's product brand awareness is the highest; second, the company's products and domestic traditional security software is completely different from the traditional anti-virus and firewall, but with the United States FireEye and other companies in the same technical level, can resist apt attack, position attack, such as a new generation of firewall products. 360 over the past few years it has been a way for all emerging security companies to use cloud security and large data architectures to solve security problems, and all companies are far ahead of all domestic manufacturers.

Sales methods, each enterprise may be different, such as terminal security, we are according to the number of terminals, some enterprises we are providing a complete set of solutions, so the way of billing is not the same.

Xu Zuori: There is no such thing as cross-selling with other businesses, because the business is just getting started, and the rest of the company's business is mainly about consumers, and the only possible part of it may be advertising, but it hasn't started yet and the company is focused on this opportunity.

(Chu Shen)