CMCM drops; SA Pro author sees weak hand relative to Qihoo

|By:, SA News Editor

With Cheetah Mobile (CMCM -4.5%)  obtaining 82% of its 2013 revenue from ad sales, and 92.6% from PCs, the ongoing shift in Chinese ad spend from PC to mobile "puts it in a tough spot," writes WestEnd511 in a column now out of embargo.

The author argues Cheetah's "subscale" position in key markets especially leaves it at a disadvantage relative Qihoo (QIHU +2.1%) and other bigger rivals. Cheetah's mobile security software has an estimated 3% Chinese market penetration vs. 62% for Qihoo's software, 27% for Tencent's, and 18% for Baidu's.

On PCs, Cheetah's antivirus software has 25% penetration vs. 92% for Qihoo's product and 23% for Tencent's. Its PC browser share is at just 1.3%, well below Qihoo's 24.6% and Internet Explorer's 48.1%.

The author adds Qihoo, Baidu, and Tencent's popular Android app stores give them a distribution edge. A $16 PT is set based on a sum-of-the-parts analysis.