Sohu buys back own search arm

One of the largest web portals in China, Sohu.com Inc, has entered into a $25.8 million agreement with Alibaba Group Holding Ltd to buy back the 10.88 percent stake the e-commerce giant owns in the portal's online search arm Sogou.

Analysts said the repurchase is seen as a preparation for Sogou's future public listing, although the company has denied any plans to go public.

In 2010, Sohu sold 16 percent of its stake to Alibaba Group and the Yunfeng fund, co-founded by Alibaba Chairman Jack Ma, and another 16 percent to a fund owned by Sohu Chairman Charles Zhang. Sogou was split from Sohu for independent operation at the same time.

In an internal e-mail to employees, Sogou's Chief Executive Officer Wang Xiaochuan wrote that with the company's rapid development in recent years, "we don't think Alibaba Group can further its support to Sogou strategically."

Sogou and Alibaba Group jointly launched a browser that safeguards online shopping in 2011, but the competition between the two has been intensifying after Alibaba Group launched its online shopping search engine Etao.com in 2010.

Baidu took up 78.5 percent of China's search market in terms of revenues in the first quarter, followed by Google's 16.6 percent, according to domestic research company Analysys International. Sogou ranked a distant third with 2.8 percent.

However, according to the data tracker Cnzz.com Inc, Sogou has been attracting more search traffic than Google since Sept 30, 2011,

Wang's e-mail to staff stated that the company broke even in the third and fourth quarters last year. Revenues for the search engine grew by 184 percent to $23 million, according to Sohu's financial report.