By
Anders Bylund
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November 30, 2011
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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: American depositary shares of Chinese online gaming specialist Changyou.com (Nasdaq: CYOU ) scored on Wednesday, jumping as much as 14.8% on above-average trading volume.
So what: The company just agreed to buy gaming news portal 17173.com from Sohu.com (Nasdaq: SOHU ) for $163 million. This deal is the start of a brand-new platform strategy that should accelerate Changyou's growth tremendously within the vibrant Chinese gaming industry.
Now what: Sohu is the majority shareholder of both Changyou and 17173, so this might look a lot like a parent company rearranging the living room furniture just to stay busy. However, these subsidiaries are managed at arm's length, independent enough that Changyou had to sign a noncompete agreement with Sohu to get this deal done. The relationship reminds me of how storage giant EMC (NYSE: EMC ) lets majority-owned virtual computing specialist VMware (NYSE: VMW ) run free without much interference. It's a smart strategy, and the kissing-cousins deal actually makes a ton of sense.
Interested in more info about Changyou.com? Click here to add it to My Watchlist.
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