The stock of Chinese Internet conglomerate Tencent Holdings Ltd saw its biggest drop in more than two months after it was involved in an unprecedented cyber war with a leading anti-virus software provider.

Tencent, which operates QQ, China's largest instant messaging service, fell 3.1 percent to HK$181.30 (US$23.39) on Thursday, knocking more than US$1.37 billion off Tencent's market value.

The fall came after the company said late on Wednesday that it would stop running QQ on computers installed with Qihoo 360's security software.

Analysts said it will be a lose-lose war for Tencent and 360, while other players may benefit from the war of accusations and counter-accusations.

Kingsoft and Kaspersky, two paid anti-virus software providers, on Thursday announced they will offer their products free for one year, according to a report from news portal 163.com, in a move to grab shares in China's Internet security market, of which 360 claims to control a share of more than 70 percent.

"There are companies that may benefit from the situation," said Duncan Clark, chairman of the research firm BDA. "But how much they can benefit depends on how long the situation runs on and how clever these companies are, and their tactics," he added.

Li Zhi, an analyst with the domestic research firm Analysys International, said while security software providers may benefit from the dispute, other instant messaging providers are not likely to benefit because it is not easy for users to change from one instant messenger to another.

As the dispute between the two companies has intensified, Clark from BDA said it may end with government intervention.

(China Daily November 5, 2010)