Chinese dotcom celebrates profit
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Leading Chinese portal Sohu.com reports a small but significant profit of $11.56 million for its fourth quarter.
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BEIJING, China (Reuters) -- Chinese Internet media firm Sohu.com Inc has posted a jump in quarterly profit on sales of online advertising and mobile text message services.
Revenues were on the low end of its own forecast.
Sohu, based in Beijing, said Tuesday its fourth-quarter net profit rose to $11.57 million, or 28 cents per diluted share, compared with $1.93 million, or five cents per diluted share, in the same quarter a year ago.
Revenue rose 132 percent during the quarter to $24.6 million from $10.6 million in the year-earlier period.
"We intend to stay well ahead of the increasing number of competitors that are trying to break into this promising Internet space," Charles Zhang, Sohu's founder and chief executive, said.
"Key drivers in 2004 and future years will be online advertising and search," he said.
DBS Vickers analyst Wallace Cheung said Sohu's quarterly net profit beat his forecast by four percent, but he was disappointed with its revenue growth.
"Overall, the margins are quite good though," he said, referring to operating profit margins of 45 percent.
Sohu said in October it expected a fourth-quarter net profit of between $9.5 million and $11.2 million, and fourth-quarter revenue between $24.3 million and $25.7 million.
It said it expected first-quarter 2004 revenue in the range of $25.6 million to $26.6 million with a surge in advertising revenue during the rest of the year.
It expected first-quarter net profit between $11.2 million and $11.9 million.
It said second quarter net income would top the levels projected for the first quarter.
Sohu stock closed up 3.7 percent at $37.91 in New York ahead of the report. It remains within sight of the $43.40 high set last July.
The results boded well for Sohu's Nasdaq-listed rivals Sina.com Corp and NetEase.com Inc, which will report results in the coming weeks.
Chang-hua Qiu, an analyst at Forun Technologies, said Sohu was still not overvalued with a forward price earnings ratio around 30. Yahoo Inc, by comparison, had a forward price earnings ratio around 90.
Sohu's advertising revenues surged in the fourth quarter, with sales from brand ads and sponsored Internet search climbing to $9.5 million, a 120 percent increased from a year earlier.
Revenue from non-advertising sources such as wireless text-messaging subscriptions grew 141 percent on the year to $15.1 million.
Analysts said Sohu must respond aggressively to competition from Internet upstarts trying to chip away at its core businesses of advertising and mobile messaging.
Ambitious Chinese domestic players such as Tencent Technology Ltd, Shanda Networking Co Ltd and Baidu.com -- all eyeing offshore listings -- have expanded their online offerings to encroach on territory previously held by established Internet media firms.
Sohu has responded by closing two deals worth a total of $36.5 million in November, seeking to boost revenue and justify the rising share price that has made it the fifth-best-performing Nasdaq stock in 2003.
It purchased Focus.cn, a Chinese real estate Web site, for $16 million and online game Web site 17173.com for $20.5 million.
The firm said first-quarter operating expenses would rise over the fourth quarter of 2003 due to the added costs of integrating the acquisitions.
It plans to test a new online game called Blade Online during the second quarter of 2004, with an eye to a third-quarter commercial launch.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
