Sohu reveals double-digit earnings increases
By Liu Baijia (China Daily)
Updated: 2004-07-30 08:56

Chinese Internet company Sohu.com Inc reported double-digit growth in both revenues and profits in its second quarter thanks mainly to its online advertising business, but the firm's short messaging service (SMS) continued to decline.

The NASDAQ-listed Chinese firm said yesterday that its revenues rose by 41 per cent year-on-year in the quarter to US$27.3 million, beating its prediction of US$26.1 to 27.1 million.

Its quarterly profits also rose to US$9.9 million, or 25 US cents per share.

The price of Sohu's American depository receipt rose 4.84 per cent to US$17.75 on the NASDAQ and gained almost another 1 per cent in after-hours trading.

Sohu's arch-rival Sina Corp reported on Wednesday that its revenues grew year-on-year by almost 90 per cent to US$49.20 million.

Online advertising was Sohu's biggest growth engine.

"Advertising revenues exceeded our expectations, reflecting Sohu's clear-cut competitive strength in corporate brand advertising and sponsored search," said Charles Zhang, Sohu chairman and chief executive officer.

The advertising revenues reached US$13.4 million, almost doubling the figure in the same period of last year.

Internet industry analyst Michael Yin believed the fast growth was mainly due to last year's acquisition of gaming website 17173.com and the real estate website Focus.cn.

Sohu, which already witnessed a decline in its SMS business, said its wireless value-added service business, including SMS, multimedia messaging service (MMS), wireless application protocol, fell about 8 per cent over the first quarter to US$11.30 million.

Yin pointed out that intense competition and tightening regulatory measures from the Ministry of Information Industry and the country's dominant wireless operator China Mobile were two major reasons.

The Chinese authorities have required that mobile service providers (SPs) should not charge users subscriptions without their confirmation and they should not help third parties charge users, something which has limited many SPs' revenue pools.

Sohu's other major competitor Netease reported in early July that its wireless business may shrink by as much as 41 per cent in the third quarter.

Netease is scheduled to announce its results next Tuesday.

Sohu acquired Beijing G Feel Technology Co Ltd in May in order to diversify the product lines of its wireless business.

Sohu forecast that its revenues for this quarter would be between US$28.10 and US$29.10 million, with earnings per share being between 23 and 25 US cents.

It aims to achieve a quarter-on-quarter growth of 16 to 19 per cent in its online advertising business.

Victor Koo, president and chief operating officer of Sohu, said the rights to build the official websites for the ongoing Asian Football Cup in China and the coming China Tennis Open, as well as next month's Athens Olympics will attract more clients.

Revenues from its non-advertising business including wireless business, e-commerce and other consumer business will range between US$12.5 and US$13.1 million.

Koo also estimated that the decline of Sohu's wireless business will end this quarter, as the 2.5-G value-added services like MMS and WAP are growing fast and adding more product lines to its wireless business.

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