BIZCHINA / Zhang Chaoyang
Sohu results top expectations, shares up
(Reuters)
Updated: 2006-02-07 10:42
Chinese Internet media firm Sohu.com Inc. reported a 37 percent rise in
quarterly profits led by strong growth in its wireless business and large
tax benefits, sending its shares up 10 percent.
Fourth-quarter net income rose to $8.9 million, or 23 cents per diluted
share, compared with the year-earlier quarter's $6.5 million, the
Beijing-based company said on Monday.
Zhang Chaoyang, CEO of Sohu.com Inc. at the ceremony marking the launch
of Sohu's partnership with Beijing Olympic Committee. [CRI]
However, due to the expensing of stock-based compensation packages and
higher Chinese income taxes, Sohu estimated first-quarter profit this
year would fall to between 14 cents and 16 cents per share.
The latest quarter's results topped analysts expectations' for both net
and operating profit. Analysts surveyed by Reuters Estimates had
predicted a profit, excluding one-time items, of between 20 cents and 22
cents per share.
Revenue rose 27 percent to $30.5 million, exceeding the range of analyst
expectations of between $28.3 million and $30.0 million, according to
Reuters Estimates.
"We had a very good quarter," said Charles Zhang, Sohu's chairman and
chief executive.
Advertising revenue rose 28 percent to $20.3 million, or two-thirds of
company revenue. Search revenue rose 26 percent to $3.4 million, while
non-advertising revenue rose 24 percent to $10.2 million, led by a 55
percent leap in wireless revenue.
Sohu and most of its peers in China's Internet market have struggled for
much of the last 18 months after Beijing launched a program to crack down
on spam, pornography and other controversial material delivered to mobile
phone customers.
Shares of Sohu traded up 10.5 percent to $21.32 in after-hours trade
after earlier gaining as much as 13 percent. Ahead of the report the
stock had traded down 35 cents, or 1.8 percent, to close at $19.30 on
Nasdaq.
The latest results included other income of $2.4 million consisting of a
gain of $1.2 million arising from the company's repurchase of $15.22
million in convertible notes at a discount and gain of $1.2 million on
tax exemptions and refunds. Continued ...
Prior to the jump in the price of the shares, Sohu's stock had lost about
11 percent since the crackdown began in the summer of 2004. That compares
with a nearly 20 percent gain for the broader Nasdaq Composite Index over
the same period.
Nine of the 11 analysts who track Sohu shares have a hold rating on the
stock. Two analysts have a strong buy rating, according to Reuters
Estimates data.
Sohu and rivals Sina Corp. (SINA.O: Quote, Profile, Research) and
NetEase.com Inc. (NTES.O: Quote, Profile, Research) were once China's
fastest-rising high-tech stars, as the trio of Web portals found elusive
profits in China's fast-growing mobile messaging market.
But the company now expects advertising to be its core source of revenue,
especially after it was chosen last year as the official Internet content
sponsor of the Beijing 2008 Olympics.
Sohu estimated that first-quarter revenue would total $28 million to $30
million, or roughly in line with analysts' forecasts according to Reuters
Estimates.
It expects advertising revenue of $19 million to $20 million and
non-advertising sales of $9 million to $10 million.
"We expect to see even more Sohu exclusive co-marketing and cross selling
opportunities come into effect as the Beijing 2008 Olympics approaches,"
said Zhang.
The company said it expects first-quarter employee stock compensations
expenses of around $1.7 million to $1.8 million and a higher tax rate in
China of 7.5 percent, which will result in tax expense of around $500,000
to $700,000.
Sohu paid negligible taxes of $20,000 during the fourth quarter, down
from $199,000 in the year-earlier quarter.
These expenses are expected to cut Sohu's fully diluted earnings by 5
cents to 6 cents per share, the company said.
Analysts forecasts, excluding one cent per share of special items, call
for a first-quarter profit of between 18 cents and 19 cents per share,
according to Reuters Estimates.
(For more biz stories, please visit Industry Updates)
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