Earnings slide at China's Sina

[HenryTo]

Shares down more than 8% in after-hours trading earlier yesterday evening. This is a stock to watch going forward. SOHU was down about 2.8% in AH trading. NTES remained unaffected.
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Earnings slide at China's Sina, shares follow
Fri May 6, 2005 12:11 AM ET

SAN FRANCISCO/HONG KONG, May 6 (Reuters) - Top Chinese Internet firm Sina Corp. (SINA.O: Quote, Profile, Research) , squeezed by a crackdown on advertising for fortune-telling services, posted a worse-than-expected 36 percent drop in first-quarter earnings.

Sina forecast current-quarter revenue below analysts' consensus estimate, and its shares skidded by 8 percent in after-hours trade.

"The March quarter has been the toughest quarter for Sina in recent memory," Chief Executive Officer Wang Yan said on a conference call.

To help diversify revenue, the company said it plans to launch a new search engine by the end of June, joining a competitive field that includes local rival Baidu.com and the Chinese service offered by Google Inc. (GOOG.O: Quote, Profile, Research) .

Sina's first-quarter net income was $10.3 million, or 18 cents per share, compared with $16.0 million, or 28 cents a share, in the year-earlier quarter.

The decline in earnings was the first for Sina since it turned profitable at the end of 2002, but was not as steep as the 44 percent decline in first quarter earnings reported late last month by rival Sohu.com (SOHU.O: Quote, Profile, Research) .

In February, Beijing imposed a ban on radio and television advertising for fortune-telling services. Sina's short message service (SMS) revenue fell by 30 percent from the prior quarter.

Nevertheless, net revenue rose almost 11 percent to $45.8 million from $41.4 million a year earlier. Advertising revenue contributed $16.6 percent -- up 27 percent from a year ago -- and SMS revenue was $20.2 million.

Sina's results fell short of average estimates of analysts polled by Reuters Estimates. They had targeted net income of 19 cents a share on revenue of $46.2 million.

For the current second quarter, Sina forecast revenue of $44 million to $48 million and earnings excluding items of $11 million to $13 million. Analysts, on average, were targeting revenue of $49 million for the second quarter and earnings of 20 cents per share.

"Towards the second half of the year, the company should see better growth momentum," said J.P. Morgan analyst xxx Wei, citing an expected stabilising in the wireless content market and new revenue opportunities from instant messaging, games and the search engine.

Shares of Sina, which closed down 19 cents at $28.30 on the Nasdaq, dropped to $26.00 in after-hours trade.

Sina shares traded at about 27 times forecast 2005 earnings based on their Nasdaq closing price, compared with Sohu's P/E of 20 times and Netease.com Inc.'s (NTES.O: Quote, Profile, Research) 19 times.

Its comparatively high valuation is driven in part by investor hopes of a takeover after top Chinese online gaming firm Shanda Interactive Entertainment Ltd. (SNDA.O: Quote, Profile, Research) revealed in February that it had accumulated a 19.5 percent stake in Sina through share purchases on the open market.

Sina adopted a so-called "poison pill" plan to ward off a hostile takeover.

The February advertising ban followed another clampdown that began over a year ago on pornographic messages and other controversial content sent over mobile messaging services.

Sina and China's other Internet companies -- including Sohu.com and Tom Online (TOMO.O: Quote, Profile, Research) (8282.HK: Quote, Profile, Research) -- have been aggressively pushing entertainment services for the fast-growing mobile phone market.

China's value-added services market for mobile phones, which includes SMS and other services like multimedia messaging services (MMS) and games, generated an estimated $845 million, or 7 billion yuan, last year, with the amount expected to grow to 10.6 billion yuan this year, according to iResearch.

[HenryTo]

SINA now only down 2.6% at 10am ET - is this the beginning of a tradable rally for the Chinese internet shares?

Sure looked like a washout happened last night.