SHANGHAI, CHINA: Sina Corp, China's largest Internet portal, faces an uncertain outlook this year after Beijing's crackdown on pornography dragged fourth-quarter profit and revenue below expectations.
Sina touted improving advertising spending but is grappling with a decline in mobile services revenue after Chinese carriers including China Mobile late last year suspended wireless application protocol billing to support a government drive against pornography and other undesirable content on the mobile Internet.
The fall in its mobile services business weighed on Sina's first-quarter revenue forecast and its shares fell more than 4 per cent to $35.85 in after-hours trade on Wednesday.
Online advertising, which contributes the lion's share of the company's revenue, is returning to normal as China's economy recovers, Sina executives told a conference call with analysts.
"We're comfortable that we're going to see pretty strong growth in the first quarter and probably the first half of the year," Chief Executive Charles Chao said.
Uncertainty about China's economy, however, left him cautious about discussing the outlook for advertising revenue for the remainder of 2010.
"At this point we don't have visibility for the entire year, but the momentum has been good," he said.
Sina competes with Tencent Holdings and Sohu in China's portal advertising market, worth about $160 million in revenue in the third quarter. Sina was the leader with 34 per cent market share. China is the world's largest Internet market by users with more than 380 million.
Mobile uncertainty
Analysts said prior to the results that Sina might take a hit of up to 10 per cent to its total revenue for 2010 due to billing changes by the phone companies, the major delivery vehicle for Sina's wireless value-added services.
Chao said the company had originally thought the changes would be short-lived but it was now understood they would extend into the second quarter and probably return to normal thereafter.
One analyst for a U.S. brokerage said there was still much uncertainty around mobile services but this was already known in the market and the outlook should not be considered a surprise.
Sina's net revenue in the fourth quarter excluding revenue from its recently carved-out real estate advertising business totalled $93.5 million, above net revenue of $88.7 million in the year-earlier period but below the $94.7 million expected by analysts, according to Thomson Reuters I/B/E/S.
Sina's adjusted advertising revenue of $63.2 million was a hair ahead of the company's forecast for the fourth quarter, but adjusted revenue from its mobile services business fell short of the company's expectations.
Sina's fourth-quarter net income was $372.1 million, compared with $25.2 million in the year-earlier period, thanks to a one-time gain of more than $370 million from the recent merging of its real estate advertising business with the China Real Estate Information Corp.
Excluding items, Sina said it earned $19.1 million, or 31 cents per share. Analysts were looking for 36 cents per share on that basis, according to Thomson Reuters I/B/E/S.
Sina forecast adjusted first-quarter revenue at $78 million to $80 million, below the $85.9 million expected by analysts.
Chao added that Sina aimed to use its cash for acquisitions in online games and other areas to promote revenue growth and diversification and enhance product and user technology.