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Sohu expects Q4 earnings to beat estimates

(China Daily)
Updated: 2008-10-28 16:39

Sohu.com Inc, operator of China's second-biggest Web portal, forecast fourth-quarter earnings that beat analysts' estimates on rising advertising sales.

Sohu predicted earnings per share of between $1.20 and $1.25 this quarter, more than the $1.05 average estimate of seven analysts in a survey compiled by Bloomberg. Third-quarter profit more than quadrupled to $1.02 a share, from 25 cents, a year earlier, the company said in a statement yesterday.

Sohu's agreement to operate the official website of the Beijing Olympics helped it win Chinese consumers, defying a slowdown in sales growth for the global advertising industry. The Beijing-based company added new monsters and weapons to its online role-playing games, luring more players.

"In 2008, total advertising spending by the Olympic sponsors on Sohu will have surged 50 percent to 100 percent," Richard Ji and Jenny Wu, analysts at Morgan Stanley Asia Ltd, wrote in a research report dated Oct 15.

The third-quarter net income of $40.3 million beat the $38.4 million average of seven analysts' estimates in a survey compiled by Bloomberg. Sales more than doubled to $120.7 million from $51.5 million, according to the statement.

Advertising revenue rose 62 percent to $51.1 million, and online games sales more than quadrupled to $54.6 million.

Sohu predicted advertising sales will rise to between $45.5 million and $47.5 million in the fourth quarter, from $33.7 million a year earlier. Online game sales are projected to more than double to as much as $59 million from $24 million.

"We are confident of spending patterns in the fourth quarter," the statement said.

Global Web advertising spending is projected to increase 25 percent this year, slowing from 35 percent growth in 2007, according to a Oct 23 report by JPMorgan Chase & Co. This is less than half the 55 percent expansion expected in Chinese Internet advertising sales, the US bank said.

Internet users in China rose to 253 million at the end of June, helping the Asian country overtake the US as the world's biggest Web market by subscribers, according to Chinese government data.

The company said it will use $150 million to buy back shares. Sohu's proposed share buyback program is the company's third in the past five years, according to the statement. The Chinese Internet company had cash or cash equivalent of $279.4 million at the end of September, the statement said.