Sohu.com Inc (搜狐), operator of China’s third-biggest Internet portal, posted profits that increased more than analysts estimated, led by online advertising and games.
Second-quarter net income jumped sevenfold to US$40.2 million, or US$1.02 per share, from US$5.7 million, or US$0.15, a year earlier, the Beijing-based company said yesterday. Profit was 45 percent more than the highest of six analyst estimates compiled by Bloomberg. Sohu forecast third-quarter sales that exceeded analyst projections.
The online games division’s revenue jumped about 12-fold, enabling the company to begin plans to list its Changyou.com (暢遊時代) unit that operates the Tian Long Ba Bu (天龍八部) game. Sohu said a spinoff would help it focus on its online advertising business that competes against Sina Corp (新浪) and Tencent Holdings Ltd (騰訊).
Listing the games unit “sounds like a good thing for the company, which will let Sohu concentrate on its advertising business,” said Dick Wei, a Hong Kong-based analyst with JPMorgan Chase & Co who recommends buying Sohu shares. “They had a pretty good set of numbers.”
Sohu has plans to file a draft registration for a possible initial public offering of Changyou.com with the US Securities and Exchange Commission. The company hasn’t decided how much money it may raise, how many US depositary receipts it may sell or when, it said yesterday.
Online game revenue jumped to US$47.9 million from US$3.83 million, helped by Tian Long Ba Bu, a role-playing martial arts game introduced last year.
Revenue more than doubled to US$102 million, beating the highest analyst estimate by US$1 million. Third-quarter sales may be US$112 million to US$116 million, Sohu said, compared with Bloomberg’s US$107 million median projection.
Sohu fell 1.7 percent to US$82.82 in NASDAQ Stock Market trading on Friday. The shares have gained 52 percent this year, compared with a 2.2 percent advance for rival Sina.
Advertising sales in the second quarter rose 53 percent to US$43.4 million as companies including Adidas AG and Sony Corp paid more for Internet commercials before next month’s Olympics in Beijing.
Sohu’s gross margin, or the percentage of sales left after deducting production costs, rose to 76 percent in the second quarter from 61 percent a year earlier, Sohu said.
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