Sohu pushes expansion of games business after 48pc profit surge
Sohu.com, which posted better than expected earnings in the first quarter, aims to accelerate expansion of the online games business run by subsidiary Changyou.com with a strategic US$100 million acquisition on the mainland.
The Beijing-based internet firm yesterday reported a 48 per cent rise in net profit for the quarter to March to US$44.8 million, from US$30.2 million a year earlier, on strong sales from its core games, brand advertising and search services.
Revenue climbed 35 per cent to US$174.4 million from US$129.5 million.
Nasdaq-listed Sohu had earlier projected first-quarter net profit would be US$40 million to US$42 million, while turnover would be US$164.5 million to US$169.5 million. Its reported net profit also beat the US$41.8 million average forecast from analysts' estimates compiled by Bloomberg.
Online brand advertising sales reached US$57.2 million, up 45 per cent from US$39.5 million in the same quarter last year. Income from internet search, under the Sogou brand, grew 183 per cent to US$8 million from US$2.8 million.
Online games remained Sohu's leading revenue contributor, with sales climbing 32 per cent from US$72.1 million to US$94.9 million.
Chairman and chief executive Charles Zhang Chaoyang said buying a majority stake in Shenzhen 7Road Technology 'will expand Changyou's product portfolio to cover not only multiplayer online role-playing games but also web-based games'.
Changyou, which is also listed on the Nasdaq stock market in the US, will spend US$101.02 million for a 68.26 per cent controlling stake in 7Road. That sum comprises US$68.26 million in upfront cash payment and US$32.76 million in further cash consideration based on certain performance milestones up to December next year.
The acquisition is expected to be completed by June 30, subject to regulatory approvals and other specified conditions.
'Web-based games, which can be played in a browser without installation of a client application, are experiencing rapid growth and this is the right time to invest and enter this space,' Changyou chief executive Wang Tao said.
Changyou operates seven online role-playing games on the mainland, while 7Road has launched its highly popular DDTank web-based shooting game in markets such as Vietnam, Taiwan and Brazil.