Sohu sales outlook beats estimates as ads revive

PUBLISHED : Tuesday, 05 February, 2013, 12:00am
UPDATED : Tuesday, 05 February, 2013, 5:28am the owner of the mainland's second-largest online video site, forecast first-quarter sales that topped analyst estimates as an increase in visitor numbers spurs advertising.

Sales would probably be US$290 million to US$299 million, the Beijing-based company said in a statement yesterday. That compares with the US$280 million average of analysts' estimates and revenue of US$226.6 million a year earlier.

Fourth-quarter revenue rose 22 per cent to US$299 million as Sohu lured more visitors to its main website, search engine and games. Brand advertising revenue was also at the high end of the company's forecast, led by the vehicle, online video and real estate segments, co-president Belinda Wang said in the statement.

Visitor numbers and page views at both grew about 25 per cent in the past year, she said.

The results "are encouraging despite the slowdown in China's total growth", chairman and chief executive Charles Zhang said on the company's earnings call.

Fourth-quarter profit fell 9 per cent to US$23 million because of higher labour and content costs. The higher content charges were due to "the additional bandwidth cost that comes with additional traffic especially in the video side", chief financial officer Carol Yu said.

The video division should become profitable in 18 to 24 months, she said.

Sohu fell 1.6 per cent to US$48.43 at one point in New York. The stock has climbed 4 per cent this year through February 1, compared with an 8.3 per cent gain for Baidu, which operates China's largest search engine.

Sohu's online game unit boosted fourth-quarter profit 17 per cent to US$75.2 million.

Alicia Yap, a Hong Kong-based analyst at Barclays, said the video-game division would buoy Sohu's sales this year.

"With solid momentum coming from Changyou gaming growth, we believe Sohu is likely to deliver relatively decent top-line growth," she said in a report. Yap rates both Sohu and Changyou overweight.

The game division was "well positioned" to take advantage of its growing market this year, Zhang said.