Bloomberg News

Sohu Profit Misses Estimates as Higher Costs Erode Sales Gain

August 01, 2011

Aug. 1 (Bloomberg) -- Sohu.com Inc., operator of China’s fifth most-visited website, reported second-quarter profit rose 37 percent, missing analysts’ estimates, after the company boosted spending to offer online games and video services.

Net income was $42.7 million, or $1.10 a share, from $31.3 million, or 82 cents, a year earlier, the Beijing-based company said in a statement today. That missed the $50 million average of six analyst estimates compiled by Bloomberg. Sales rose 36 percent to $198.7 million.

Sohu is increasing spending on video content and stepping up development of its search-engine to attract users, helping the company reduce a reliance on sales of display advertising. Online games unit Changyou.com Ltd. is adding new titles to compete for gamers against bigger rivals including Tencent Holdings Ltd. and NetEase.com Inc.

Third-quarter revenue may reach $225 million to $230 million, Sohu said. That compares with the $208.7 million average of 12 analyst estimates compiled by Bloomberg.

Operating expenses rose 37 percent to $76.8 million last quarter, Sohu said.

Sohu rose 1.4 percent to $90.10 in New York trading on July 29, and has advanced 42 percent this year.

Changyou increased second-quarter profit 29 percent to $54.2 million, according to a separate statement today. Sales rose 35 percent to $105 million. Changyou shares gained 2.2 percent to $51.83 before the announcement.

Sohu ranks behind Baidu Inc., China’s biggest search- engine, Tencent’s QQ.com, Sina Corp., and Alibaba Group Holding Ltd.’s Taobao.com in user traffic in China, according to China Websites Ranking, a site run by the Internet Society of China that compiles Web traffic information.

--Editors: Young-Sam Cho, Suresh Seshadri.

To contact Bloomberg News staff on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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