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Sohu.com Profit Rises 47%, Fueled by New Online Game (Update2)

Sohu.com Inc., China's third-biggest Internet portal, said third-quarter profit rose 47 percent after the introduction of an online role-playing game boosted sales.

Net income increased to $9.69 million, or 25 cents a share, from $6.6 million, or 17 cents, a year earlier, the Beijing-based company said today in a statement. Sales rose 46 percent to $51.5 million. The results, along with a forecast for this quarter, topped analysts' estimates, spurring the shares in extended trading.

Chief Executive Officer Charles Zhang introduced the ``Tian Long Ba Bu'' Web title in May to win a bigger share of China's online game market, where sales may rise to 9 billion yuan ($1.2 billion) in 2008 from 7.2 billion yuan this year, according to the government-backed Internet Society of China. Sohu's online advertising sales, its biggest business, surged after China's 162 million Web users lured more marketers online.

``Sohu did a wonderful job in developing this game,'' Tian Hou, an analyst with Pali Capital in New York, said before the release. ``If the game can continue to stimulate interest, it can be successful no matter how many other games are in the market.'' Hou recommends buying Sohu shares.

Analysts had projected $8.1 million in profit, the average of five estimates compiled by Bloomberg. They had estimated sales of $46.5 million.

Company Forecast

Fourth-quarter profit, excluding costs such as stock-based compensation, will be 33 cents to 35 cents a share on sales of as much as $55.5 million, Sohu said. Analysts had estimated 29 cents in profit and $48.9 million in revenue.

Sohu shares climbed 6.7 percent to $57.13 in U.S. after- hours trading. The stock rose $3.61, or 7.2 percent, to $53.53 at 4 p.m. New York time in Nasdaq Stock Market trading before the earnings announcement.

Third-quarter online advertising sales gained 32 percent to $31.5 million, the company said. Non-advertising revenue, made up mostly of online-game revenue and sales of ring tones and games to mobile-phone users, rose 74 percent to $20 million.

Product development spending climbed 45 percent to $6.88 million in the third quarter, Sohu said. Sales and marketing expenses increased 88 percent to $13.6 million.

http://www.bloomberg.com/apps/news?pid=20601080&sid=a0MN6dp1disQ&refer=asia