Sohu.com posts Q3 profit on ads, sees growth in Q4
By Juliana Liu and Eric Auchard
BEIJING/NEW YORK, Oct 24 (Reuters) - Chinese Internet media
firm Sohu.com Inc <SOHU.O> reported on Friday a rise in
quarterly profit that beat expectations, reflecting surging
sales of online advertising and data services for mobile
phones.
Beijing-based Sohu.com posted third-quarter net profit of
$2.67 million, or seven cents per diluted share, compared with
$112,000, or nil per diluted share, in the same quarter a year
earlier.
Revenue soared 194 percent to $22.1 million in the third
quarter, compared to $7.5 million a year ago, it said.
"Online advertising continues to exceed our expectations,"
Charles Zhang, Sohu's founder and chief executive, told
analysts in a conference call. "Companies now understand that
Sohu has developed into a leading mainstream online media
asset."
Sohu, whose shares have soared more than 14-fold in the
past year, also profited from mobile phone downloads such as
ringtones, logos and news.
"Chinese consumers are demanding more value-added services
besides voice," said Zhang, one of China's richest men thanks
to his firm's rise amid increasing use of the Internet and
mobile phones in the world's most populous country.
Sohu, which means "search fox" in Chinese, said it expected
a fourth-quarter net profit between $9.5 million and $11.2
million, or 24 cents to 28 cents per diluted share, and
fourth-quarter revenue between $24.3 million and $25.7 million.
FROM RELICS TO PROFITS
The firm's results bode well for its Nasdaq-listed rivals
Sina.com Corp <SINA.O> and NetEase.com Inc <NTES.O>, which will
report results next week.
All three, once dismissed as washed up relics of the
Internet boom, posted profits over the last year as the ranks
of China's Web surfing population swelled to over 70 million
users, second only to the United States.
Sohu shares, which closed down nine cents at $32.81 in New
York ahead of the results announcement, jumped as high as
$33.69 in after-hours trade.
The firm said sales of consumer services, including mobile
text message-based services, jumped 248 percent from a year
earlier period to $13.3 million, while ad sales rose 138
percent to $8.7 million.
Analysts said a muted quarter-on-quarter growth in consumer
services, from a base of $12.5 million in the second quarter,
was expected due to a regulatory clampdown on some of Sohu's
partner sites that sell racy entertainment.
But they were particularly pleased with quarterly growth in
advertising sales, which were $6.8 million in the second
quarter.
"They showed surprising strength especially since short
messaging revenue was expected to be light," said Safa
Rashtchy, an analyst at U.S. Bancorp Piper Jaffray, who holds
an "outperform" rating on the stock.
"We think growth will accelerate and there will be room for
further expansion," said Rashtchy, who had forecast
third-quarter revenue of $21.7 million.
Sohu had said in July it expected third-quarter revenue to
be between $20 million and $21.3 million.
The firm said advertising revenues will grow to around $9.5
million and revenue for consumer services will reach between
$14.9 million and $16.1 million.
Sohu, which promotes basketball star Yao Ming, said it
signed a deal to launch the official Web site of Disney China,
a unit of the Walt Disney Co <DIS.N>.
Fred
Market Data 
Markets 
AI
