Sohu.com Inc, the Chinese Internet company that separately listed its online-games unit last year, said profit fell 43 percent, missing analysts' estimates, after the spinoff cut earnings from the subsidiary.
Fourth-quarter net income declined to $32.3 million, or 76 cents a share, from $56.6 million, or $1.45, a year earlier, Sohu said in a statement today. Profit was expected to be $36.2 million according to the median of six analyst estimates compiled by Bloomberg. Sales rose 12 percent to $135.8 million from $121.6 million.
First-quarter revenue will be between $123 million and $128 million, Sohu said. The company was expected to post sales of $139 million for the period, according the median of five analyst forecasts compiled by Bloomberg.
Sohu is expanding its search-engine and video services to boost web advertising sales as the spinoff of Changyou.com Ltd last year siphoned off online games earnings. The parent's Sougou search site may win share in China if Google Inc ends its local operations in the world's biggest Internet market by users, according to Credit Suisse Group AG.
Some advertisers are expected to switch to "second-tier" Chinese search engines such as Sougou and Tencent Holdings Ltd.'s Sosou, Credit Suisse analyst Wallace Cheung wrote in a Jan 18 report.
Ad sales rise
Changyou, operator of the Tian Long Ba Bu role-playing game, said fourth-quarter profit rose 34 percent to $38.9 million from $29.1 million a year earlier, according to a separate statement today. Sohu's stake in the online-game unit was cut to 71 percent after the subsidiary's initial public offering in April, which meant the parent was entitled to a reduced share of earnings. Sohu said it derived 94 percent of its online gaming revenue from the title in 2008.
Sohu fell 3.9 percent to $50.35 on the NASDAQ stock market on Jan 29, extending the stock's decline this year to 12 percent. Baidu Inc, China's biggest search engine, has dropped 0.1 percent so far in 2010. Changyou shares rose 2.9 percent on Jan 29, and have more than doubled since its IPO.
Online advertising sales rose 4.6 percent to $48.8 million from $46.6 million, Sohu said.
China was home to 384 million web users at the end of 2009, according to the China Internet Network Information Center, a state agency that registers online domain names. The country added more than 80 million new subscribers last year, it said.
