Friday, August 19, 2011

Sina's (SINA) Profits Continue to Suffer, but Markets Focused on Exposive Weibo Growth

There has not been much use looking at company fundamentals the past month, as the macro has dominated everything but eventually the focus will return back to individual stories.  Sina (SINA) reported earnings Wednesday night and much like the previous quarter, profits are suffering as the company continues to plow dollars into their Twitter like service, Weibo.  That service has now hit the 200M user mark, which is remarkable - but like the U.S. version, one wonders how many are active accounts.  Whatever the case, it appears Sina has already 'won' the space with its first mover advantage.  Now the trick will be to monetize it without turning off users, something Twitter also is facing.

Technically, this is not normally a great chart setup, but in this type of market its one of the better ones, all things considered.  I have not drawn the 2 diagonal lines but Sina is forming a huge triangle, with the range narrowing as you go to the right side of the page.  Usually whichever direction a stock breaks out from, out of this formation leads to an explosive move.

Via Reuters:

  • Sina Corp, China's largest Internet portal, said net profit fell 60 percent as the firm spent heavily on investment in its highly popular microblogging service, Weibo. Sina said on Wednesday it earned a second-quarter net income of $10 million, or 15 cents a share, compared with $25.2 million or 38 cents a share for the same period a year ago.   Excluding one-off items, it earned 20 cents a share, beating the average forecast of earnings of 19 cents a share, according to Thomson Reuters I/B/E/S.
  • Revenue excluding Sina's separate real estate advertising business rose 21 percent to $114.3 million, within the range of its forecast of $112 million to $115 million.
  • Advertising revenue jumped 26 percent year-over-year to $91.8 million in the second quarter, while mobile-related revenue declined 2 percent to $19.5 million
  • For the third quarter, Sina expects adjusted revenue between $123 million and $126 million, versus analysts' expectations of $125.7 million.
  • Sina, which rolled out its Weibi virtual currency this month, is trying to generate revenue from Weibo and turn it into a full-fledged social networking site.

The WSJ takes a closer look (video and story)

  • China's Sina Corp. said the number of accounts for its Twitter-like Weibo service jumped about 40% in three months to more than 200 million users.  For all its popularity, though, Weibo has yet to return a profit. 
  • Mr. Chao, the CEO, said on a conference call Thursday that the service likely will start generating revenue in next year's first half. Sina is betting that its heavy investment in Weibo, which helped drive up Sina's second-quarter operating expenses by 87%, will pay off by recharging revenue growth through online advertising, e-commerce and other services.  "We are currently developing an advertising system for Weibo and are in the process of enhancing the micropayment system, both of which we believe are essential for future monetization," Mr. Chao said. "We are also working on an e-commerce platform on Weibo."  
  • Analysts have questioned the reliability of user statistics in China's Internet industry, in part because some individuals register multiple accounts, though the doubts haven't been aimed at Sina specifically.

[Feb 18, 2011: BW - A Twitter Knock Off has China Talking
[Jan 11, 2011: Word is Getting Out on Sina's Secret - Weibo]
[Dec 9, 2010: The Twitter of China - Weibo]

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