Internet

Net Income Drops For Sohu.com, Expects Better Q3

Chinese Internet portal Sohu.com's (SOHU) unaudited financial results for the second quarter ended June 30, 2007 show non-GAAP net income of US$5.7 million, down from non-GAAP US$8.4 million in the second quarter of 2006.

On a high note, the conmpany recorded advertising revenues of US$26.6 million, up 38% year-on-year and 13% quarter-on-quarter, and non-advertising revenue of US$10.6 million, down 6% year-on-year and up 42% quarter-on-quarter. Total revenues reached US$39.0 million, up 14% year-on-year and 18% quarter-on-quarter.

Dr. Charles Zhang, chairman and CEO of Sohu.com, said, "Our dominant advantages surrounding the Beijing 2008 Olympic Games — as official Internet Content Sponsor and operator of beijing2008.cn, exclusive strategic partner of China Interactive Sports, and exclusive Internet Content Partner for Team China — are paying off. Advertising revenue momentum continues to accelerate as our unmatched content strength brings in more users, increased traffic and new advertisers."

Sohu's gross margin of 61% in second quarter of 2007 increased from 60% in the previous quarter and decreased from 63% in the same period of 2006. Non-GAAP gross margin was 62% in the second quarter of 2007, up from 61% in the previous quarter and down from 64% in the same period of 2006.

For second quarter of 2007, Sohu's operating expenses totaled US$18.7 million. Non-GAAP operating expenses totaled US$16.7 million, an increase of 22% from the previous quarter and up 19% year-on-year.

As of June 30, 2007, Sohu's balance of cash, cash equivalents and investments in marketable debt securities was US$113.1 million, compared to US$97.5 million and US$129.7 million as of March 31, 2007 and December 31, 2006, respectively.

Sohu estimates total revenues for third quarter 2007 to be between US$45 million to US$47 million, with advertising revenues of US$30 million to US$31 million and non-advertising revenues of US$15 million to US$16 million. Sohu estimates brand advertising revenues for the third quarter of 2007 to be between US$28.5 million to US$29.5 million.

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