Profit for the first quarter of 2009 at Chinese Internet company Sina Corporation dropped 31%, forced down by a 10% drop in advertising revenues and machinations surrounding a subsidiary's closing.
"The uncertainty in the Chinese economy at the beginning of the year had a severe impact on our online advertising business in the first quarter of 2009. Although market visibility is still relatively low, we have seen improved confidence and sentiment among our advertisers," stated Charles Chao, CEO of Sina. "While fighting the tough economic cycle, we remain focused on our long-term strategy in building the leading online media platform in China by investing in products, content and brand. We believe our investments in the downturn will make Sina a more competitive company in the long run when the Chinese economy further recovers."
As part of Sina's unaudited financial results for the quarter ended March 31, 2009, the company says net revenues increased 3% year over year to USD73.8 million, within the company's guidance of between USD73.0 million and USD77.0 million. Advertising revenues decreased 10% year over year to USD43.2 million, but non-advertising revenues increased 30% year over year to USD30.6 million. GAAP net income decreased 31% year over year to USD9.7 million
Gross margin for the first quarter of 2009 was 52%, compared to 59% for the same period last year and 60% last quarter. Advertising gross margin for the first quarter of 2009 was 50%, compared to 60% in the same period last year and 64% in the previous quarter.
Operating expenses for the first quarter of 2009 totaled USD29.9 million, an increase of 4% from the same period last year and a decrease of 24% from last quarter. Non-GAAP operating expenses for the first quarter of 2009, which exclude stock-based compensation and amortization expense of intangible assets, was USD26.9 million, representing a 4% increase from the same period last year and a 26% decrease from last quarter. The sequential decrease in operating expenses was mainly due to lower marketing expenditures and professional service fees, as well as lower accrued bonuses and commissions. Income from operations for the first quarter of 2009 was USD8.7 million, compared to USD13.4 million for the same period last year and USD21.5 million from last quarter.
On June 5, 2009, Sina furnished a Form 6-K/A to the Securities and Exchange Commission in the United States to amend the Form 6-K furnished to the Securities and Exchange Commission on May 16, 2008, including the press release and unaudited financial results as of March 31, 2008 and for the three months ended March 31, 2008.
The company's results for the first quarter of 2008 included USD2.0 million of net foreign exchange gains mainly related to capital repatriation from the closing of a subsidiary in China, which the company recognized as other income under non-operating income. After reviewing the accounting treatment for the foreign exchange gains, Sina and its independent accountant determined that the requirements for releasing cumulative translation adjustments of liquidated foreign subsidiaries and recognizing the released amounts as foreign exchange gains in the income statement were not met, and the company is, therefore, required to reverse such gains from non-operating income, net income and net income per share in the relevant period covered by the first quarter of 2008 press release. These adjustments do not impact the company's cash position, revenues or income from operations.
As of March 31, 2009, Sina's cash, cash equivalents and short-term investments totaled USD564.3 million, compared to USD511.6 million and USD603.8 million as of March 31, 2008 and December 31, 2008, respectively.