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Sina 2Q Profit Drops 61% On Higher Costs

DOW JONES NEWSWIRES Sina Corp.'s (SINA) second-quarter earnings fell 61% as higher product development and advertising costs weighed down the bottom line. Shares still jumped 5.5% to $98.01 after hours as the company's adjusted profit came in better than expected. The stock has more than doubled over the past year. Sina, which owns the largest Internet portal in China, has benefited from the long-term growth of an Internet-savvy middle class. Its popular Weibo website, a Twitter-like microblogging service, has also positioned the company to generate rising revenue. Weibo's registered accounts recently topped 200 million. The company was forced to defend its corporate governance practices in June after it disclosed that a holding company set up by Sina executives and private-equity investors had agreed to sell some of its shares to an arm of Goldman Sachs Group (GS). Chief Executive Charles Chao said the holding company, New-Wave Investment Holding Co., doesn't plan to sell any of its remaining shares in Sina, as some investors have feared. In the latest quarter, operating expenses jumped 87% as the cost of advertising, which includes stock-based compensation, increased 30%. Product development costs nearly doubled. The company posted a profit of $10 million, or 15 cents a share, down from $25.2 million, or 38 cents a share, a year earlier. Excluding stock-based compensation, deferred revenue and other items, earnings were 20 cents, down from 42 cents. Analysts polled by Thomson Reuters expected 19 cents. Revenue rose 20% to $119 million, while adjusted revenue increased 21% to $114.3 million. In May, the company predicted an adjusted top line between $112 million and $115 million. Gross margin narrowed to 57.4% from 58.4% on the higher operating costs. Advertising revenue climbed 26% to $91.8 million, while adjusted nonadvertising revenue grew 3.9% to $22.5 million. Looking ahead to the third quarter, the company forecast adjusted revenue between $123 million and $126 million, excluding the recognition of $4.7 million in deferred license revenue related to an equity investment. Analysts projected $126 million. -By Drew FitzGerald, Dow Jones Newswires; 212-416-2909; Andrew.FitzGerald@dowjones.com

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