Sohu Beats Census in Profit on Better Ad Sales

Sohu.com Inc. (SOHU), owner of China’s third-largest search engine, posted first-quarter profit that beat analyst estimates on higher online advertising sales.

Net income rose 14 percent to $23 million, the Beijing- based company said in a statement today. That beat the $18.8 million average of six analysts’ estimates compiled by Bloomberg. Sales rose 36 percent to $308 million, compared with the average of analysts’ estimate of $296 million.

Sohu has expanded into online videos and search in competition with Baidu Inc. (BIDU) to diversify its sales channels and depend less on its Web portal business in China, which has more Internet users than the population of any country except India. Revenue from online advertisements rose 41 percent from a year earlier to $116 million, it said.

“Online advertising was better than expected,” Eric Qiu, an analyst at Guosen Securities Co. in Hong Kong, said by telephone before the results. “Most of the ad growth is coming from its portal website and search business,” said Qiu, who recommends buying the stock.

Second-quarter revenue will be between $333 million and $342 million, Sohu said. That compares with the $318 million average of seven analyst estimates compiled by Bloomberg.

Sohu’s American depositary receipts rose 0.9 percent to $50.77 in New York trading on April 26. The receipts have gained 7.3 percent in 2013, after falling in the past two years.

Sohu’s Sogou accounted for 5.4 percent of search-engine queries in China in the fourth quarter, trailing Baidu’s 82.3 percent and Qihoo 360 Technology Co.’s 8.2 percent, according to Bloomberg Industries.

Sohu’s Web portal, China’s third largest, had 306 million unique visitors in December. Tencent Holdings Ltd. (700)’s QQ.com was the Chinese market leader with 421 million unique visitors as of December 2012, following by Sina Corp. (SINA) with 332 million, according to Bloomberg Industries.

China had 564 million Internet users at the end of last year, up 10 percent from the year before, according to the government-run China Internet Network Information Center. That is greater than the population of any country except India.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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