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Sina May Post Second Straight Loss as Weibo Costs Climb

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May 16 (Bloomberg) -- Sina Corp., operator of the Twitter-like Weibo microblog in China, may post a second straight quarterly loss because of increased spending.

“It is essential for us to build a more dominant scale in order for us to be successful in the long term,” Chief Executive Officer Charles Chao said on a conference call today after Sina reported a loss in the first quarter. The Shanghai-based company may post an “operating loss” this quarter, Chao said.

Sina plans to raise spending on Weibo 45 percent this year to upgrade the service and win users and advertisers against competition from rivals including Tencent Holdings Ltd. Government rules requiring microblog users to verify their identities, which slowed growth at Weibo in the first quarter, and any other new restrictions won’t deter investments in the service, Chao said.

“In spite of the regulatory uncertainty, we will continue to invest heavily in Weibo,” Chao said. The new rules “had an impact” on Weibo’s growth in the first quarter, and the service added about 30 million users in the period taking the total to 324 million at the end of March, Chao said.

Sina fell 1.1 percent to $51.68 in New York trading yesterday before its earnings announcement. The stock has declined 0.6 percent this year, underperforming the Hong Kong-traded shares of Tencent, China’s biggest Internet company.

First-quarter net loss was $13.7 million, compared with a profit of $15 million a year earlier, Sina said yesterday. The loss was projected at $19.3 million, according to the average of 10 analysts’ estimates compiled by Bloomberg. Revenue rose 6 percent to $106.2 million.

Second-quarter revenue may be between $126 million and $129 million, Sina forecast. That compares with the $131.5 million average of 11 analysts’ estimates compiled by Bloomberg.

‘Slow Start’

“We got off to a slow start in our brand advertising business, largely due to a slowdown in the macroeconomic conditions in China,” Chao said. Business was slightly better this quarter, and Sina may post increased sales from sales of advertising related to the Olympics games this summer, he said.

Sina at present gets most of its revenue from sales of display advertising on its Web portal. The company started advertising sales on Weibo last month, which may make a “meaningful” contribution in the second half, Chao said.

In December, China began requiring users in cities including Beijing, Guangzhou and Shenzhen to register their real names. That rule will be expanded to other regions, Wang Chen, minister of the State Council Information Office, said in January.

In March, Sina and Tencent disabled the comment function on their microblog services for 72 hours, after authorities detained six people accused of spreading rumors of a coup attempt in Beijing. Government oversight of the social media platforms have tightened as they’ve grown in popularity.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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

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