Sina warns on H2 earnings, to use Weibo to boost revenue

Wed Aug 15, 2012 11:38pm EDT

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(Reuters) - Chinese Internet company Sina Corp, which posted a surprise quarterly net profit, warned that second-half earnings will not be "significant" and it will offer more services on its microblogging platform Weibo to boost revenue.

Sina, which makes most of its revenue from online advertising, is facing stiff headwinds this year as corporations slash advertising due to a weakening economic outlook. But the company sees social media advertising via Weibo as a bright spot for the firm.

Net profit rose to $33.2 million in the second quarter from $10 million a year earlier, boosted by a stake sale in a real estate company. That beat a $1 million loss expected by analysts polled by Thomson Reuters I/B/E/S, and helped Sina shares rise more than 5 percent in after-hours trade on Wednesday.

"We do not expect to generate significant operating profits in the second half of this year," Sina's Chief Executive Charles Chao said on an earnings conference call. "We expect to return to profitability in the third quarter on the operating level."

Sina started monetizing Weibo this year by offering special services to business accounts and selling VIP memberships to regular users. Chao said 2012 will be a year of investment for Weibo as the company builds up its user base and stickiness.

Total investment into Weibo in the second quarter came to $38 million, said Herman Yu, Sina's chief financial officer.

"We expect the advertising revenue contribution from Weibo to accelerate in the second half of the year. That will help our advertising growth rate as compared to the market," Chao said.

Sina's advertising revenue increased 12 percent to $103.1 million in the second quarter, while non-advertising revenue rose 5 percent to $28.5 million.

Overall net revenue totaled $131.6 million, up from $118.96 million in the year-ago period.

In the second quarter, Weibo contributed about 10 percent to total advertising revenue and had 368 million registered accounts.

"We do not expect that total monetization on Weibo will be significant this year. Our main objective would be building the system and infrastructure for monetization to take off in larger scale next year," Chao said, adding that Weibo will add more monetization features in the second half.

For the third quarter, Sina expects adjusted net revenue to range between $145 million and $148 million, with advertising revenues forecast to increase between 19 percent and 21 percent from a year earlier.

The recently concluded London Olympics will help support third-quarter earnings, as the portal and Weibo were the go-to sites for Chinese seeking news about the games, Sina said.

"The environment is still challenging," said ThinkEquity analyst Henry Guo.

But Sina's results show advertisers view its website as "must-buy inventory," he said.

(Reporting by Alexei Oreskovic in San Francisco and Melanie Lee in Shanghai; Editing by Phil Berlowitz and Ryan Woo)

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