SINA misses on decline in SMS and MMS revs, higher operating expenses; offers weak Q2 guidance; stock whacked (1Q05 earnings)

| About: Sina Corporation (SINA) (ticker: SINA) reported Q1 2005 earnings results
yesterday. Here are comments from CEO Wang Yan, Co-COO Hurst Lin, and
CFO and Co-COO Charles Chao from the company's conference call:

Q1 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

  • Net revenue rose 11% to $45.8 million, versus consensus estimates of $46.3 million, and versus guidance of $43.0 - $47.0 million. 
  • Advertising revenue rose 27% to $16.6 million versus guidance of $16.5 - $17.0 million.
  • Ad revs accounted for 36% of total revenue.
  • Non-advertising revenue grew 3% to $29.2 million versus guidance of $26.5 - $30.0 million.
  • Non-ad revs accounted for 64% of total revenues.
  • Gross margins were 67% versus 70%.
  • Operating expenses increased 64% to $20.9 million.
  • Operating income declined 37.9% to $10.0 million.
  • US GAAP net income decreased 36% to $10.3 million.
  • US GAAP diluted net income per share of $0.18 versus $0.28.
  • Non-GAAP net income decreased 31% to $11.5 million versus guidance of $11.0 - $13.0 million.
  • Non-GAAP diluted net income per share of $0.20 versus $0.29, and consensus of $0.22.
  • Non-GAAP net income included $728,000 in fees for the Company's
    recent adoption of a shareholder rights plan and related legal and
    financial advisory services.

Revenue Breakdown

  • Mobile value-added service revenue declined 26% sequentially.
  • SMS revenues declined 30% sequentially to $20.2 million due to ban on certain SMS products.
  • MMS revenue declined 50% sequentially to $2.2 million due to change in China Mobile's (ticker: CHL) billing policies.
  • BUT: 2.5G products, IVR and other new services, grew 69% sequentially to $4.0 million.

Operating Expenses

  • Expenditures from Crillion, which was acquired in late March 2004 (see below).
  • Higher product development costs related to instant messaging, iGame and search engine.
  • $728,000 in fees for the Company's adoption of a shareholder rights plan and related legal and financial advisory services.

Acquisition-related Payout

Based on
Crillion's 2004 performance, SINA is obligated to pay an additional
consideration of $28.1 million, 60% in cash and 40% in SINA ordinary
shares, in accordance with the Crillion acquisition agreement. In March
2005, the Company made the first installment cash payment of $12
million. In April 2005, the Company made the remaining cash payment and
issued 274,684 shares in ordinary stock to settle the contingent
consideration related to Crillion's achievement of its 2004 performance

Balance Sheet

  • Cash and equivalents of $283.4 million.

Q2 Guidance

  • Total revenue of $44.0 - $48.0 million, versus consensus estimate of $50.4 million.
  • Advertising revenue of $19.0 - $20.0 million.
  • Non-advertising revenue of $25.0 - $28.0 million.
  • Non-GAAP net income of $11.0 - $13.0 million.

Internet Search Product

  • After a year of development, SINA completed its first version of search.
  • Began beta testing in late April.
  • Launch expected in the June quarter.

CEO Wang Yan

....Despite a seasonally weak quarter due to Chinese New Year and a tough
regulatory environment, we grew both our advertising and
non-advertising businesses year-over-year as well as meeting our guidance. Looking ahead, we will streamline and refocus our
energy on SINA's core strengths in Internet portal while continuing to explore
new opportunities in the mobile value-added services.

SINA chart.


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