Google Considering Sina Acquisition? (GOOG, SINA)

Includes: GOOG, SINA
by: SA Editors

From Gene Marcial's Business Week column "Inside Wall Street":

As Google (NASDAQ:GOOG) spreads its wings in China, many think it may try to buy Sina (NASDAQ:SINA), the country's top Net portal. With its online ad business projected to grow 30% to 35% annually for the next three years, Sina is a "very attractive target" for Google, says Jane Hsieh of investment firm Clay Finlay, whose $7 billion portfolio is heavily invested in China, Japan, and Korea. Google wants to gain a larger foothold in China, she says, and is "considering Sina as a buyout." It offers an array of news, entertainment, and other content targeting people of Chinese descent worldwide. Now trading at 26.12, Sina's stock "is cheap relative to its peers, at 33 times estimated 2006 earnings of 80 cents a share," figures Hsieh. At 35, the stock would equal its peers' valuation, she says. Ming Shao of Susquehanna Financial Group, who rates Sina a "buy," sees several Chinese outfits as suitable suitors, too. Among them:, Tom Online (NASDAQ:TOMO), and Focus Media (NASDAQ:FMCN).

Comment: Many analysts believe that the Chinese government would not allow a foreign company to buy a Chinese media company that disseminates news to such a large number of Mainland Internet users. Furthermore, the Chinese government's strong support for Baidu (NASDAQ:BIDU) is another reason to believe that it would never agree to a Google (GOOG) acquisition of Sina (SINA).