Chinese Internet Revenue Rises While Profit Goes Down For Sohu.com

Chinese Internet portal Sohu.com Inc. says its revenues rose by 12% year-over-year as it reported unaudited financial results for the first quarter ended March 31, 2010.

Total revenues were USD129.5 million. Breaking that down, brand advertising revenues were USD39.5 million and online game revenues reached USD72.1 million.

Gross margin was 75% in the first quarter of 2010, compared with 75% in the fourth quarter of 2009 and 76% in the first quarter of 2009. Non-GAAP gross margin for the first quarter of 2010 was 75%, compared with 75% in the fourth quarter of 2009 and 76% in the first quarter of 2009.

For the first quarter of 2010, Sohu’s operating expenses totaled USD48.5 million. Non-GAAP operating expenses totaled USD43.0 million, down 4% sequentially from USD45.0 million and up 19% year-over-year. The year-over-year increase primarily reflects an increase in marketing expenses. Operating margin was 37% in the first quarter of 2010, compared with 39% in the fourth quarter of 2009 and 43% in the first quarter of 2009. Non-GAAP operating profit margin was 42% for the first quarter of 2010, compared with 42% in the previous quarter and 45% in the first quarter of 2009.

Before deducting the share of net income pertaining to the non-controlling interest in Changyou, a related online game company of Sohu.com, GAAP net income for the first quarter of 2010 was USD41.3 million, down 3% quarter-over-quarter and 7% year-over-year. Non-GAAP net income for the first quarter of 2010 was USD48.4 million, down 4% quarter-over-quarter and up 3% year-over-year. After deducting the share of net income pertaining to the non-controlling interest in Changyou, GAAP net income for the first quarter of 2010 was USD27.9 million.

Sohu.com’s cash position stood at USD599.2 million as of March 31, 2010.

Dr. Charles Zhang, chairman and CEO of Sohu.com, stated: “We continued to execute our strategies in our portal and online game businesses. We are significantly ramping up our library of exclusive and licensed video content as many of the great media companies in China and around the world partner with us. By combining licensed content with our own in-house produced material, we are able to expand and promote our full offering to a rapidly growing online community.”