SINA Corp. (
reported a loss of 21 cents per share in the first quarter of 2012,
deteriorating drastically from the year-ago earnings of 25 cents
per share. The weaker-than-expected result was primarily attributed
to higher operating expenses in the quarter.
Including stock-based compensation of $3.8 million but excluding
one-time items amounting to $4.1 million, loss per share stood at
27 cents, in line with the Zacks Consensus Estimate.
Total revenue (excluding deferred revenue) increased 6.3% year
over year to $101.5 million in the reported quarter, slightly above
the low end of management's guided range of $101.0 million to
The year-over-year growth in total revenue was primarily driven
by higher advertising revenue in the quarter, up 8.6% to $78.5
million on a non-GAAP basis and marginally ahead of the low end of
management's guidance range of $78.0 million to $80.0 million.
Non-advertising revenue inched down 0.8% year over year to $23.0
million in the quarter. This was in line with the low end of the
company's guided range of $23.0 million to $24.0 million. MVAS
revenue was $19.0 million, slightly down from $21.3 million in the
Gross profit on a non-GAAP basis declined 8.7% year over year to
$44.4 million in the quarter. Gross margin declined to 43.8% in the
quarter from 51.0% in the prior-year quarter.
Advertising gross margin declined to 43.9% from 54.3% in the
prior-year quarter. The year-over-year decline was primarily due to
increased spending on bandwidth and content and higher personnel
related costs. Non-advertising gross margin expanded 270 bps to
43.3% from 40.3% in the year-ago quarter.
Mobile-value-added-services (MVAS) gross margin remained flat at
Operating loss, excluding one-time items and charges, came in at
$22.7 million in the quarter compared with a profit of $7.1 million
in the prior-year quarter. The year-over-year decline was primarily
driven by higher operating expenses, which increased 61.4% year
over year on the back of higher marketing expenditure,
personnel-related expenses and infrastructure costs related to
Interest and other income increased 31.0% year over year to $3.5
million in the reported quarter. Net loss on a non-GAAP basis was
$17.8 million versus income of $13.9 million in the year-ago
SINA exited the first quarter with cash, cash equivalents and
short-term investments of $647.9 million compared with $673.5
million at the end of the fourth quarter. Cash outflow from
operating activities in the quarter was $10.5 million.
SINA expects non-GAAP net revenue to be between $126.0 million
and $129.0 million for the second quarter of 2012. Non-GAAP
advertising revenue is expected in the range of $103.0 million to
$105.0 million, while non-GAAP non-advertising revenue is projected
in the range of $23.0 million to $24.0 million.
We believe that SINA remains a premier company based on its
strong product pipeline, continuous investment in product
development and marketing and a robust user base for its E-Commerce
and Weibo offerings.
However, earnings growth continued to disappoint primarily due
to higher operating costs related to its social networking platform
Weibo. We believe that any weakness in advertising revenue will
impact SINA's ability to counter increasing operating expenses,
which in turn will hurt its bottom line going forward.
We believe that increasing competition in the domestic market
Baidu Inc. (
Sohu.com Inc. (
, Tencent and Alibaba will hurt profitability over the long term.
Further, we believe that increasing regulations from the Chinese
Government will remain the primary concern over the stock going
We remain Neutral over the long term (6-12 months). Currently,
SINA has a Zacks #3 Rank, which implies a Hold rating in the near
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