Sina Corporation (SINA)

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SINA Corporation (SINA)

Q2 2009 Earnings Call

August 31, 2009 9:00 pm ET


Cathy Peng - Manager, Investor Relations

Charles Chao - President, Chief Executive Officer, Director

Herman Yu - Chief Financial Officer


Jason Brueschke - Citigroup

Richard Yi - Morgan Stanley

Cathy Chen - Goldman Sachs

Eddie Leung - Banc of America

C. Ming Zhao - SIG

Gene Munster - Piper Jaffray

Steve Weinstein - Pacific Crest Securities

Dick Wei - J.P. Morgan



Good day, ladies and gentlemen and welcome to the SINA Corporation second quarter 2009 earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s conference, Ms. Cathy Peng, Investor Relations Manager. Please go ahead, Madam.

Cathy Peng

Thank you. Good morning. Welcome to SINA's earnings release for the second quarter 2009. Joining me today are our President and CEO, Charles Chao; and our Chief Financial Officer, Herman Yu. This conference call is also being broadcast on the Internet and is available through the investor relations section of the SINA website.

Before the management presentation, I would like to read you the Safe Harbor statement in connection with today’s conference call. During the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties, a number of the important factors that could cause actual results to differ materially from those contained in any forward-looking statements. SINA assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding these and other risks is included in SINA's annual report on Form 20-F for the year ended December 31, 2008 and its other filings with the Securities and Exchange Commission.

Additionally, I would like to remind you that our discussion today includes non-GAAP measures which exclude stock-based compensation as well as other items. We use non-GAAP measures to exclude certain items that are not expected to result in future cash payments that are non-recurring, or that may not be indicative of our core operating results.

For further explanation of our non-GAAP measures and detailed reconciliations between our GAAP and non-GAAP results, please refer to our earnings release.

Following management’s prepared remarks, we will open the lines for a brief Q&A session.

With this, I would like to turn the call over to our President and CEO, Charles Chao.

Charles Chao

Thank you, Cathy and good morning, everyone. Welcome to SINA's second quarter 2009 financial results conference call. For the second quarter, our advertising revenues reached the high-end of our guidance and our non-advertising revenue beat our guidance as our mobile business outperformed. At the beginning of this year, advertisers became much more cautious in advertising spending, especially in the area of brand advertising. The advertising market sentiment improved significantly in the second quarter as the government stimulus package began to take effect and we saw strong rebound in [inaudible] market and the housing market and a strong momentum in automobile sales. As a result, we saw significant sequential growth in advertising revenues in the second quarter. However, on a year-over-year basis, we still experienced a decline in advertising revenues. The second quarter of last year was a particularly strong quarter and we had 58% year-over-year growth due to the Olympic factor.

For the second quarter 2009, we saw sequential growth in advertising revenues in almost all major categories, including automobile, housing, and financial services, FMCG, and IT. On a year-over-year basis, we had quite significant declines in IT and financial services and a modest decline in automobile.

For automobile, the largest ad revenue sector for SINA, even though the sequential rebound has been strong, we experienced a year-over-year decline partly because most of automobile advertising has been focused more on driving sales volume instead of promoting brands and partly because there were fewer new models introduced this quarter compared to the same period last year when many auto clients rushed out new model launches before the Olympic Games.

Categories experienced year-over-year growth were housing, FMCG, and education. We expect these patterns will continue in the third quarter.

Overall, the year 2009 will be a difficult year for SINA's advertising business as there are more signs for the economic recovery underway, we expect our advertising business will continue to improve sequentially for the remaining year. In the meanwhile, we are more focused on investing in our content, products, and brand to further enhance the competitiveness and the value of our online media property.

Now let me talk briefly about our mobile business. In the second quarter, our mobile business grew 26% year-over-year and 7% quarter over quarter. However, we see challenges to grow more business revenue further in the near future, given the intensified competition. As a result, we expect our revenues from the mobile business will be largely flattish in the next couple of quarters. For the year 2009, we still expect our mobile business may grow approximately 10% to 20% in revenues.

During the second quarter, China Mobile, China Unicom, and China Telecom, all launched their 3G service. We believe 3G will provide new opportunities for SINA mobile business going forward over the long-term.

Next I am going to talk about our M&A activities. First I would like to give you an update on our merger process with Focus Media’s out-of-home advertising business. As we stated before, this deal will now be completed without the approval from the Chinese commerce department for the anti-trust review. Until now, we have not received an official application acceptance for the anti-trust review from the commerce department. Given our understanding of such a review process, we believe that it is unlikely that approval will be obtained by the end of September, which is the extended deadline for the deal closing agreed by both parties.

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