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Sherman So

Earnings increase 28pc on boost from Olympics
Sina Corp, the nation's largest online portal, expects revenue to grow more than 52 per cent next quarter despite an economic slowdown and  predictions of tougher times ahead.
The Beijing-based firm forecast fourth-quarter revenue to rise to US$98 million to US$101 million from US$64.3 million a year earlier, slightly more than  market estimates of US$98.7 million.
'It is still business as usual for Sina,' said Jason Brueschke, the head of Asia internet media research at Citigroup. 'There have been no cancellations of advertising contracts. It had a record-breaking second quarter and third quarter and it is going to have a record fourth quarter.'
The company reported a 68 per cent jump in sales in the third quarter to US$105.4 million as it benefited from the Beijing Olympics.
Net income rose 28 per cent to US$21.96 million from a year earlier.
Gross margin, however, shrank to 57 per cent from 62 per cent due to costs related to the Olympics. Game-related costs totalled US$9 million to US$10 million, including content acquisition and Olympic sponsorship.
Mr Brueschke expects margins will rebound once these costs are eliminated next quarter.
The outlook  for next year, however, is less rosy. More than half of Sina's advertising clients come from the motor, property and financial services sectors, all heavily affected by the current financial crisis.
'Sina's clients are struggling and investors are concerned about whether they will maintain their advertising levels,' he said. But he expects that even under the worst-case scenario, online advertising will still be growing next year.
'Even if China's economic growth is only 5 per cent, I expect advertising as a whole can grow 10 per cent and online advertising 20 to 25 per cent.'
Analysts believe the online  gaming sector is a safe haven in the current difficult times but not all companies will perform well.
'Online games will be the last sector to be affected by the financial crisis,' said Citigroup analyst Alicia Yap.
She expects the sector to grow  20 to 30 per cent next year.
However, she said NetEase.com, the mainland's second-largest online gaming firm, was expected to lag behind the industry next year with a 12 per cent growth in revenue, as its games were rather old.
It recently signed contracts with US-based Blizzard Entertainment for new games. It booked US$4 million as upfront licensing fees in the third quarter, and more are expected in the coming quarter. Blizzard's new games, however,  were not expected to operate until the end of next year or 2010, Ms Yap said.
NetEase.com reported a 44 per cent rise in third-quarter sales to US$99.4 million. Profit grew 20 per cent to US$46.14 million and was affected by widening foreign exchange losses.
Its Fantasy Westward Journey,  the most popular game in the country, reached a  record 2.3 million concurrent players in August.
'We saw snowstorms and the Olympics this year, and the sector still continued to grow. It shows how attractive these games are to  players,' Ms Yap said.
Many of the players were teenagers who did not care about the state of the world economy, she added.
And as average spending was only 50 yuan (HK$56.70) to 60 yuan per month, it was insignificant as a percentage of family income.



Sina expects 52pc sales  jump amid tough times