SINA May Be Sexier Than It Looks

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On the surface, SINA's (Nasdaq: SINA) third-quarter results are uninspiring. Revenue fell by 9% to $96.4 million, with a steeper 16% slide in its flagship online-advertising business. Non-GAAP earnings of $0.34 a share fell short of the $0.39 it earned a year ago. And SINA's top-line guidance for the current quarter -- $93 million to $96 million -- translates into sequential weakness.

Well, there's more than meets the eye on all three points.

Online-advertising revenue is certainly lower than it was a year ago, but SINA has posted back-to-back quarters of healthy sequential gains. Besides, did you forget that the Beijing Olympics took place during last year's comparable quarter? The world turned its attention to China, and brand advertisers in the country made sure they were visible before its citizenry.

And while earnings are lower, gross margins have improved at SINA, and $0.34 a share is also better than the $0.31 that Wall Street was expecting. SINA had topped Wall Street estimates for 13 consecutive quarters before simply matching analyst predictions in the second quarter. It's nice to see the company back on track.

Another factor weighing on the bottom line is its hefty cash balance. Plummeting global interest rates find SINA raking in less than half of the interest income it collected a year ago, despite holding more money.

Finally, the company's guidance is sandbagged by its recent decision to merge its online real estate business with an E-House (NYSE: EJ) subsidiary. On an apples-to-apples basis, SINA's top-line guidance would have been $106 million to $109 million, a healthy improvement sequentially and year over year.

This doesn't mean everything is rosy at SINA. Its deal to acquire Focus Media's (Nasdaq: FMCN) meatiest out-of-home advertising businesses fell apart. Springtime rumors of a Microsoft (Nasdaq: MSFT) buyout proved bogus. Rival Sohu.com (Nasdaq: SOHU) saw brand advertising fall by just 2% over the past year, and that was a company with an even bigger bet on last year's Olympic Games. Paid-search leader Baidu (Nasdaq: BIDU) hasn't hit any of SINA's speed bumps.

So what if SINA isn't perfect? The important takeaway from last night's quarterly report is that it isn't as imperfect as you may think.