The Motley Fool Previous Page


SINA Needs to Show Some Cash

http://www.fool.com/investing/general/2012/05/24/sina-needs-to-show-some-cash.aspx

Keki Fatakia
May 24, 2012

China's largest Internet portal and media website company, SINA (Nasdaq: SINA  ) , came out with higher first-quarter revenue and posted a smaller-than-expected loss as well.

However, it was mainly the company's future outlook that disappointed the Street. SINA expects more losses going forward as it plans to invest more in its microblogging platform.

So what does the future hold for SINA in a country whose Internet-based industry is increasingly facing the pinch of government restrictions? Let's find out.

Figuring it out
SINA, which operates a microblogging platform called Weibo that operates similarly to Twitter, increased its revenue by about 6% from the year-ago period to $106.2 million. It did so mainly on the back of higher advertising revenue, while other sources remained largely unchanged.

Even then, SINA is unlikely to make much money from Weibo in the near future, as it plans to increase its investment in the latter by as much as 45% over last year's, with the majority of the funding going into upgrades and efforts to stave off competition. In fact, a large part of the company's losses can be attributed to the fact that its operating expenses shot up by 61% from the previous year due to greater spending on hiring personnel, marketing, and infrastructure, all mostly related to the Weibo platform.

Of late, SINA and other companies like Tencent that operate social-networking sites have come under fire from the Chinese government for allowing "rumors" to spread on their websites. This has compelled SINA to hire personnel to censor posts that are deemed unsuitable, which in turn has added to its already-high operating expenses.

Economic woes
Apart from gov