Chinese net stock Sohu.com
Other China portals all moved down in unison, including Sina
Sohu said that the suspension, coupled with the recent cut of billing rates for messaging services by some China Mobile subsidiaries, would lower third-quarter revenue by $1.5 million to $1.8 million, making the lower end of guidance $26.3 million.
The significance of the suspension has further-reaching aspects, though. Multimedia messaging services may have accounted for only 15% of Sohu's revenue the previous quarter, but demand for them is growing at a rapid rate. Should the multimedia messaging suspension end up lasting the full year, Sohu would lose ground on competitors rushing to fill the void, especially because China Mobile is the country's leading mobile operator.
During its conference call this morning, Sohu took pains to highlight the strengths of its other core businesses. It is still the No. 1 Web portal in China, and in sponsored search it already has 70,000 small and medium-size enterprises making monthly payments. The company is also involved in online gaming and e-commerce.
Another area of concern would be the change in climate for wireless service providers. China Mobile is state-controlled, and its recent moves may signal the start of a more regulatory approach to China's booming mobile phone services market.
Those who feel they missed out on the China bandwagon the first time may be aching to buy at current levels. Sohu definitely has very high potential. A quick scan of Sohu's businesses shows that it does have its finger in every pie -- it's looking to be a hybrid of Yahoo!
Fool contributor Tim Goh does not own any stake in the companies mentioned.