Sina Corp, China's biggest Internet portal, forecast a record quarterly sales drop, citing a "challenging" online advertising market.

The company projected yesterday third-quarter sales will drop as much as 14 percent to US$91 million, missing the US$96 million median of nine analyst estimates compiled by Bloomberg.

The sales outlook is below what Shanghai-based Sina had expected, Chief Executive Officer Charles Chao said in a conference call, without specifying the previous forecast.

Sina predicted online ad sales may fall as much as 21 percent in the current period, larger than local rival Sohu.com Inc's projected drop.

China's economic slowdown in the first half weakened spending by Sina's customers in the automobile, property and technology industries, Chao said.

"Sina's guidance is for a much steeper drop than Sohu's," said Timothy Chan, who rates Sina "underperform" at CLSA Ltd in Hong Kong. "Sina's content-related costs are also going up, which makes us quite negative on the company."

The stock fell 1.1 percent to US$30 in NASDAQ Stock Market trading on Monday before the results were announced, reducing its gain to 30 percent this year. That compares with a 29 percent advance in Sohu, the second-biggest Chinese portal.

"The online advertising market is still challenging, and visibility is still low," Chao said.

In July, Sohu reported second-quarter advertising sales rose 5 percent.

The Beijing-based company forecast ad sales in the current quarter may be between US$49.5 million and US$51.5 million, compared with US$51.1 million a year earlier.

Sina plans to maintain increases in network spending to host more video content and attract online advertisers as demand remains "cautious", Chief Financial Officer Herman Yu said.

Sina's second-quarter net income declined 41 percent to US$13.3 million. Profit missed the US$13.7 million median of five analyst estimates compiled by Bloomberg.

Operating expenses rose to US$36.7 million in the second- quarter, compared with US$29.9 million in the previous three months, Sina said.

"Media content and bandwidth costs are still rising faster than revenues," Jason Brueschke, a Citigroup Inc analyst, wrote in an Aug 27 report. "We see a growing competitive environment."

Focus Media deal unlikely

Sina is "unlikely" to complete its planned acquisition of the main outdoor advertising assets of Focus Media Holding Ltd by a deadline at the end of this month as the transaction is pending antitrust approval by the Ministry of Commerce, Chao said.

Sina and Focus Media are in talks to review options, including extending the deadline for the deal's completion, or altering the terms of the transaction, said Chao, without providing details.

In December, Sina agreed to buy the digital out-of-home division of Focus Media in a stock-only deal that was valued at US$1.3 billion.

Focus Media sells advertising on more than 100,000 flat-screen televisions in office buildings and public spaces in China, it said.

(China Daily September 2, 2009)