UPDATE 2-Sohu Q2 profit dips slightly, but beats forecasts

* Q2 net attributable EPS at $0.88 vs Street view $0.795

* Sees Q3 revenue $153-$158 mln vs Street f’cast $155 mln

* Shares rise as much as 6 pct
(Adds share movement)

SHANGHAI, July 26 (BestGrowthStock) – Quarterly net profit at
China’s No.2 Internet portal Sohu.com Inc (SOHU.O: ) was flat,
beating estimates after four straight quarterly declines, as
better results at its online games unit offset higher costs.

Sohu expects third-quarter revenue of between $153 million
and $158 million, in line with expectations of $154.9 million,
according to analysts polled by Thomson Reuters I/B/E/S.

The revenue includes contributions from its Changyou
(CYOU.O: ) online gaming unit, which made up 53.2 percent of
Sohu’s total revenue for the second quarter.

Changyou competes with NetEase.com (NTES.O: ), Tencent
Holdings (0700.HK: ) and Shanda Games (GAME.O: ) in China’s
increasingly competitive online gaming market.

China is home to the world’s largest Internet market with
more than 420 million users. China’s online games market shrank
in the second quarter for the first time in more than a year,
shedding 1.8 percent to 7.34 billion yuan ($1.1 billion) from
the previous quarter, according to data from iResearch.
[ID:nTOE66L02T]

“The results are overall pretty strong, on the advertising
front there was a stabilisation of margins and games user
growth was strong,” said JPMorgan analyst Dick Wei.

Advertising, Sohu’s other main revenue source, made up 39.1
percent of revenue in the second quarter, as China’s
advertising market rebounded in the first half of 2010, driven
by big ticket events such as the World Expo held in Shanghai
and the World Cup.

Sohu said Changyou’s revenue grew 16.7 percent to $77.72
million on strong results for its blockbuster martial arts
game, but its own overall operating margins shrank slightly to
35 percent from 38 percent due to higher marketing expenses and
bandwidth costs.

“We continue to place emphasis on online video and are
convinced this will be an area of significant future growth,”
said Sohu’s Chief Executive Charles Zhang in a statement.

Sohu’s second-quarter net profit came in at $33.45 million,
or $0.88 per share, versus $33.53 million, or $0.88, a year
ago. That beat market expectations for second-quarter earnings
of $0.795 per share, according to analysts polled by Thomson
Reuters I/B/E/S.

Sohu shares, which have underperformed the broader Nasdaq
and lost 23 percent so far this year, were up 73 cents at
$45.77 in midday trade Monday on Nasdaq. They rose as much as 6
percent to touch a high of $47.54 earlier in the session.
($1=6.778 Yuan)

Stock Market News

(Reporting by Melanie Lee; Additional reporting by Saqib Iqbal
Ahmed in Bangalore; Editing by Anshuman Daga and Jacqueline
Wong)

UPDATE 2-Sohu Q2 profit dips slightly, but beats forecasts