UPDATE 2-Sohu sees return to profit growth as ads pick up

* Q1 EPS $0.73 versus $0.72 view

* Sees Q2 revenues between $139 mln-$144 mln

* Expects key events like Shanghai World Expo to boost ads

(Rewrites throughout, adds quotes, background and detail)

By Melanie Lee and Bijoy Koyitty

SHANGHAI/BANGALORE, April 26 (BestGrowthStock) – Sohu.com (SOHU.O: ), China’s No.2
Internet portal, forecast a return to year-on-year growth in the second quarter
on strong outlook, as it posted a first-quarter fall in profit that was in line
with expectation.

The company said it expects high-profile events such as the Shanghai World
Expo and the soccer World Cup to drive growth in its advertising segment, which
constitutes more than 30 percent of its total revenue.

“We are optimistic that business will accelerate as advertisers ramp up
their promotional campaigns,” said Belinda Wang, Sohu’s chief operating officer.

Sohu’s Chief Executive, Charles Zhang, said the focus this year would be on
diversifying Sohu’s games portfolio and acquiring licensed video content for its
online portal.

Sohu spun off its online game unit, Changyou (CYOU.O: ) last year as a
separately listed company.

Sohu said its second-quarter could see non-GAAP earnings of 87 cents to 92
cents a share, on revenue of $139 million to $144 million.

Analysts were expecting earnings of 84 cents a share, on revenue of $140.4
million, but it was not immediately clear if the profit forecast was comparable
with Sohu’s guidance.

“The second-quarter revenue guidance for 17-22 percent year-on-year growth,
materially accelerated from just 1 percent year-on-year growth in the
first-quarter, should ease concerns over near-term market share losses,” said
Citigroup analyst Catherine Leung in a note.

China is the world’s largest Internet market, with 404 million users at the
end of the first quarter, according to government statistics.

Sohu competes in an increasingly cut-throat environment in the portal space
against market leader Sina Corp (SINA.O: ), as well as leading game operators like
NetEase.com (NTES.O: ) and Tencent Holdings (0700.HK: ).

Sohu posted first-quarter results for its advertising segment that were
in-line with market expectation, and said an expansion pack for its blockbuster
online martial arts game Tian Long Ba Bu helped drive upside in its online games
segment.

For the first-quarter, the company reported net income of $41.3 million,
compared with $44.6 million, or $1.15 a share, in the year-ago period.

Net income attributable to Sohu.com shareholders fell to $30.2 million, or
73 cents a share, from $44.6 million, or $1.15 a share, after the spin off of
its Changyou online games unit last year.

Revenue rose 12 percent to $129.5 million, helped by a 17 percent increase
in online games revenue.

Analysts on average were expecting earnings of 72 cents a share on revenue
of $128.2 million, according to Thomson Reuters I/B/E/S.

Sohu shares have fallen 7 percent this year, underperforming the Nasdaq
index, which is up about 11 percent.
Investing

(Editing Doug Young and Rupert Winchester)
([email protected]; +86 21 6104 1778; Reuters Messaging:
[email protected])

UPDATE 2-Sohu sees return to profit growth as ads pick up