TMT Analyst: August 2009

Saturday, August 29, 2009

Sina 2Q09 Preview; Focus Media Acquisition by year-end

Sina will report second quarter earnings on Monday, August 31st after the market close. Consensus expectations are for revenues of $88 million (-3% y/y and +20% q/q) and pro forma EPS of $0.30.

Display revenues are expected to decline 12% y/y due in part to tough comparisons to the Olympics ad spend in 2Q08, however, I expect a sequential improvement from 1Q09 as several advertising categories such as autos and real-estate have rebounded in China during the quarter. Mobile revenues is likely to be up in the high teens y/y.

In addition to the fundamentals, attention will be paid to commentary from management pertaining to the Focus Media outdoor acquisition, for which sentiment has been negative. Most expect the deal to collapse, however, my bet is that it goes through. The main hold-up is the Chinese government's extensive review process, which I believe is occurring due to the upcoming 60th anniversary of the communist party on October 1st. When that date passes, I think the government may give the green list to the acquisition.

In addition, both sides continue to want the deal to consummate and Sina has even added Focus Hot Brand Zone to its website, which is an advertising section on the site for Focus Media's outdoor clients. Clearly that would have not occurred if both sides had cooled to the deal or if they believed that the government would strike it down. Plus, no major shareholder have come out against the deal.

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