SINA Reports Second Quarter 2004 Financial Results - The Company Reports Net Revenues of $49.2 Million and U.S. GAAP Net Income of $18.0 Million

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SINA Reports Second Quarter 2004 Financial Results - The Company Reports Net Revenues of $49.2 Million and U.S. GAAP Net Income of $18.0 Million

SHANGHAI, China, Jul 27, 2004 /Xinhua-PRNewswire via COMTEX/ -- SINA Corporation (Nasdaq: SINA), a leading online media company and value-added information service provider for China and for global Chinese communities, today announced its financial results for the second quarter ended June 30, 2004:

     * Net revenues for the quarter grew by 89.3% year-over-year to a record
       $49.2 million.

     * Advertising revenues for the quarter grew by 63.4% year-over-year to
       $15.5 million and accounted for 32% of total revenues.

     * Non-advertising revenues for the quarter grew by 104.2% year-over-year
       and accounted for 68% of total revenues.

     * US GAAP net income for the quarter was $18.0 million; or $0.31 diluted
       net income per share, compared to a net income of $7.1 million, or
       $0.14 diluted net income per share for the same period in 2003.

     * Pro forma net income for the quarter was $19.1 million, or $0.33
       diluted net income per share, compared to a pro forma net income of
       $9.2 million, or $0.18 diluted net income per share for the same period
       in 2003.

     * Cash flow from operating activities for the quarter was $14.0 million,
       compared to $9.0 million for the same period in 2003.

"We are very pleased with our results for the second quarter," said Wang Yan, CEO of SINA. "We continue to maintain strong momentum and leadership in our major business lines despite an increasingly competitive market environment."

Financial Results

For the quarter ended June 30, 2004, SINA reported record net revenues of $49.2 million, an increase of 89.3% from $26.0 million reported in the same period in 2003 and an increase of 18.9% from $41.4 million reported in the previous quarter, within the range of the Company's guidance of between $48.5 million and $49.5 million.

Advertising revenues totaled $15.5 million for the quarter, representing a 63.4% increase over $9.5 million reported in the same period in 2003 and an 18.3% increase over $13.1 million reported in the previous quarter.

Non-advertising revenues totaled $33.7 million for the quarter, a 104.2% increase over $16.5 million reported in the same period in 2003 and a 19.2% increase over $28.3 million reported in the previous quarter. The increase in non-advertising revenues was primarily driven by the growth in mobile value-added service. Total revenues from mobile value-added services were $31.1 million, representing an increase of 119.6% from $14.2 million reported in the same period of last year and of 20.7% from $25.8 million reported in the previous quarter.

For the second quarter, SINA continued to benefit from its diversified product offerings in mobile value-added service. Revenues from 2.5G (MMS and WAP) products, IVR and other new services grew approximately 200% from $1.7 million or 7% of total mobile value-added service revenues for the first quarter to $5.1 million or 16% of total mobile value-added service revenues for the second quarter. On the other hand, due to the changes in regulatory environment and mobile operators' policies, during the second quarter, the Company saw a decline in its SMS business excluding the results of Crillion Corporation, a mobile value-added service provider acquired in March 2004. Although total SMS revenues including Crillion increased from $24.1 million for the first quarter to $26.0 million for the second quarter, excluding the revenues from Crillion, SINA's SMS revenues actually declined from $23.7 million for the first quarter to $20.0 million for the second quarter.

The gross margin for the quarter was 70.9%, up from 69.7% reported in the previous quarter and from 68.9% reported in the same period in 2003.

Operating expenses for the second quarter totaled $16.1 million, an increase of 44.9% from $11.1 million reported in same period of 2003 and an increase of 25.9% over $12.8 million reported in the previous quarter. The increase in operating expenses was mainly due to the Crillion acquisition, our increased effort in new product development and the increase in amortization of intangible assets.

Net income for the second quarter was $18.0 million, representing an increase of 153.0% from a net income of $7.1 million for the same period in 2003 and an increase of 12.3% from a net income of $16.0 million for the previous quarter. Diluted net income per share was $0.31 for the quarter, compared to a diluted net income per share of $0.14 for the same period of 2003 and a diluted net income per share of $0.28 for the previous quarter.

On a pro forma basis, net income for the second quarter totaled $19.1 million, compared to a pro forma net income of $9.2 million for the same period in 2003 and of $16.6 million for the previous quarter. Diluted net income per share, on a pro forma basis, was $0.33 for the quarter, compared to a pro forma diluted net income per share of $0.18 for the same period of 2003 and of $0.29 for the previous quarter, above the range of the Company's guidance of between $0.31 and $0.32 per share. Pro forma net income excludes non-cash charges relating to amortization of intangible assets, stock based compensation and convertible bond issuance cost, and gain or loss from Sun Media Group investment.

As of June 30, 2004, SINA's cash, cash equivalents and investments in marketable securities totaled $243.0 million, an increase of $4.9 million from three months ago. Cash flow from operating activities for the second quarter was $14.0 million, compared to $19.6 million for the previous quarter and $9.0 million for the same period in 2003.

New Businesses

In July, SINA announced its agreement to acquire Davidhill Capital Inc. and its UC instant messaging technology platform. Launched in 2002, the UC instant messaging service allows users to communicate in real-time over the Internet and mobile phone networks, via text messages, images and voice. UC also provides community services such as chat rooms, online games, alumni clubs, online karaoke and other entertainment services. Based on a highly scalable technology platform, the UC instant messaging service has approximately 80 million registered user accounts and approximately 200,000 peak simultaneous online user accounts. SINA will pay US$15 million in cash and shares as the first installment and an additional contingent payment of up to US$21 million in cash and shares in the next year based on growth performance levels.

Also in July 2004, SINA successfully launched its casual game portal -- igame http://www.igame.com.cn providing casual games, cards and board games as well as avatars and community-based services such as chat rooms and hompeys. This game portal is based on the platform and games provided by NetMarble of Korea. To date, about three weeks after launch, igame has already obtained over 800,000 registered users.

Management Appointment

SINA also announced that its Board has appointed Charles Chao, the Company' s CFO as Co-COO together with Hurst Lin effective immediately. Mr. Chao will remain as the CFO of the Company and will assume more operational duties.

Business Outlook

The Company estimates that its total revenues for Q3 2004 to be between $49.0 million and $50.0 million, with advertising revenues between $18.0 million and $18.5 million and non-advertising revenues between $31.0 million and $31.5 million. Pro forma EPS on a fully diluted basis is expected to be $0.29 to $0.30 for Q3 2004.

NON-GAAP Measures

To supplement the consolidated financial statements presented in accordance with GAAP, SINA uses non-GAAP measures of gross profit, operating income, net income and earnings per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses that are not expected to result in future cash payments, gains and losses that are non-recurring in nature or may not be indicative of our core operating results. In addition, because the Company has historically reported certain non-GAAP results to investors, the Company believes the inclusion of non-GAAP measures provides consistency in our financial reporting. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for or superior to GAAP results. Consistent with the Company's historical practice, the non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.

Conference Call

SINA will host a conference call at 9:00 p.m. Eastern Time today to present an overview of the Company's financial performance and business operations for the second quarter 2004. The dial-in number for the call is 617-786-4501. The pass code is 98335488. A live webcast of the call will be available from 9:00 p.m. - 10:00 p.m. ET on Tuesday, July 27th, 2004 (9:00 a.m. - 10:00 a.m. Beijing Time on July 28th, 2004). The call can be accessed through the Company's corporate web site at http://corp.sina.com. The call will be archived for 12 months on SINA's corporate website at http://corp.sina.com. A replay of the conference call will be available for forty-eight hours after the conclusion of the conference call. The dial-in number is 617-801-6888. The pass code for the replay is 90740623.

About SINA

SINA Corporation (Nasdaq: SINA) is a leading online media company and value-added information service (VAS) provider for China and for global Chinese communities. With a branded network of localized web sites targeting Greater China and overseas Chinese, SINA provides services through five major business lines including SINA.com (online news and content), SINA Mobile (mobile value-added services), SINA Online (community-based services and games), SINA.net (search and enterprise services) and SINA E-Commerce (online shopping and travel). Together these provide an array of services including region-focused online portals, mobile value-added services, search and directory, interest-based and community-building channels, free and premium email, online games, virtual ISP, classified listings, fee-based services, e-commerce and enterprise e-solutions.

Safe Harbor Statement

This announcement contains forward-looking statements concerning SINA's expected financial performance (as described without limitation in the Business Outlook section and quotations from management in this press release), as well as SINA's strategic and operational plans. SINA may also make written or oral forward-looking statements in our periodic reports to the Securities and Exchange Commission on forms 10-K, 10-Q, 8-K, etc., in its annual report to shareholders, in its proxy statements, in its offering circulars and prospectuses, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, SINA's historical losses, its limited operating history, the uncertain regulatory landscape in the People's Republic of China, fluctuations in quarterly operating results, the Company's reliance on mobile value-added service and online advertising sales for a majority of its revenues, the Company's reliance on mobile operators in China to provide mobile value-added service, any failure to successfully develop and introduce new products and any failure to successfully integrate acquired businesses. Further information regarding these and other risks is included in SINA's Annual Report on Form 10-K for the period ended December 31, 2003 and its recent reports on Form 10-Q as well as in its other filings with the Securities and Exchange Commission.


                               SINA CORPORATION
                UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
                    (in thousands, except per share data)

                                     Three months ended     Six months ended
                                       June 30,   March 31,      June 30,
                                     2004    2003     2004     2004     2003
    Net revenues
        Advertising               $15,512  $9,495  $13,118  $28,630  $16,793
        Non-Advertising            33,683  16,492   28,270   61,953   27,308
                                   49,195  25,987   41,388   90,583   44,101

    Cost of revenues
        Advertising                 4,961   3,239    4,332    9,293    6,065
        Non-Advertising             9,336   4,855    8,194   17,530    8,122
        Stock-based compensation       --      12       --       --       26
                                   14,297   8,106   12,526   26,823   14,213

    Gross profit                   34,898  17,881   28,862   63,760   29,888

    Operating expenses
        Sales and marketing         9,072   5,086    7,098   16,170    9,540
        Product development         2,143   1,407    1,974    4,117    2,828
        General and
         administrative             3,940   3,091    3,215    7,155    5,207
        Stock-based compensation       --     198       --       --      428
        Amortization of
         intangibles                  926     414      484    1,410      919
        Write-off of intangibles       --     903       --       --      903
                                   16,081  11,099   12,771   28,852   19,825

    Income from operations         18,817   6,782   16,091   34,908   10,063

    Other income, net                 909     655    1,049    1,958    1,056
    Gain on Sun Media Investment       --      --       59       59       --
    Loss on equity investments       (756)   (316)    (333)  (1,089)    (622)

    Income before income taxes     18,970   7,121   16,866   35,836   10,497

    Provision for income taxes       (952)     --     (824)  (1,776)      --

    Net income                    $18,018  $7,121  $16,042  $34,060  $10,497

    Shares used in computing       50,257  47,661   49,329   49,871   47,217
     basic net income per share

    Basic net income per share       0.36    0.15     0.33     0.69     0.22

    Shares used in computing
     diluted net income per share  58,110  51,971   57,826   58,048   51,529

    Diluted net income per share *  $0.31   $0.14    $0.28    $0.59    $0.20

    * Net income used for diluted
     net income per share
     calculation

    Net income                    $18,018  $7,121  $16,042  $34,060  $10,497

    Amortization of convertible
     debt issuance cost               171      --      171      342       --

    Net income used for diluted
     net income per share
     calculation                  $18,189  $7,121  $16,213  $34,402  $10,497


                               SINA CORPORATION
           UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                    (in thousands, except per share data)

                                      Three months ended     Six months ended
                                          June 30, March 31,      June 30,
                                      2004    2003     2004     2004     2003
    Net revenues
        Advertising                $15,512  $9,495  $13,118  $28,630  $16,793
        Non-Advertising             33,683  16,492   28,270   61,953   27,308
                                    49,195  25,987   41,388   90,583   44,101

    Cost of revenues
        Advertising                  4,961   3,239    4,332    9,293    6,065
        Non-Advertising              9,336   4,855    8,194   17,530    8,122
                                    14,297   8,094   12,526   26,823   14,187

    Gross profit                    34,898  17,893   28,862   63,760   29,914

    Operating expenses
        Sales and marketing          9,072   5,086    7,098   16,170    9,540
        Product development          2,143   1,407    1,974    4,117    2,828
        General and administrative   3,940   2,516    3,215    7,155    4,632
                                    15,155   9,009   12,287   27,442   17,000

    Income from operations          19,743   8,884   16,575   36,318   12,914

    Other income, net                1,080     655    1,220    2,300    1,056
    Loss on equity investments        (756)   (316)    (333)  (1,089)    (622)

    Pro forma net income before
     income taxes                   20,067   9,223   17,462   37,529   13,348

    Provision for income taxes        (952)     --     (824)  (1,776)      --

    Pro forma net income            19,115   9,223   16,638   35,753   13,348

    Shares used in computing pro
     forma basic net income per
     share                          50,257  47,661   49,329   49,871   47,217

    Pro forma basic net income per
     share                            0.38    0.19     0.34     0.72     0.28

    Shares used in computing pro
     forma diluted net income
     per share                      58,110  51,971   57,826   58,048   51,529

    Pro forma diluted net income
     per share                       $0.33   $0.18    $0.29    $0.62    $0.26



    Reconciliation from GAAP
     results to pro forma results:

    GAAP net income                $18,018  $7,121  $16,042  $34,060  $10,497

    Stock based compensation
        Cost of revenues                --      12       --       --       26
        Operating expenses              --     198       --       --      428

    Amortization of intangibles        926     414      484    1,410      919
    Amortization of convertible
     debt issuance cost                171              171      342       --
    Gain on Sun Media Investment        --              (59)     (59)      --
    Write-off of intangibles            --     903       --       --      903
    Severance pay                       --     575       --       --      575

    Pro forma net income           $19,115  $9,223  $16,638  $35,753  $13,348


                               SINA CORPORATION
                        UNAUDITED SEGMENT INFORMATION
                                (in thousands)

                                     Three months ended      Six months ended
                                        June 30,   March 31,       June 30,
                                     2004     2003     2004     2004     2003
    Net revenues
             Advertising          $15,512   $9,495  $13,118  $28,630  $16,793
             Mobile related        31,131   14,177   25,786   56,917   23,374
             Others                 2,552    2,315    2,484    5,036    3,934
                                  $49,195  $25,987  $41,388  $90,583  $44,101

    Cost of revenues
             Advertising           $4,961   $3,239   $4,332   $9,293   $6,065
             Mobile related         9,097    4,540    7,977   17,074    7,572
             Others                   239      315      217      456      550
                                  $14,297   $8,094  $12,526  $26,823  $14,187


                               SINA CORPORATION
                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
                          (in thousands U.S. dollar)

                                                   June 30       December 31
                                                      2004              2003
    Assets
       Cash, cash equivalents and investments
        in marketable securities                  $243,014          $227,164
       Accounts receivable, net                     29,578            17,606
       Property and equipment, net                  12,010             8,646
       Long-term investments                        11,811             8,878
       Goodwill/intangible assets, net              33,333            18,660
       Other assets                                 16,776             8,943
          Total assets                            $346,522          $289,897

    Liabilities and Shareholders' Equity
       Liabilities                                 $36,994           $30,390
       Convertible Debt                            100,000           100,000
       Shareholders' equity                        209,528           159,507

          Total liabilities and
           shareholders' equity                   $346,522          $289,897

SOURCE SINA Corporation

CONTACT:
Chen Fu,
Investor Relations of SINA Corporation,
+8621-62895678, ext. 6089,
fuchen@staff.sina.com;
or
Denise Roche of The Ruth Group,
+1-646-536-7008,
droche@theruthgroup.com,
for SINA Corporation