SINA Reports Third Quarter 2004 Financial Results

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SINA Reports Third Quarter 2004 Financial Results

The Company Reports Net Revenues of $52.5 Million

SHANGHAI, China, Oct. 26 /Xinhua-PRNewswire/ -- 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 third quarter ended September 30, 2004:

     * Net revenues for the quarter grew by 64.5% year-over-year to a record
       $52.5 million, beating the Company's guidance of between $49.0 million
       and $50.0 million.
     * Advertising revenues for the quarter grew by 61.8% year-over-year to
       $18.5 million and accounted for 35.2% of total revenues.
     * Non-advertising revenues for the quarter grew by 66.0% year-over-year
       to $34.0 million and accounted for 64.8% of total revenues.
     * US GAAP net income for the quarter was $14.5 million; or $0.27 diluted
       net income per share, compared to a net income of $11.7 million, or
       $0.21 diluted net income per share for the same period in 2003.
     * Pro forma net income for the quarter was $17.4 million, or $0.32
       diluted net income per share, compared to a pro forma net income of
       $12.3 million, or $0.21 diluted net income per share for the same
       period in 2003.

"We are extremely happy with our financial performance for the third quarter," said Wang Yan, CEO of SINA. "Our better than expected results in a very tough market and regulatory environment further demonstrated SINA's execution capability."

Financial Results

For the quarter ended September 30, 2004, SINA reported record net revenues of $52.5 million, an increase of 64.5% from $31.9 million reported in the same period in 2003 and an increase of 6.7% from $49.2 million reported in the previous quarter, beating the Company's guidance of between $49.0 million and $50.0 million.

Advertising revenues totaled $18.5 million for the quarter, representing a 61.8% increase over $11.4 million reported in the same period in 2003 and a 19.4% increase over $15.5 million reported in the previous quarter.

Non-advertising revenues totaled $34.0 million for the quarter, a 66.0% increase over $20.5 million reported in the same period in 2003 and a 1.0% increase over $33.7 million reported in the previous quarter. Total revenues from mobile value-added services were $31.3 million, representing an increase of 72.5% from $18.1 million reported in the same period in 2003 and of 0.5% from $31.1 million reported in the previous quarter.

For the third 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 37.0% from $5.1 million or 16.3% of total mobile value-added service revenues for the second quarter to $7.0 million or 22.2% of total mobile value-added service revenues for the third quarter. During the quarter, the Company's IVR service was temporarily suspended by China Mobile due to the violation of certain operating procedures. Excluding the effect of the IVR service, revenues from 2.5G products and other new mobile value-added service revenues for the third quarter grew by 77.6% from the previous quarter. On the other hand, revenues from SMS declined another 6.6% from $26.0 million for the second quarter to $24.3 million for the third quarter. On October 15, 2004, SINA's IVR service was resumed by China Mobile.

The gross margin for the quarter was 67.9%, down from 70.9% reported in the previous quarter and from 70.0% reported in the same period in 2003. Gross margin for advertising revenues was approximately 61.4% for the third quarter, compared to 68.0% for the previous quarter. The decline in advertising gross margin was largely due to $1.1 million revenue share paid to an exclusive Olympic content partner associated with China Olympic Committee. Excluding this revenue share payment and some other one-time content purchases relating to Olympic coverage, advertising gross margin would have been unchanged from the previous quarter. Gross margin for mobile value-added service revenues for the third quarter was 70.0% as compared to 70.8% for the previous quarter. The slight decline in mobile value-added service gross margin was a result of increased transmission cost paid to mobile operators with the increase in usage- based services.

Operating expenses for the third quarter totaled $18.8 million, an increase of 74.4% from $10.8 million reported in same period of 2003 and an increase of 16.8% over $16.1 million reported in the previous quarter. Excluding the amortization of intangible assets, pro forma operating expenses for the third quarter totaled $17.7 million, an increase of 72.8% over $10.3 million reported in the same period of 2003 and an increase of 17.1% over $15.2 million reported in the previous quarter. The sequential increase in pro forma operating expenses was mainly due to an additional $1 million marketing expenditure relating to the Olympic event, an increase in advertising expenses relating to mobile value-added services and an increase in product development cost with the addition of instant messaging operation as a result of the acquisition of UC instant messaging platform as well as the launch of the casual game portal iGame.

Net income for the third quarter was $14.5 million, representing an increase of 24.4% from a net income of $11.7 million for the same period in 2003 and a decrease of 19.5% from a net income of $18.0 million for the previous quarter. Diluted net income per share was $0.27 for the quarter, compared to a diluted net income per share of $0.21 for the same period of 2003 and a diluted net income per share of $0.31 for the previous quarter. During the third quarter, the Company recorded a gain of approximately $1.0 million from the sale of a minority interest investment and a write-off of approximately $2.7 million for its investment in Sun Media Group. The net investment loss was $1.7 million.

On a pro forma basis, net income for the third quarter totaled $17.4 million, compared to a pro forma net income of $12.3 million for the same period in 2003 and of $19.1 million for the previous quarter. Diluted net income per share, on a pro forma basis, was $0.32 for the quarter, compared to a pro forma diluted net income per share of $0.21 for the same period of 2003 and of $0.33 for the previous quarter, above the range of the Company's guidance of between $0.29 and $0.30 per share. Pro forma net income excludes non-cash charges relating to amortization of intangible assets, stock based compensation, convertible bond issuance cost, gain or loss from Sun Media Group investment and other one-time investment gains or losses.

As of September 30, 2004, SINA's cash, cash equivalents and investments in marketable securities totaled $243.6 million, an increase of $0.6 million from three months ago. Cash flow from operating activities for the third quarter was $10.8 million, compared to $14.0 million for the previous quarter and $13.7 million for the same period in 2003. The sequential decline in cash flows from operating activities was primarily due to an increase in accounts receivable balance from $29.6 million at June 30, 2004 to $42.9 million at September 30, 2004. Accounts receivable from mobile operators for mobile value-added services increased by approximately $7.9 million for the quarter as certain provincial mobile operators delayed payments to all wireless service providers pending account reconciliations during the quarter. The Company however has received a majority of these delayed payments after the end of the third quarter. Total payments received from mobile operators after the quarter end and up to October 26 were approximately $8.0 million. In addition, accounts receivable relating to advertising business also increased by $5.4 million from the previous quarter. The increase in advertising related accounts receivable was largely due to the increase in gross advertising revenues as well as the seasonality for collection.

Olympics

During the quarter, SINA was able to capitalize on the singular event of 2004, the 2004 Summer Olympics Games to further solidify its position and brand as the premier portal in China. The SINA Olympics Official Site with exclusive live video interviews of the Chinese gold medallists as well as real time updates on the various Olympic events became one of the most trafficked sites in China. According Nielsen/NetRatings, between August 13 and August 30, the SINA Olympics Site was visited by 28 million unique visitors. In addition to the portal, SINA was able to leverage the event to market its mobile services and further cement various content and marketing relationships with many of its key partners.

Online Game

In late August, SINA through its joint venture with NcSoft commenced the open beta test of Lineage 2 game. To date, Lineage 2 has been deployed in 12 regional telecom data centers to service game players throughout China. From October 1 through October 26, the daily average concurrent user count is roughly 120,000. Lineage 2 has entered into its final stage of open beta test and the Company expects to commence commercial operation in mid November.

SINA's casual game portal iGame has obtained 3.6 million users to date since its launch in July. The casual game portal now offers 23 casual games, 7 of which are self-developed by SINA.

Acquisition

In July 2004, 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. The acquisition was closed in October 2004. SINA paid approximately $12.6 million in cash and approximately 64,000 SINA ordinary shares valued at $2.4 million as the first installment payment. SINA will pay up to an additional $21 million in cash and shares in the 12 months if certain simultaneous online user targets are reached. As a result of the acquisition, the Company recorded certain intangible assets in the amount of $10.8 million, which will be amortized over periods ranging from 27 months to 10 years. The amortization expense related to these intangible assets amounted to $0.3 million for the third quarter. In addition, the Company recorded goodwill in the amount of $4.3 million for this acquisition. The operating results of Davidhill Capital have been consolidated starting July 1, 2004 when SINA took over the effective control of the company.

Business Outlook

The Company estimates that its total revenues for Q4 2004 to be between $54.5 million and $55.5 million, with advertising revenues between $18.5 million and $19.0 million and non-advertising revenues between $36.0 million and $36.5 million. Pro forma net income is expected to be between $18.5 million and $19.0 million for Q4 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 third quarter 2004. The dial-in number for the call is 617-786-4501. The pass code is 53753723. A live Webcast of the call will be available from 9:00 p.m. - 10:00 p.m. ET on Tuesday, October 26th, 2004 (9:00 a.m. - 10:00 a.m. Beijing Time on October 27th, 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 25527268.

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              Nine months ended
                              September 30,    June 30        September 30,
                           2004        2003      2004      2004         2003

    Net revenues
      Advertising        $18,516    $11,441    $15,512    $47,146    $28,234
      Non-Advertising     33,989     20,473     33,683     95,942     47,781
                          52,505     31,914     49,195    143,088     76,015

    Cost of revenues
      Advertising          7,144      3,767      4,961     16,437      9,832
      Non-Advertising      9,711      5,790      9,336     27,241     13,912
      Stock-based
       compensation           --          5         --         --         31
                          16,855      9,562     14,297     43,678     23,775

    Gross profit          35,650     22,352     34,898     99,410     52,240

    Operating expenses
     Sales and marketing  10,646      5,613      9,072     26,816     15,153
     Product development   3,034      1,733      2,143      7,151      4,561
     General and
      administrative       4,065      2,923      3,940     11,220      8,130
     Stock-based
      compensation            --         88         --         --        516
     Amortization of
      intangibles          1,041        415        926      2,451      1,334
     Write-off of
      intangibles             --         --         --         --        903
                          18,786     10,772     16,081     47,638     30,597

    Income from
     operations           16,864     11,580     18,817     51,772     21,643

    Other income, net      1,124        675        909      3,082      1,731
    Loss on investments   (1,675)        --         --     (1,616)        --
    Loss on equity
     investments          (1,082)      (175)      (756)    (2,171)      (797)

    Income before income
     taxes                15,231     12,080     18,970     51,067     22,577

    Provision for income
     taxes                  (728)      (423)      (952)    (2,504)      (423)

    Net income           $14,503   $ 11,657    $18,018   $ 48,563    $22,154

    Shares used in
     computing basic
     net income per
     share                50,387     48,279     50,257     50,043     47,571

    Basic net income
     per share              0.29       0.24       0.36       0.98       0.47

    Shares used in
     computing diluted
     net income
     per share            53,885     57,622      58,110    56,703     53,675

    Diluted net income
     per share *           $0.27      $0.21      $ 0.31     $0.86      $0.42

    * Net income used for
      diluted net income
      per share calculation

    Net income           $14,503    $11,657     $18,018   $48,563    $22,154

    Amortization of
     convertible debt
     issuance cost            --        170         171       342        170

    Net income used for
     diluted net income
     per share
     calculation         $14,503    $11,827     $18,189   $48,905    $22,324


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

                           Three months ended              Nine months ended
                              September 30,    June 30        September 30,
                           2004        2003      2004      2004         2003

    Net revenues
      Advertising        $18,516    $11,441    $15,512    $47,146    $28,234
      Non-Advertising     33,989     20,473     33,683     95,942     47,781
                          52,505     31,914     49,195    143,088     76,015

    Cost of revenues
      Advertising          7,144      3,767      4,961     16,437      9,832
      Non-Advertising      9,711      5,790      9,336     27,241     13,912
                          16,855      9,557     14,297     43,678     23,744

    Gross profit          35,650     22,357     34,898     99,410     52,271

    Operating expenses
      Sales and marketing 10,646      5,613      9,072     26,816     15,153
      Product development  3,034      1,733      2,143      7,151      4,561
      General and
       administrative      4,065      2,923      3,940     11,220      7,555
                          17,745     10,269     15,155     45,187     27,269

    Income from
     operations           17,905     12,088     19,743     54,223     25,002

    Other income, net      1,296        845      1,080      3,596      1,901
    Loss on equity
     investments          (1,082)      (175)      (756)    (2,171)      (797)

    Pro forma net income
     before income taxes  18,119     12,758     20,067     55,648     26,106

    Provision for income
     taxes                  (728)      (423)      (952)    (2,504)      (423)

    Pro forma net income  17,391     12,335     19,115     53,144     25,683

    Shares used in
     computing pro forma
     basic net income
     per share            50,387     48,279     50,257     50,043     47,571

    Pro forma basic
     net income per share   0.35       0.26       0.38       1.06       0.54

    Shares used in computing
     pro forma diluted net
     income per share     53,885     57,622     58,110     56,703     53,675

    Pro forma diluted net
     income per share      $0.32      $0.21      $0.33      $0.94      $0.48


    Reconciliation from GAAP
     results to pro forma
     results:

     GAAP net income     $14,503    $11,657    $18,018    $48,563    $22,154

    Stock based compensation
       Cost of revenues       --          5         --         --         31
       Operating expenses     --         88         --         --        516

    Amortization of
     intangibles           1,041        415        926      2,451      1,334
    Amortization of
     convertible debt
     issuance cost           172        170        171        514        170
    Loss on investments    1,675                    --      1,616
    Write-off of intangibles             --                              903
    Severance pay                        --                              575

    Pro forma net income $17,391    $12,335    $19,115    $53,144    $25,683


                               SINA CORPORATION
                        UNAUDITED SEGMENT INFORMATION
                                (in thousands)

                           Three months ended              Nine months ended
                              September 30,    June 30        September 30,
                           2004        2003      2004      2004         2003

    Net revenues
        Advertising      $18,516    $11,441    $15,512    $47,146    $28,234
        Mobile related    31,290     18,144     31,131     88,207     41,518
        Others             2,699      2,329      2,552      7,735      6,263
                         $52,505    $31,914    $49,195   $143,088    $76,015

    Cost of revenues
        Advertising       $7,144     $3,767     $4,961    $16,437     $9,832
        Mobile related     9,389      5,584      9,097     26,463     13,156
        Others               322        206        239        778        756
                         $16,855     $9,557    $14,297    $43,678    $23,744


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

                                                 September 30   December 31
                                                       2004          2003
    Assets
      Cash, cash equivalents and
       investments in marketable securities        $243,563      $227,164
      Accounts receivable, net                       42,879        17,606
      Property and equipment, net                    14,539         8,646
      Long-term investments                           8,459         8,878
      Goodwill/intangible assets, net                47,344        18,660
      Other assets                                   14,468         8,943
        Total assets                               $371,252      $289,897

    Liabilities and Shareholders' Equity
      Liabilities                                   $43,229       $30,390
      Convertible Debt                              100,000       100,000
      Shareholders' equity                          228,023       159,507

        Total liabilities and shareholders' equity $371,252      $289,897

SOURCE SINA Corporation

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