Earnings: Sohu.com Q2 Revs Up 162 Percent; Income Soars; Will IPO Games Unit Separately

imageThe major Chinese portals continue their torrid pace of growth, as Sohu.com (NSDQ: SOHU) announced Q2 revenue growth of 162 percent to $102 million. GAAP net income of $40.2 million or $1.02 per share was up over 600 percent from last year. The top-line was helped by 53 percent ad revenue growth, as well as 450 percent growth in non-advertising revenue, largely from online games. The company’s in-house developed MMO Tian Long Ba Bu grew 11.5 fold since its inception in May 2007. In addition to boosting the top line, it also helped expand profitability: Gross margins stood at 76 percent, compared to 61 percent in the year ago period.

The company cited the upcoming Beijing Olympics as a factor in growing online ad spending, and it predicted that the games would lead to higher internet penetration in China, benefiting it over the long run.

And since the iron seems to be hot for its games business, the company announced today that it plans to do a US IPO of the unit, which will be called Changyou.com. It has yet to file a statement with the SEC concerning this, nor has it made any announcement as to the size of the sale. The company says the spin will help it focus on its core online media business, though obviously it represents a way to take advantage of the fast-growing unit. RedlineChina: Sources have stated that Sohu has already established an offshore company in the Cayman Islands for its online gaming business, a common practice among Chinese online games companies. Its main online games revenues are derived from the Chinese-themed title Tianlong Babu, which generated revenues of $45.5 million, up 17 percent quarter-on-quarter in Q2 2008.

Release. Earnings call transcript.