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IR HOME > Press Room > Press Archive - 2001


SOHU.COM Reports Fourth Quarter, Year End 2000 Financial Results

Revenue momentum maintained, costs under control, record page view growth

Live web cast of conference calls on February 8, 2001 at 4:00 AM EST (17:00 PM Hong Kong time) will be broadcast at http://www.videonewswire.com/SOHU/020801/ or via
http://www.sohu.com/about/English/earnings/index.htm

BEIJING, CHINA, February 8, 2001 - Chinese Internet portal SOHU.com (NASDAQ: SOHU) today reported unaudited results for the fiscal fourth quarter and year ended December 31, 2000.

Highlights:
- Q4 2000 net revenue of US$ 2.2 million beats consensus expectations of US$ 2.1 million
- Sequential quarterly revenue growth of 36% and year-on-year growth of 297%
- Market leadership maintained with #1 China ranking by Iamasia
- Consistent growth of page views and registered users
- Focused integration of ChinaRen.com operations, now substantially complete
- Burn rate to drop below pre-merger levels entering Q2 2001

Financial
Net revenues for the fourth quarter ended December 31, 2000 were $2,179,000, a 297% increase over net revenues of $549,000 for the quarter ended December 31, 1999, and a 36% sequential increase over net revenues of $1,602,000 for the third quarter ended September 30, 2000.

Pro forma net loss for the fourth quarter, at $4.7 million or $0.14 per share, included the consolidated results of the October 18, 2000 ChinaRen.com merger. This compares to a pro forma net loss of $1.7 million or $0.07 per share for the fourth quarter of 1999 and a $3.5 million or $0.12 pro forma net loss per share for the third quarter ended September 30, 2000. Pro forma net loss excludes non-cash charges for amortization of intangibles, accretion on mandatorily redeemable convertible preferred stock, investment write-down, and stock-based compensation. Taking into account non-cash charges, net loss attributable to common stockholders for the fourth quarter of fiscal 2000 was $8.3 million or $0.24 loss per share. This compares to the net loss attributable to common stockholders of $2.3 million or $0.25 loss per share for the fourth quarter of 1999 and the net loss attributable to common stockholders of $4.3 million or $0.16 loss per share for the last quarter.

Net revenues for the year 2000 were $6.0 million, representing a 270% increase over net revenues of $1.6 million in 1999. Pro forma net loss for 2000 was $14.7 million or $0.50 per share compared to a pro forma net loss of $3.4 million or $0.16 per share in 1999. Taking into account non-cash pro forma charges, the 2000 net loss attributable to common stockholders was $23.2 million or $1.14 per share and 1999 net loss attributable to common stockholders was $4.4 million or $0.47 per share.

During the fourth quarter of fiscal 2000, online advertising comprised 95% of net revenues. Revenues from multinational advertising as a percentage of total revenues increased from 30% in the previous quarter to 44% in the fourth quarter, while domestic companies remained relatively constant at 39% of revenues. Exposure to dotcom companies dropped significantly from 28% to 19%. "Our customer mix reflects an intelligent approach to the China advertising sector. Domestic companies are plentiful. They will always advertise in their home market and are increasingly embracing the online media. MNC's, while more limited in number, have larger contract sizes and are more stable than dotcom companies. SOHU.com is an early-mover in capitalizing on this important market dynamic," said Charles Zhang, CEO and President of SOHU.com.

Although pro forma net loss increased sequentially from $3.5 million in the third quarter to $4.7 million in the fourth quarter due to the ChinaRen.com acquisition, SOHU.com immediately implemented cost reductions to realize the economies sought in the merger. ChinaRen.com spending (cost of revenue plus operating expenses) was reduced from a pre-merger level of $1.2 million per month to an average of $0.5 million per month in the fourth quarter and down further to $0.4 million in the month of December. This was accomplished through integration of promotional activities, content operations, and sales forces with Sohu departments as well as a company-wide December workforce reduction.

Operations
"SOHU.com and ChinaRen.com have accomplished significant integration in less than three months of joint operations and have achieved superior metrics. The ChinaRen.com acquisition has made SOHU.com a more balanced portal with very strong community offerings on top of SOHU.com's strengths in news and search. The former founders of ChinaRen.com are key drivers of the new combined company. Additionally, the merger has afforded us the opportunity to consolidate content operations, accelerate technology projects and to realize economies on expenses, capital equipment and bandwidth. Through further economies planned in the first quarter of 2001 and beyond, SOHU.com reiterates its commitment to improve upon its pre-merger third quarter 2000 burn rate level as we enter the second quarter of 2001," said Charles Zhang, CEO and President of SOHU.com.

SOHU.com's leadership position in the China Internet market, as demonstrated by its top ranking in the latest Iamasia survey, was further solidified in the fourth quarter through stronger sequential quarterly page view growth than in the previous three quarters.
Total page views for SOHU.com properties increased by 80%, from 44 million averaged in September to 79.2 million average page views for the month of December. Registered users totaled 12.4 million as of December 31, 2000, up 49% from 8.3 million users registered as of September 30, 2000. "By all measures we are the Number One portal in the hearts and minds of the Chinese. And this is underscored by the latest survey by Iamasia in which SOHU.com surpassed all other web properties by a large margin on size, reach and user base," said Charles Zhang.

During the fourth quarter of 2000, SOHU.com introduced a number of new business initiatives designed to further attract, retain and entrench advertisers. For example, SOHU.com introduced its Email Group List service, which in its first eight weeks accumulated 225,000 registered users, comprising over 25,000 community lists. This greater ability to target market segments is deemed valuable to advertisers.

Furthermore, SOHU.com expanded into the realm of E-Business Solutions offering Internet professional services including turn-key corporate portal solutions, web-based application development, Internet consulting services, and web-site development services. Additionally, the Interactive Business Center was introduced in the fourth quarter to provide online marketing services to companies including on-line road shows, conferencing, training, and polling. Each new business initiative is marked by its ability to leverage SOHU.com's existing assets and large user database. They also support advertising revenues by further entrenching existing relationships and by attracting new advertising clients. These non-advertising revenue sources and Short Messaging subscription services, while minimal in the current first quarter, are expected to approach 20% of revenue by the fourth quarter of this year.

SOHU.com was one of only two Internet content providers to be granted ICP and News licenses by the Chinese government in December 2000. "The government regulations published during Q4 have provided clarity in the regulatory landscape. SOHU.com was among the first to comply fully with the new rules, providing greater comfort to investors and further emphasizing our leadership role in the Internet industry in China," commented Charles Zhang.

Business Outlook
SOHU.com's primary objective for 2001 is a relentless drive to profitability via sustainable growth and stringent spending control.

During 2000 the competitive landscape in China's Internet industry changed markedly, with a limited number of companies going public in foreign markets in the first half of the year while smaller or later Internet companies experienced difficulties in raising capital. The resulting consolidation of Internet companies has focused advertiser attention on a few remaining viable portals leading to greater market share amongst fewer players.

While the growth rate of online advertising experienced in the first half of 2000 was not sustained into the second half, China's online advertising demand continues to offer attractive growth rates given the large market size. The present advertising environment offers SOHU.com the opportunity to increase market share (and revenues) in two ways. First, through the overall market expansion; and second, through exploiting its competitive advantages during the market's consolidation. "As expected, order intake was weak in the early weeks of January. However, order intake rebounded in the two weeks after the Chinese New Year holidays as the advertising budgets of our clients were released. Although it is too early to predict ad revenue for the full year, we expect moderate sequential growth in the first quarter of 2001," said CEO and President Charles Zhang.

"Our plan is to substantially narrow the pro forma net loss and burn rate in the first half of 2001. In the first quarter we expect an improvement of $0.5 million over Q4 2000's pro forma net loss due predominantly to workforce reductions implemented in December, consolidation of promotional budgets of SOHU.com and ChinaRen.com, and, of course, revenue growth. We expect this reduction in net loss to continue in the second quarter of 2001," said Derek Palaschuk, SOHU.com's VP of Finance.

SOHU.com expects annual capital expenditures to decrease from $8.0 million spent by SOHU.com and ChinaRen.com during the year ended 2000 to less than $6.0 million for the combined company during the year ending 2001; headcount to decline from 524 at year end 2000 to 470 at year end 2001; and total operating expenses to track lower accordingly for 2001.

"Transparency and financial discipline remain hallmarks of SOHU.com's finance department. We have re-established strong sales momentum in the quarter while maintaining a strict revenue recognition policy," said Derek Palaschuk. Among other things, SOHU.com prides itself on not recording barter transactions as revenue. SOHU.com remains committed to exploiting its competitive advantages in order to drive a successful and sustainable business model.

About SOHU.com
SOHU.com is the leading Internet portal in Mainland China with current daily page views exceeding 12 million. It provides navigation/search, news, sports, business and finance, real estate channel, entertainment, chat, email and e-commerce activities for a solid and wide base of visitors. Dr. Charles Zhang founded SOHU.com in 1997. Its investors include Intel, Dow Jones, IDG, the Morningside China Group, PCCW, Legend and Hikari. Its content partners include CNET, DOW Jones and dozens of local media organizations in China.

For further information:
Dahlia Wei
SOHU Investor Relations and Communications
Tel: +86 10 6272 6598
E-mail: ir@sohu-inc.com
http://www.sohu.com/about/English/


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