Sohu.com (SOHU)

Thank you all for being on our conference call today.

We are pleased to report these first quarter results that reflect how we were able to meet or exceed our own expectations for this quarter. Our first quarter revenues of US$23.7 million came in above company guidance. Our advertising revenues, which include brand advertising and sponsored search, were at the high end of our expectations despite strong seasonality of the Chinese New Year holidays. Our game operations are on track, with Q1 revenues in line with company expectations. And we are particularly pleased to note that wireless business has turned the corner with quarterly sequential revenue at $6.0 million, well above our expectations. We believe that we have left last year’s transitional and regulatory issues behind us. As a result, we expect that SOHU’s first quarter results put us on firm footing for a good business year.

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Let me discuss the progress of our business this quarter in more detail.

First, advertising revenues.

Our advertising revenue of US$14.86 million met the high end of company guidance. These are solid first quarter results from which we can now move into the traditional high season for advertising in Q2 and Q3. Therefore we can reaffirm our full year guidance of 30% year-over-year growth in advertising revenues for 2005.

In our brand advertising we continue to see strong contributions from advertisers in the dotcom sector, financial services, fast moving consumer goods, as well as real estate advertising.

In sponsored search, I am happy to report that we launched our search engine SoGou version 2.0 during the first quarter, which is a significant technical upgrade of the first version that we launched in August last year. Sogou’s traffic has already shown some initial uptake from the upgrade in the first quarter with traffic that is double the Q4 level. As we explained before, our key objective for this year is to grow our search traffic, so that we build up a solid basis from which to monetize our search engine.

Even so, I am pleased to see that client spending on our Sponsored Search has strongly picked up again after the Chinese New Year. Therefore we expect quarter-on-quarter growth in Sponsored Search of 15%, growing faster than our brand advertising.

Our longer-term aim is to make SoGou the #1 search engine for Chinese language search in terms of technology, product and usage. A key component of our drive to grow traffic is our effort to build the largest web page database in the Chinese language. Currently our indexed web pages in the search engine stand at 800 million pages, and we expect our database to surpass one billion pages within weeks.

We expect our long-term prospects in online search to be further strengthened with our acquisition of Go2Map, an online mapping service provider. This seven-year old company is the dominant player in mapping technology in China. Through this acquisition, which we expect to close soon, we aim to quickly establish a market position in mapping solutions for the most than 100 million Internet users who go online to find city destinations such as government offices, restaurants and hotels, and bus line information. We believe the acquisition will enhance our overall competitive strength as a portal and search engine.

Turning to our other business lines, our non-advertising revenue of US$8.87 million exceeded company guidance because of a stronger than expected recovery in our wireless business.

Let me now briefly go over each of our non-advertising business lines: wireless business, online games, and e-commerce.

We finally turned the corner in the first quarter in our wireless business, which returned to quarterly sequential growth for the first time after 5 quarters of sequential decline. Each of our wireless business segments recorded growth, with SMS and WAP now providing the bulk of our wireless value-added services.

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We are also pleased to note that our acquisition of Goodfeel, the WAP company we acquired last year, has started to pay off. The fully integrated SOHU-Goodfeel WAP team is taking full advantage of Chinese consumers’ increasing acceptance of WAP services.

We had an inline quarter for online games, with our two multi-player games Blade online and Knight online performing as expected. We are committed to online games for the long term and we are encouraged by this incremental progress. We are preparing to launch a casual game portal in the second half of this year. These games will not be revenue generating for now, but will enhance our overall portal entertainment offerings and lengthen the amount of time our users spend online with us.

Finally, a few words on e-commerce. Our e-commerce operation was affected by seasonality as well this past quarter. Our order intake is traditionally strong in the weeks leading up to Chinese New Year holidays. But just as with the Christmas holidays in other countries, customers do not shop much during and shortly after the holidays. We strongly believe in the long-term opportunity for e-commerce in China.

I’d like to make one final point before we move to the financial presentation. I have noticed that there is some confusion about my ownership holdings of Sohu. Let me clarify that here. I own 9.5 million shares, which is 26.1% of the company. I increased my holdings in the past year by 2%.

The bulk of these shares is held by the Photon Group, of which I am the sole owner. I transferred shares to Photon last year for personal planning purposes. My ownership furthermore includes 1.2 million shares subject to a 3-year variable prepaid forward sales contract signed in August 2003. You can find more details about my ownership of Sohu in the SEC filings.

Now I would like to give the floor to our CFO, Carol Yu, for a financial review.

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