Sohu.com (SOHU)

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Sohu.com, Inc., (SOHU), is a leading online brand in China. Services provided by the company include news, search, e-mail, games and wireless messaging. The company offer services through one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and online media destination sohu.com interactive search engine sogou.com online mapping service provider go2map.com online alumni club chinaren.com games information portal 17173.com real estate website focus.cn and wireless value-added services provider goodfeel.com.cn. SOHU markets its products and services to clients primarily in China. The company has approximately 1,000 employees. SOHU competes with various Internet service providers, including Web directories, search engines, content sites, and sites maintained by the government and educational institutions. In the first three quarters of 2007, the company derived about 69% of its revenue from online advertising. Wireless business and online games contributed 31% of the company's revenue.

SOHU reported blockbuster financial results for the third quarter of 2007. Both the company's revenue and earnings exceeded market expectations because of strong growth in online game and advertising business. Gross margin of 66.7% in the third quarter of 2007 increased from 60.6% in the previous quarter. Brand advertising revenues were US$29.8 million, up 42% year-over-year and 12% quarter-over-quarter. Online games revenues were US$12.7 million, up 473% year-over-year and 232% quarter-over-quarter.

Although SOHU faces fierce competition from different fields including brand advertising, online game, wireless value added services, and search, the company manages to be a main player in almost each field. With the Beijing 2008 Olympics sponsorship, SOHU has a well-known brand and rich website resources to leverage the great opportunities for online business in China. Overall, we think the current stock price is overvalued. Therefore, we are upgrading the stock from Hold to Buy on SOHU shares.

 Sohu.com

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Company	Data From	Revenue from Subscriptions	Advertising Revenue Growth	Increase in Page Views	Net Income
IAC - InterActiveCorp (IACI)	2007	$890M[1]	12%[1]	Add	$87.5M[2]
InfoSpace (INSP)	2007	Add	(8.62%)[3]	Add	$14.6M[4]
LookSmart (LOOK)	2006	Add	17.7%[5]	Add	($13.7M)[6]
Sohu.com (SOHU)	2007	Add	29.9%[7]	Add	$34.9M[7]
TheStreet.com (TSCM)	2006	$35.5M[8]	62.2%[8]	78.9%[9]	$12.9M[8]

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[edit] References

1. ↑ ^{1.0 1.1} 2007 IACI, 10-K, Item 7, Page 41
2. ↑ 2007 IACI, 10-K, Item 8, Page 77
3. ↑ INSP , 2007 10-K, Item 6, Pg 27
4. ↑ INSP , 2007 10-K, Item 8, Pg 53
5. ↑ LOOK , 2006 10-k, Item 6, Pg 21
6. ↑ LOOK , 2006 10-k, Item 8, Pg 40
7. ↑ ^{7.0 7.1} 2007 SOHU, 10-K, Item 6, page 42
8. ↑ ^{8.0 8.1 8.2} 2006 TSCM, 10-K, Item 6, Page 20
9. ↑ 2006 TSCM, 10-K, Item 1, Page 8