Sina Promises The Moon

Sina Corporation (SINA) reported interesting results. Much of the numbers were juiced with Olympic coverage which is understandable. Other media outlets usually have a let down after the Olympics. Sina is signalling that they will continue growing. The Chinese economy is showing signs of strain as the world economy slows, stutters and sputters. The three big verticals are real estate, finance and auto’s. It’s hard to believe that these three in a Chinese context will be totally immune to difficulties.

Sina management is still going for the brass ring. They claim that they are going to work on margins and attempt to expand dramatically. I cannot think of one corporate instance where dramatic expansion has been achieved on a long run basis without margin pressures coming into play. Its just not the capitalist way.

Check out this quote from the earnings transcript (sourced from www.seekingalpha.com) where analyst Vivian Li from Piper Jaffray asks the key question.

“Vivian Li – Piper Jaffray

Hi, good morning Charles, Herman, and Cathy. Congrats on the quarter. Just a follow-up to Charles' comment in the last question. In term of margin strategy going forward, when looking at ‘09 on a relatively basis, will SINA focus more on managing margins given the uncertainty of macro economy or will SINA focus more on expanding to more verticals and gaming and trying to gain market shares? Thank you.

Charles Chao

Well, I think we’ll do both. Our current core businesses will be much more focused on the margin control and to provide better cost control and a better margin for our current business. But I think we’re not going to cut our investment, expansion in new areas if we see good opportunities basically.”