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China's Dot-Com Companies Post Good Profits
After years of losses, China’s three biggest Internet portals are making a turnaround, posting their first profits and providing a rare bright spot on the slumping Nasdaq Stock Market. Sina is the last of the “big three” portals to post a profit.

Investors can thank the Chinese people’s interest in mobile phones. The turning point came when China Mobile, the country’s biggest mobile-phone company, introduced a system last year that lets portals share revenues for wireless Internet access.

Sina, NetEase and Sohu charge users who visit their websites via SMS text messages sent on mobile phones. The portals get about 1.5 yuan, or about twenty cents, each time a cell phone user downloads information or games.

Zhang Chaoyang, chief executive officer at Sohu.com, explains why SMS-ing is so popular among Chinese people, particularly youngsters.

“The number of mobile phone users has increased rapidly in China, and the price of SMS messages is reasonable. What’s more, Chinese people prefer to communicate by text message.”

China had 200 million mobile phone subscribers by the end of December, and the number is still rising. China Mobile says users sent 80 billion SMS messages in 2002, up from 16 billion in the previous year.

Users of China Mobile now can opt for subscription services, via any of the big websites. For example, they can select 15 new items to transmit daily. They also can download pictures and ring tones to their mobile phones. Actually, they are crazy for those things.

NetEase became the first to go into the black, and Sohu made US$2 million profit for the three months ending in December.

Analysts say that unlike Western markets, which are considered saturated, China still has plenty of room for growth.

Investors have responded by driving up the stock prices of Chinese dot-coms.

Netease was one of the Nasdaq’s biggest gainer during 2002 as its share price skyrocketed at one point to US$17, far from its nadir of 69 cents in October 2001. Meanwhile, Sohu’s stock price soared to US$10 a share, and Sina leapt from a low of US$1.4 to US$15.

Daniel Mao, chief executive at Sina, says the momentum will continue.

“We hope to build on our success with online gaming and text messaging, and are also exploring new options, such as online dating services.”

The three big portals listed on the Nasdaq at the height of the Internet boom in summer 2000. But all saw their share price plummet as losses mounted. At one point, NetEase was threatened with removal from the Nasdaq after it missed financial reporting deadlines.

(Cri.com.cn January 30, 2003)

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