Tudou Surprises With Profit, Licensing Deal 土豆网意外扭亏为盈视频分享市场的好兆头

By newsdoug on November 15, 2011

Tudou serves up tasty earnings In an otherwise low-key earnings season, beaten-up video sharing site Tudou (Nasdaq: TUDO) has perhaps provided one of the biggest surprises so far by reporting a surprise profit — the first since its troubled IPO in August. The company’s announcement that it earned a net profit of 53 million yuan in the third quarter, or about $8.2 million, marked its first-ever profit, following a 79 million yuan loss in the second quarter and a small loss in the third quarter of 2010. (English announcement; Chinese article) Tudou announced the results after New York markets closed, and I suspect the stock will get a nice bounce on Tuesday. The profitable results came on the back of a healthy 52 percent rise in net revenues, with growth expected to accelerate to 55-60 percent in the fourth quarter. Mobile service revenue nearly doubled as well, providing a valuable alternative to traditional advertising revenue. In addition, the company also joined rivals Youku (NYSE: YOKU) and Sohu (Nasdaq: SOHU) in announcing a new content licensing deal with a major Hollywood studio, in this case with Disney (NYSE: DIS) for its popular animated films from its Pixar unit. These kinds of deals are being strongly encouraged by Beijing, as it tries to wean companies off pirated material, and are critical to the long-term viability of companies like Tudou, Youku and even Baidu (Nasdaq: BIDU) The report seems to contain nothing but good news, as Tudou, after losing a race to market with Youku that cost it a valuable first-to-market premium, now appears to have finally beat its rival in the race to become profitable. The market expects Youku to report a small loss when it announces its own results on November 16 in New York, though obviously the company could also surprise by reporting a profit. (earrnings preview) Tudou’s shares now trade at less than half their $29 IPO price, closing at just over $14 on Monday, after the company made its debut into a stormy market after months of delays. Look for its shares to get a nice lift from this upbeat report, and for new rumors to circulate that Tudou, already about 10 percent owned by leading web portal Sina (Nasdaq: SINA) could become a takeover target.

Bottom line: Tudou’s surprise move into the profit column bodes well for China’s video sharing market, with similar upside news possible from rival Youku when it reports later this week.

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