Sohu’s Changyou.com competes against NetEase.com, Tencent Holdings and Shanda Games on China’s $4 billion online game market.

Changyou posted a 21 percent rise in fourth-quarter revenue to $70.7 million and net profit rose by more than a third to $38.9 million.

Changyou makes up more than half of Sohu’s total revenue.

Sohu said current first-quarter revenue would be $123-$128 million, less than the $135.8 million in the fourth quarter and below expectations of $139.9 million, according to Thomson Reuters.

“We didn’t expect much for the first-quarter numbers because a lot of (Changyou’s) games have been delayed,” said CLSA analyst Elinor Leung. “I think the earliest new game will only be launched in the second quarter.”

The firm said non-GAAP operating expenses increased 14 percent on higher marketing costs, while revenues for advertising and wireless segments were flat.

Fourth-quarter net profit fell to $32.3 million from a record $56.6 million a year ago. On a non-GAAP basis, net income was $35.8 million on revenue of $135.8 million.

China’s advertising market remained weak last year as companies slashed advertising and marketing budgets because of the financial crisis. Analysts expect brand advertising to bounce back in 2010 driven by big ticket events such as the World Expo held in Shanghai and the Asian Games in Guangzhou.

Source : Konaxis