Quake forces Focus Media to cut outlook

Shanghai outdoor media firm posts quarterly loss

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SAN FRANCISCO -- Chinese digital advertising company Focus Media said on Thursday it swung to a quarterly loss from a year-ago profit and cut its financial outlook, sending shares down 11% in Nasdaq trade.

The Shanghai-based company, citing the dislocations caused by the recent earthquake in Sichuan, further cut its full-year revenue forecast, excluding discontinued operations, by around 4.5% to between $820 million and $850 million.

Analysts were looking for 2008 year revenue, on average, of $880 million, according to Reuters Estimates. Forecasts ranged from $851 million to $968 million. Earlier this year, the company had forecast revenue of $900 million to $930 million.

The reduced outlook reflects the impact on its advertising operations in Chengdu and Chongqing, the two major cities closest to the earthquake's epicenter.

Focus Media is China's top operator of electronic advertising displays located in commercial office buildings, elevators, retail chain stores, residential apartments, shopping malls and various outdoor billboard settings.

The company recorded a first-quarter net loss of $53.8 million, or 42 cents per diluted American depositary share, compared with a year-earlier net profit of $16.3 million, or 13 cents per diluted ADS.

Analysts expected a quarterly net loss of $57.4 million, on average, according to five analysts surveyed by Reuters Estimates. The reported loss was within the range of estimates of $49.5 million to $67.7 million.

In April, the company cut its earnings and revenue forecast for 2008, citing a shortfall in mobile advertising revenue. The decline stemmed from changes in its text messaging advertising policies where Focus prohibited its units from sending text messages to phone users without their explicit permission.

The company posted a loss from discontinued operations of $76.9 million, reflecting the disposal of the company's mobile advertising business units, and net income from continuing operations of $23.6 million.

Reflecting a series of acquisitions over the past year, revenue jumped 215% to $161.6 million, excluding $11.3 million from the discontinued mobile phone advertising business.

For the second quarter, Focus said it expected to return to a profit, excluding option expenses and acquisition-related costs, of 40 cents to 41 cents per diluted ADS. Analysts, on average, had expected a 46 cent per share profit.

For 2008, the company forecast a profit, excluding stock option costs and one-time items, of $1.76 to $1.91 per diluted ADS. However, analysts, on average, had been looking for a profit of $1.99 per ADS, according to Reuters Estimates.

Its shares rose 94 cents, 2.6%, to close at $36.79 in regular trading on Nasdaq ahead of the results. Following the report, the stock fell 11.6% to $32.51 in extended trade.