SINA Corp. (SINA) recently announced a partnership with Beijing-based AutoNavi Holdings Limited (AMAP). SINA is a leading provider of social networking services in China and operates popular microblogging platform, Weibo. On the other hand, AutoNavi is a leading provider of digital map content, navigation and location-based solutions in China.
The partnership will allow Weibo users to directly log in to AutoNavi’s website to access its mobile map application known as AMAP. Similarly, AMAP users will be able to directly log in to the microblogging platform through Weibo Connect and access its contents and services.
We believe that the partnership is mutually beneficial to both the companies due to the massive growth opportunity in the Chinese mobile Internet market and its allied services. According to a latest report from China Internet Network Information Center (:CNNIC), at the end of June 2012, China had more than 388 million mobile Internet users (approximately 72% of total Internet users) with the number of mobile micro-blog users jumping to 170 million at the end of the same period.
As per data available from Analysis International, China's mobile map users reached 229 million at the end of June 2012, up 33% sequentially and a massive 206% from the comparable prior-year quarter. Total number of mobile map users is expected to hit 287 million by the end of 2012 and 600 million by the end of 2015. This represents a huge growth opportunity in our view.
Currently, SINA has more than 400 million Weibo users while AutoNavi expects to have approximately 100 million users by the end of this year. We believe that the deal fills a significant gap in both the companies’ mobile product offerings, which will further boost their respective customer base going forward.
This is particularly a positive for SINA as the company continues to search for new avenues to monetize its mobile traffic. Lately, SINA has been looking for partnerships to extend its mobile market share. In July this year, SINA entered into a partnership with Baidu (BIDU) to collaborate on five key aspects namely search, content, platform, technology and resources.
We believe that partnerships with Baidu and AutoNavi, both leaders in their respective fields, will help SINA to expand its mobile offerings in the near term. Moreover, the partnerships will provide SINA a significant competitive edge over its peers going forward.
Nevertheless, we believe that China’s strict regulatory environment is significant growth impediment for Internet companies such as SINA. Moreover, earnings growth continued to disappoint primarily due to higher operating costs related to its social networking platform Weibo. Thus, we remain Neutral on the stock over the long term (6-12 months).
Currently, SINA has a Zacks #3 Rank (Hold).
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