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Sina.com: Big Questions, Big Potential

The latest foreign Internet portal with plans to sell stock on an American exchange is the most popular Web destination in the most-coveted market in the world.

That alone should ensure that Sina.com, mainland China's largest Chinese-language consumer portal, receives a wildly enthusiastic welcome when it begins trading on the Nasdaq, despite recent executive management turmoil, a change in strategy and the ever-present threat of intervention from a government eager to restrict what content its citizens can access on the Web.

Indeed, Chinese government rules forbid foreign investment in Internet content providers. To get permission to list on the Nasdaq, Sina.com, which is funded primarily by U.S. backers, turned over rights in December to a sister company owned by Chinese investors.

Sina.com hopes to raise $72 million in the Nasdaq IPO by selling 4 million shares under the ticker symbol SINA. Lead underwriters are Morgan Stanley & Dean Witter and China International Capital Corp. Limited.

They're not the same underwriters who were whipping up enthusiasm for Sina.com on Wall Street last year, when the company first contemplated going public in the U.S. Back then Goldman Sachs and Flatiron Partners were squiring Sina.com around town.

But a top-level culture clash last fall resulted in a showdown that left control of the company entirely in the hands of Chinese executives. Soon Goldman and Flatiron Partners were off the board, and CEO Jim Sha was out. Sina.com then went into stealth mode, resurfacing late last month to file with the U.S. Securities and Exchange Commission.

The company also late last month announced a shift in strategy, broadening beyond merely providing content. Despite averaging 16.6 million page views per day and 3.1 million registered users through February, Sina.com's revenue in 1999 was only $2.8 million, against a net loss of $9.4 million. Company officials now hope to tap into this vast user base to develop e-commerce revenues.

Last July, Sina.com rival chinadotcom (CHINA) more than tripled in price on its first day of trading, even though it trailed dozens of other sites in the Chinese market in terms of Web traffic. Since then, chinadotcom has climbed to No. 5 in mainland China and made more than two dozen investments in Asian Internet companies. Meanwhile, its stock price has fallen below its first-day closing price of $67.11.

With its competition gaining, a relatively new management structure and under-monetized traffic, Sina.com faces a number of stiff challenges. But I expect investors to focus, initially at least, on potential instead of reality. Expect a moonshot when the launch comes.


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