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China Targets U.S.-Listed Sina in Porn Sting

TAIPEI (TheStreet) -- Sina.com (SINA - Get Report), one of China's largest Internet content providers, faces fines and the revocation of two licenses for its government-suspected role in spreading online porn, a sting that could start eating away at the company's performance.

China's National Office Against Pornographic and Illegal Publications found based on public tips that 20 articles and four videos on Sina.com contained "lewd and pornographic" content, state-run Xinhua News Agency reported.

Authorities decided Thursday to revoke Sina.com's license for Internet publication and audio and video dissemination. They will also impose a series of fines.

Sina, which was hit for porn last year as well, may have angered an increasingly law-and-order government, making it harder this time to resurface unscathed.

"There are anti-pornography campaigns every year, but the big Internet companies do not usually suffer from them," says Jeremy Goldkorn, founder and director of Danwei, a Beijing website and research firm that tracks Chinese media and Internet.

"These revocations seem to signal stricter enforcement of such campaigns, which is consistent with the tenor of (Chinese President) Xi Jinping's administration," Goldkorn says. "I would guess that Sina will eventually find a way to get the licenses back, but it may not be straightforward."

The impact to date is inconclusive. Last week, Sina's share price reached its lowest level since last April, extending a steady fall since late February. Shares of rival Sohu.com (SOHU - Get Report) hit close to a one-year low last week.

Meanwhile, Hong Kong-traded shares of fellow Chinese Internet giant Tencent ("TCTZF"/) And shares of Weibo (WB), the provider's microblog service comparable with Twitter (TWTR) have risen from their $17 subscription price since their debut on Nasdaq on April 17. but slacked toward the end of last week.

Sina -- which has 280 million registered users -- told Xinhua it was "sorry" for its involvement and prepared to accept punishment from Chinese authorities. That marked Sina's second apology for the same case, a sign that it wants a quick outcome so that it can resume business in China's competitive Internet content sector.

China has conducted anti-porn stings since the Internet began gaining popularity around 2000. Some analysts see those controls as part of a broader effort to monitor the Internet for content that goes against the Communist Party's rule.

Sina should come out unscathed eventually, some analysts say.

"I think there is not much impact to the company's earnings because the portal's traffic volume would not be affected much by the incident," says Ricky Lai, a research analyst with Guotai Junan International Holdings in Hong Kong.

The operation with more than 900 million daily page views carries news, games and an online real estate service through its portal at Sina.com and mobile version Sina.cn. It resumed normal business last year after authorities handed it two rounds of administrative punishment for spreading online publications with banned content.

But Xinhua warned the latest case "seems to have pushed authorities over the edge."

At the time of publication, the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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