SINA CORP - 10-K Annual Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer. Yes þ No o

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $632,222,733 as of June 30, 2003, based upon the closing sale price for our ordinary shares as quoted by the Nasdaq National Stock Market reported for such date. Shares of ordinary shares held by each officer and director and by each person known to the registrant (based on information provided by such persons and/or the most recent schedule 13G’s as filed by such persons) to beneficially own 5% or more of the outstanding ordinary shares have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 9, 2004, there were 50,010,643 shares of the registrant’s ordinary shares outstanding, $0.133 par value.

Part III (Items 10-14) incorporate information by reference from the definitive proxy statement for the 2004 Annual Meeting of Shareholders to be filed hereafter.

This Annual Report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the caption “Business — Risk Factors” included herein.

SINA Corporation (“SINA”, “we” or “the Company”), formerly known as SINA.com, is a leading online media company and value-added information services provider in China and for Chinese communities worldwide. With a network of localized web sites targeting Greater China and overseas Chinese, we provide an array of services to our users including region-focused online portals, mobile value-added services, search and directory, interest-based and community-building channels, free and premium email, online games, virtual ISP, classified listings, fee-based services, e-commerce, and enterprise e-solutions. In turn, we generate revenue through advertising, mobile value-added services, e-commerce and enterprise services. As of December 31, 2003, SINA had approximately 94 million registered users worldwide. According to a survey by the Chinese Academy of Social Sciences published in September 2003, SINA is the web site most preferred by Internet users in China.

SINA was formed by a merger between Beijing SINA Information Technology Co. Ltd. and California-based SINANET.com in March 1999. In April 2000, the Company completed its initial public offering on the Nasdaq National Market. Over the course of the past three years, SINA has transformed itself from a pure Internet portal relying almost exclusively on online advertising to a company with multiple revenue streams. For the year ended December 31, 2003, non-advertising revenues accounted for 64% of our total revenues, up from 36% for the same period in 2002.

Headquartered in Shanghai, China, SINA has offices in six cities and a network of four web sites around the world. The primary focus of our operations is in China, where we generated 95% of our total revenues for the year ended December 31, 2003. According to a survey published by the China Internet Network Information Center, China had 79.5 million Internet users as of December 31, 2003, making China the country with the second-largest number of Internet users in the world. The number of Internet users in China

is expected to grow to 154 million by 2007, according to IDC. As a leading online media company in China, SINA is expected to benefit directly from growth in China’s Internet market.

As of December 31, 2003, China had approximately 268.7 million mobile phone users, according to statistics from China’s Ministry of Information Industry, making China the country with the largest number of mobile phone users in the world. By 2007, the number is expected to reach 415 million, according to Gartner Dataquest. Short messaging services (“SMS”) as well as other forms of mobile value-added services such as multimedia messaging services (“MMS”), wireless application protocol (“WAP”), and interactive voice response (“IVR”) have grown as a result of the rapid adoption of mobile phones. Over the past three years, we have leveraged our network of websites and our large user base to become a leading mobile value-added services provider in China. Revenues from mobile-value added services were one of the major drivers for our growth in the past 24 months. In January 2003, we acquired Memestar Limited, a mobile value-added service provider in China to expand our customer base and product offerings. In February 2004, we entered into a definitive agreement to acquire all outstanding shares of Crillion Corporation, a provider of mobile value-added services in China.

We provide our services through five major business lines including SINA.com (online news and content), SINA Mobile (mobile value-added services), SINA Online (community-based services and games), SINA.net (search and enterprise services) and SINA E-Commerce (online shopping and travel).

The following table presents an overview of our financial reporting structure as well as our vertical properties and services:

Our portal network consists of four destination websites dedicated to users in Greater China including mainland China (www.sina.com.cn), Taiwan (www.sina.com.tw), Hong Kong (www.sina.com.hk), and overseas Chinese in North America (www.sina.com). Each of our destination sites consists of Chinese-language news and content organized into interest-specific channels, extensive community and communication services and sophisticated web navigation capability through SINA search and directory services. As of December 2003, SINA had approximately 94 million registered users, or SINA Netizens.

On all of our websites, SINA offers a variety of interest-based channels that provide region-focused format and content. Our most popular channels are listed below.


	•	SINA News. SINA News aggregates feeds from hundreds of news providers, bringing together content from media companies such as China Central Television and Xinhua News Agency. Through SINA News, our users have access to breaking news coverage, from multiple sources and points of view.


	•	SINA Sports. SINA Sports provides access to up-to-the-minute news, real-time statistics and scores, text broadcast programming, local and global coverage.

	•	SINA Entertainment. SINA Entertainment contains extensive coverage of the local and international entertainment news and events that are of interest to our users, including dining, movies, television programs, plays, operas as well as popular and classical music.

	•	SINA Technology. SINA Technology is a wide-ranging channel for news and information relating to the technology industry along with product reviews and software downloads.

	•	SINA Finance. SINA Finance provides a comprehensive set of financial resources, from business news to personal finance columns. SINA Finance also offers stock quotes from the Shanghai and Shenzhen stock exchanges as well as breaking news from individual listed companies and market trends analysis.

	•	SINA Search. SINA Search provides a web directory that allows the users to search the web by subjects or via a directory tree. It also features a web page search engine for users to obtain relevant web content based on the key words they enter.

	•	SINA Auto. SINA Auto is a comprehensive information source for car buyers and auto enthusiasts. The Auto channel covers the latest news from the industry, car reviews, comparison charts and a real-time interactive pricing and feature guide for car buyers.

	•	SINA Real Estate. SINA Real Estate provides the latest news, pricing and availability on new, used and rental housing. It also features interactive electronic maps, discussion forums and how-to guides for buyers, sellers and owners of properties on topics ranging from home buying, selling, furnishing and repairing.

	•	SINA Gaming. One of the largest gaming information web sites in China, SINA Gaming provides news and updates on popular online and pc games as well as game hardware and accessories in China. SINA Gaming also provides downloads and entry points for users to popular online games in China.

	•	SINA e-Ladies. SINA e-Ladies is a woman channel co-produced by SINA and L’Oreal. e-Ladies provides fashion and celebrity news, guides on make-up, clothing, fashion accessories as well as tips on health and relationship.

We employ a multi-pronged sales strategy that targets both short-term revenue opportunities such as banner advertising campaigns, as well as longer-term, higher-value contracts such as integrated marketing and communications packages. Our advertising product offerings consist of banner advertisements that appear on pages within the SINA network, promotional sponsorships that are typically focused on a particular event, such as the Olympics, and advertising campaign design and management services.

Our primary target client base for advertisers and sponsors consists of global corporations doing business in Greater China and domestic companies in each of the regions we operate in, to which we sell from both our corporate and regional headquarters. Global corporations are typically Fortune 500 and Fortune 1000 companies with significant operations worldwide that employ a global approach to their branding, marketing and communications programs. Regional companies consist of medium to large companies that are focused on specific geographic as well as demographic markets, such as Chinese Americans or Taiwanese, and smaller companies whose markets are within a local territory, such as Beijing or Hong Kong. For the year ended December 31, 2003, approximately 90% of our advertising revenues were derived from China and approximately 582 clients advertised on our China web sites. A partial list of our advertising clients includes: 999 Group, China Mobile, China Telecom, Shanghai Volkswagen, Hewlett Packard, BenQ, Microsoft, Dell, IBM, Johnson and Johnson, Lenova, L’Oreal, Motorola, Nokia, Nike, Merchant Bank of China, Samsung, and TCL.

SINA Mobile provides mobile value-added services through the Monternet platform of China Mobile Communication Corporation (“China Mobile) and the UNI-Info platforms of China Unicom Co., Ltd (“China Unicom”). We also work closely with regional mobile operators to jointly promote our mobile value-added service offerings. In 2003, we generated $64.4 million in revenues from mobile value-added services, accounting for 56% of our total revenues.

Our mobile value-added services allow users to receive news and information, download ring tones and pictures, and participate in dating and friendship communities. Users can order these services through our website or through their mobile phones on a monthly subscription basis or per-message basis. Our mobile value-added service offerings are currently priced between RMB 0.10 and RMB 2.00 per message and between RMB 2.00 and RMB 30.00 per monthly subscription. For the year ended December 31, 2003, we generated over 80% of our mobile value-added services revenues from monthly subscription services. For the months of March, June, September and December 2003, we had 4.4 million, 6.8 million, 9.0 million and 10.5 million paid monthly subscriptions for our mobile value-added services, respectively. We receive payments from our users via China Mobile and China Unicom, who bill the users on our behalf and deduct a percentage of the revenue for providing the billing service. In addition, we are charged a per-message transmission fee by China Mobile and China Unicom, which varies depending on the type of message and volume of messages sent. In 2003, we generally received 78% and 73% of the amounts collected by China Mobile and China Unicom, respectively, from users of our mobile value-added services.

Our mobile value-added services can be categorized into three main categories — news and information, community, and multimedia downloads:

As many mobile phones are able to display and send text in Chinese, SINA developed a suite of services that includes user-customized information subscription, personal greetings, customized mobile phone screen decoration, personalized ring tones, mobile dating service and mobile games.

Using general packet radio service (GPRS) technology, MMS enables users to download color pictures and sophisticated ring tones, as well as to transmit more data per message. SINA currently provides MMS services in five major categories: MMS downloads, MMS news, MMS love, MMS jokes, and MMS dating/games.

SINA’s WAP services allow users to browse content on their mobile phones similar to accessing information on Internet web sites. SINA’s WAP services use GPRS technology to provide users with color pictures and graphics, sophisticated ring tones, news, chatting and dating, games and entertainment.

SINA’s IVR service provides mobile phone users with voice content, including chatting and dating, news information and interactive games.

SINA Online offers a variety of community-building services designed to encourage users to become active and loyal registered members, or SINA Netizens. Our integrated SinaMail, Sina Instant Messenger, SinaChat, SinaForum and SinaDating products and services enable SINA Netizens to communicate with each other or with groups of others in the SINA community. SINA Online also includes our online game product offerings.

SinaMail. SinaMail is our free email service. We operate one of the largest free email systems in China.

Sina Instant Messenger. We have recently launched the SINA668 which is a free instant messaging service powered by our proprietary technology. SINA668 features over one hundred display pictures and many other innovative tools.

SinaChat and SinaForum. Through SinaChat and SinaForum, members with similar interests can meet online and share their thoughts and opinions on a variety of topics. We have also integrated the SinaForum with our news service. Users can comment on the particular news they are reading with one click on the links to the related forum topic on SinaForum.

SinaDating. For members seeking friends and personal relationships, our SINADating service provides them with a “community within a community.” Special features include the Drift Bottles, Feature Match, Astrological Match Making, Love Express, Community Court and Member Album.

Premium Email. We introduced our paid email service in China in August 2001 and have accumulated over 1.3 million registered users for the service as of December 2003. Our paid email service provides features such as anti-virus software, junk mail filter, and unlimited attachment size for a small monthly fee.

Internet Access. Through partnerships in China, Taiwan and the US, we offer dial-up Internet access to our web site users. Depending on the terms of the partnership, we may act as a marketing partner to market our partner’s services and share a percentage of the revenue or we may offer SINA branded access to the end users by buying the access at wholesale prices and reselling it to our end users with a mark-up.

Online Games. Our SINA Gaming channel has become one of the most popular gaming websites in China and has provided us with an entry into the growing online gaming market. Through our strategic alliances with local online game publishers, we are working to become a leading partner for online game operators. Our alliances usually include arrangements for SINA to host servers and develop websites organized under the SINA Games platform that provide services such as software downloads, player reviews and forums. In January 2003, we formed a joint venture with NC Soft, a leading online game provider in Korea to launch the popular online games Lineage and Lineage II in China. In January 2004, we entered into a license agreement with Plenus Inc. to introduce the NetMarble game portal service and casual games to our registered user base. NetMarble is one of the most successful game portals in Korea.

SINA.net provides enterprise solutions on an integrated platform to government agencies and small to medium-sized businesses in China. These solutions include search and listings services, web hosting, corporate email, and proprietary software products.

Our listing properties include a search engine, a directory and classified information. Our search engine and directory provide an intuitive and user-friendly online guide to web navigation and a gateway to the vertical offerings on the SINA network. Users can either browse the directory listings by subject matter, or use

SINA Search, a rapid keyword search function that scans the contents of the entire directory. In addition to any relevant listings from our directory, we provide users with web-wide search results from search engines provided by our partners. For browser-driven inquiries, our directory results include Sponsored Sites, a SINA created fee-based program that allows commercial sites to receive enhanced placement in the directory. For keyword-search-driven inquiries, our search results also include SINA Sponsor matches, site listings with enhanced placement in search results that are bought by businesses or organizations.

Leveraging our large-scale personal email system, we offer a premium email service to small/medium size businesses. This email service includes the bundling of a pre-set number of email boxes with larger storage than SinaMail as well as customized email addresses for business use.

We have developed proprietary software products that allow users to view Chinese-language content and switch between Chinese and English languages without regard to the underlying operating system. Chief among these products is RichWin. First launched in April 1994, it is an operating system overlay that allows users to move between a Chinese and an English operating environment. We sell the latest version of our RichWin software product to businesses and consumers.

Our e-commerce services are divided into two areas: SinaMall, our online shopping website which links quality vendors with our large user base and travel and hotel booking services.

We currently offer SinaMall, an online shopping website, on our China and North America web sites. Our technology platform enables both multinational and local merchants to transact business online. We generate revenue from monthly hosting fees and through receiving a percentage of online sales from our merchant partners. We work with merchants to design customized marketing campaigns that involve both advertising and sales of their products over our network.

In December 2003, we entered into a definitive agreement with a China company providing online and offline hotel booking services under the brand name Fortune Trip. Fortune Trip is a hotel booking services provider in China with over 1,000 hotels in its nationwide hotel network. As China’s economy grows, the volume of business and leisure travel is steadily increasing. However, the hotel booking market is still relatively undeveloped, given the lack of a nationwide hotel reservations system. We believe that Fortune Trip’s market position and focus on customer service, combined with SINA’s leading online brand and user base, will allow us to capture a portion of the hotel booking services market.

We have developed strategic relationships with a range of content, service, application and distribution partners in order to serve users more effectively and to extend our brand and services to a broader audience.

The goal of our content partnerships is to provide our users with the broadest offering of Chinese-language content available. We contract with approximately 800 content partners to display their content on one or more of our web sites free of charge or in exchange for a share of revenue, a licensing fee, access to our content or a combination of these arrangements. Some of our leading content providers include Xinhua News Agency, China Central Television, AFP, Reuters and Shanghai Securities News. These content partnerships are usually of one to two years’ duration with a one-year automatic renewal.

The goal of our application and service partnerships is to ensure that our users have access to user-friendly, reliable and scalable communication and search tools. Because many of our prospective partners have traditionally focused on non-Chinese speaking markets, our internal engineering and development teams often work closely with them to adapt their solutions to the Chinese-language market.

Our operating infrastructure is designed to serve and deliver hundreds of millions of page views per day to our users. This scalable infrastructure allows our users to access our products and services quickly and efficiently, regardless of their geographical location. Our infrastructure is also designed to provide high-speed access by forwarding queries to our web hosting sites with greater resources or lower loads. Our web pages are generated, served and cached by servers hosted at various co-location web hosting sites in China, U.S., Taiwan and Hong Kong.

Our servers run on RedHat Linux, FreeBSD, Solaris and Windows platforms using Apache and IIS servers. These servers are maintained at China Telecom Corporation and China Netcom Corporation in China, Hinet and APOL in Taipei, Taiwan, Qwest in Sunnyvale, California, as well as iAdvantage in Hong Kong. We believe that these hosting partners provide operating advantages, including an enhanced ability to protect our systems from power loss, break-ins and other potential external causes of service interruption. They provide continuous customer service, multiple connections to the Internet and a continuous power supply to our systems. In addition, we conduct online monitoring of all our systems for accessibility, load, system resources, network-server intrusion and timeliness of content. SINA’s mobile applications in China leverage the aforementioned web operation resources by utilizing the wireless infrastructure of China Mobile Communication Corporation and China Unicom Co., Ltd to provide mobile value-added services to SINA’s users.

We operate in the market of online content and services for the global Chinese community. The industry can be classified as highly competitive and rapidly changing due to the fact that the Internet is still at its nascent stage in China and is experiencing fast growth. Other online content/services companies such as Sohu.com, Netease, Tom.com and Yahoo! China compete with SINA for user traffic, advertising revenue, e-commerce transactions, mobile value-added services and other fee-based services. Industry consolidation, however, may also occur as the market for the Internet in China matures, which could result in increased competition for us.

As we expand our vertical product offerings into new areas such as travel, online games and e-commerce, we face increasing competition from niche players that focus on these same verticals. For example, Ctrip has attracted a significant user base in online travel and eBay/eachnet has established a market presence in online auctions in China. Similarly, Yahoo!/3721, Baidu and Huicong focus on the growing search market in China. On the mobile side, we are seeing competition from non-portal service providers that specialize in mobile value-added services such as MMS, WAP and IVR. As SINA continues to broaden its range of product offerings, we expect increasing competition from these category players in the coming years.

We also compete for advertisers with traditional media companies, such as newspapers, television networks and radio stations that have a longer history of use and greater acceptance among advertisers. In addition, providers of Chinese language Internet tools and services may be acquired by, receive investments from, or enter into other commercial relationships with large, well-established and well-financed Internet, media or other companies.

Our ability to compete successfully depends on many factors, including the quality of our content, the breadth, depth and ease of use of our services, our sales and marketing efforts, and the performance of our technology. See also “Risk Factors — The markets for mobile value-added services and internet services are highly competitive, and we may be unable to compete successfully against new entrants and established

We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our products is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriations of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. In addition, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations. See “Risk Factors — We may not be able to adequately protect our intellectual property, which could cause us to be less competitive” and “— We may be exposed to infringement claims by third parties, which, if successful, could cause us to pay significant damage awards.”

The following description of PRC laws and regulations is based upon the opinions of Jun He Law offices Lawyers, our PRC counsel. For a description of legal risks relating to our ownership structure and business, see “Risk Factors.”

The Chinese government has enacted an extensive regulatory scheme governing the operation of business with respect to the Internet, such as telecommunications, Internet information services, international connections to computer information networks, information security and censorship. Besides the Ministry of Information Industry, or MII, the various services of the PRC Internet industry is also regulated by various other governmental authorities, such as the State Administration of Industry and Commerce, or SAIC, State Council Information Office, or SCIO, the General Administration for Press and Publication, or GAPP (formerly the State Press and Publications Administration, or SPPA), the Ministry of Education, or MOE, the Ministry of Culture of PRC, or MCPRC, the Ministry of Health, or MOH. The Ministry of Public Security also has the regulation jurisdiction on the Internet business.

Among all regulations, the Telecommunications Regulations of the People’s Republic of China, or Telecom Regulations, promulgated on September 25, 2000, is the primary governing law. Telecom Regulations set out the general framework under which domestic Chinese companies may engage in various types of telecommunications services in the PRC. It reiterated the long-standing principle that telecommunications service providers need to obtain operating licenses as a mandatory precondition to begin operation. The Telecom Regulations differentiates the telecommunications services into basic telecommunications services and value-added telecommunications services. Value-added telecommunications services are defined as telecommunications and information services provided through public networks. The “Catalogue of Telecommunications Business”, an attachment to the Telecom Regulations and updated by MII’s Notice on Adjusting the Catalogue of Telecommunications Business of April 1, 2003, categorizes various types of telecommunications and telecommunications-related activities into basic or value-added services.

On December 20, 2001, after China’s formal entry into the WTO, the PRC State Council promulgated the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which became effective on January 1, 2002. The FITE Regulations stipulates that foreign-invested telecommunications enterprises, or FITEs, may undertake operations in basic telecom services and value-added telecom services. Currently, The foreign party to a value-added FITE may hold up to 50% equity,

with no geographic restrictions on its operations. Before that, foreign investor was prohibited to invest in Internet content services. The PRC government has not made any further commitment to loosen the regulation of FITEs.

According to the Measures for the Administration of Internet Information Services described below, enterprises must obtain an ICP license in first place to conduct Internet content service businesses. When the Internet content involves areas of news, education, medical, health or medicine, which are regulated by the MCPRC, the MOE, the MOH and other governmental authorities respectively, the enterprise must also obtain permission from responsible national authorities.

SINA is a holding company, which owns the following material wholly owned subsidiaries in China:


	•	Beijing SINA Information Technology Co. Ltd. (“BSIT”)

	•	Star-Village.com (Beijing) Internet Technology Limited

	•	Beijing New Media Information Technology Co. Ltd.

	•	Beijing SINA Internet Technology Service Co. Ltd.

In compliance with PRC’s foreign investment restriction in Internet information services and other laws and regulations, we conduct all our Internet information services, advertising and mobile value-added services in China via the following domestic Variable Interest Entities, or VIEs:


	•	Beijing SINA Internet Information Service Co., Ltd. (“the ICP Company”), a China company controlled through business agreement. The ICP Company is responsible for operating www.sina.com.cn in connection with its Internet content company license and selling advertisements to advertisers directly under its online advertising license. It is also responsible for providing mobile value-added services in China via third party mobile operators to the users. It is 3% owned by Yan Wang, our Chief Executive Officer and director, and 97% owned by six other of our non-executive PRC employees.

	•	Beijing SINA Interactive Advertising Co., Ltd. (“the Ad Company”), a China company controlled through business agreement. The Ad Company was responsible for placing advertisements on www.sina.com.cn for its third party customers under its advertising license. It is 75% owned by Yan Wang and 25% owned by BSIT. This entity has become inactive after the ICP Company obtained online advertising license in May 2002.

	•	Guangdong SINA Internet Information Service Co., Ltd. (“the GDICP Company”), a China company controlled through business agreement. The GDICP Company is responsible for providing mobile value-added services in China via third party mobile operators to the users under its Internet content company license. It is 10% owned by Yan Wang and 90% owned by five other of our non-executive PRC employees.

	•	Guangzhou Media Message Technologies, Inc. (“Xunlong”), a China company controlled through business agreement. Xunlong is responsible for providing mobile value-added services in China via third party mobile operators to the users under its Internet content company license. It is owned by five of our non-executive PRC employees.

	•	Beijing Star-Village.com Cultural Development Co., Ltd. (“StarVI”), a China company controlled through business agreement. StarVI is responsible for providing mobile value-added services in China via third party mobile operators to the users under its Internet content company license. It is owned by five of our non-executive PRC employees.

The capital investment in these VIEs is funded by SINA and registered as interest-free loans to these PRC employees. As of December 31, 2003, the amount of interest-free loans to the employee shareholders of VIEs amounted to $4.1 million. Under various contractual agreements, employee shareholders of the VIEs are

required to transfer their ownership in these entities to our subsidiaries in China when permitted by PRC laws and regulations or to our designees at any time for the amount of loans outstanding; all voting rights of the VIEs are assigned to SINA. SINA has the power to appoint all directors and senior management personnel of the VIEs. SINA through its wholly-owned subsidiaries in China has also entered into exclusive technical and other service agreements with the VIEs, under which these subsidiaries provide technical and other services to the VIEs in exchange for substantially all net income of the VIEs. In addition, SINA’s employee shareholders of the VIEs have pledged their shares in the VIEs as collateral for non-payment of loans or for fees on technical and other services due SINA.

The Measures for the Administration of Internet Information Services, or the ICP Measures, went into effect on September 25, 2000, Under the ICP Measures, any entity that provides information to online Internet users must obtain operating license from the MII or its local branch at the provincial level in accordance with the Telecom Regulations described above. The ICP Measures further stipulates that entities providing online information services in areas of news, publishing, education, medicine, health, pharmaceuticals and medical equipment must obtain permission from responsible national authorities prior to applying for an operating license from the MII or its local branch at the provincial or municipal level. Moreover, ICPs must display their operating license numbers in a conspicuous location on their websites. ICPs must police their Web sites to remove categories of harmful content that are broadly defined. This obligation reiterates Internet content restrictions set by other ministries over the past few years.

On December 29, 2000, the ICP Company obtained an ICP license from the Beijing Telecommunications Administration, or the BTA (the municipal branch of the MII) for the first time. It also obtained a permit to operate its bulletin board systems on July 16, 2001 pursuant to additional ICP Measure regulations issued on October 8, 2000, which requires all companies that operate bulletin board systems, or BBS, to obtain official permits. Currently, the ICP Company has an updated ICP license issued on December 30, 2003 by the BTA with a 2-year validity term subject to annual inspection.

Currently, StarVI holds an ICP license issued on April 8, 2003 by the BTA with a validity term to December 28, 2005 subject to annual inspection, Xunlong holds an ICP license issued on March 21, 2003 by Guangdong Telecommunications Administration, or GTA with a validity term to June 3, 2007 subject to annual inspection. GDICP holds an ICP license issued on December 8, 2003, by GTA with a 5-year validity term subject to annual inspection.

On November 7, 2000, the Provisional Regulations for the Administration of Web Site Operation of News Publication Services were jointly promulgated by SCIO and MII. The regulations stipulate that general web sites set up by non-news organizations may list news released by certain governmental news agencies, if they satisfy the requirements set forth in Article 9, but may not publish news items produced by themselves or news sources from elsewhere.

Before commencing news-publishing services, the above regulations also require the general websites of non-news organizations to be approved by SCIO after securing permission from SCIO at the provincial level. In addition, the general websites intending to publish the news released by the aforementioned news agencies must enter into agreements with the respective organizations, and submit copies of the agreements to the relevant administration department.

On December 27, 2000, SCIO approved The ICP Company to develop online news publishing services.

On December 26, 2001, the MII published the Administrative Measures for Telecommunications Business Operating Licenses, or Telecom License Measures to supplement the FITE Regulations. The

Telecom License Measures confirm that the MII is the competent approval authority for foreign-invested telecom enterprises. Two types of telecom operating licenses exist in China (including FITEs): license for basic telecom services and license for value-added telecom services. Furthermore, a distinction is made as to whether a license is granted for intra-provincial or “trans-regional” (inter-provincial) activities. An appendix to the license will detail the permitted activities granted to the enterprise. An approved telecom service operator must conduct its business (basic or value-added) in accordance with specifications recorded on its Telecom Service Operating License. However, there are still ambiguities regarding the interpretation and application of the FITE Regulations.

The ICP Company is currently holding a Value-Added Telecommunications Services Operating License issued on February 18, 2004 by the MII with a 5-year validity term subject to annual inspection, authorizing nationwide provision of information service in value-added telecommunications services.

Xunlong is currently holding a Value-Added Telecommunications Services Operating License issued on February 26, 2003 by the GTA with a validity term to November 18, 2007 subject to annual inspection, authorizing the provision of call center service. StarVi is currently holding a Value-Added Telecommunications Services Operating License issued on January 17, 2004 by the BTA with a 5-year validity term subject to annual inspection, authorizing the provision of mobile value-added telecom services. Xunlong, StarVi, GDICP are in process of applying trans-regional Value-Added Telecommunications Services Operating License at present.

On June 27, 2002, the SPPA and MII jointly released the Provisional Rules for the Administration of Internet Publishing, or Internet Publishing Rules, which define “Internet publications” as works that are either selected or edited to be published on the Internet or transmitted to end-users through the Internet for the purposes of browsing, reading, using or downloading by the general public. Such works mainly include content or articles formally published by press media such as: (a) books, newspapers, periodicals, audio-visual products and electronic publications; and (b) literature, art and articles on natural science, social science, engineering and other topics that have been edited.

According to the Internet Publishing Rules, Web portals like SINA are required to apply to and register with the GAPP before distributing Internet publications. In accordance with this rule, the ICP Company obtained a license from the GAPP on October 30, 2003 with a 10-year validity term subject to annual inspection to distribute Internet publications.

On December 30, 1997, the Rules for the Administration of Electronic Publications, or Electronic Publication Rules, was published by the SPPA, and went into effect as of January 1, 1998. The Electronic Publication Rules outline a licensing system for business operations involving electronic publications, which has been interpreted by the GAPP to include online games. Under the Electronic Publication Rules, if a PRC company is contractually authorized to publish foreign electronic publications, it must obtain the approval and register the copyright licensing contract with the GAPP.

On March 4, 2003, the Provisional Regulations for the Administration of Online Culture was issued by the MCPRC and went into effect on July 1, 2003. According to this regulation, commercial entities are required to apply to the relevant local branch of the MCPRC for an Online Culture Operating Permit to engage in online games services. On September 5, 2003, the MCPRC issued an Online Culture Operating Permit subject to annual inspection to the ICP Company, which authorize the ICP Company to provide online games service.

In order to meet the legal requirements, SINA entrusted a licensed agency to obtain the GAPP’s approval and register the copyright licensing contract. The agency has completed these procedures, and obtained the relevant licensing and approval codes relating to this specific online game.

Pursuant to the Measures for the Administration of Internet Medical and Health Information Services issued on January 8, 2001, MOH, is responsible for reviewing the qualifications of Web sites and approving their publication of health-related information. According to the Provisional Regulations for the Administration of Internet Drug Information Services, issued by the State Drug Administration, or SDA, on January 11, 2001, websites publishing drug-related information must obtain approval from the SDA or one of its local branches.

The ICP Company has obtained the aforementioned approvals from Beijing Health Bureau and Beijing Drug Administration on May 27, 2002 and January 17, 2002 respectively.

The Provisional Regulations for the Administration of Online Culture as described above applies to entities engaging in activities related to “online cultural products”, including music and video files, network games, animation features, audiovisual products, performing arts and artworks converted for publishing via the Internet. Pursuant to this legislation, commercial entities are required to apply to the relevant local branch of the MCPRC for an Online Culture Operating Permit if they engage in any of the following types of activities:


	•	production, duplication, import, wholesale, retail, leasing or broadcasting of online cultural products;

	•	publishing of online cultural products on the Internet or transmission thereof to computers, fixed-line or mobile phones, radios, television sets or gaming consoles for the purpose of browsing, reading, using or downloading such products; or

	•	exhibitions or contests related to online cultural products.

On September 5, 2003, the MCPRC issued an Online Culture Operating Permit with a 3-year validity term subject to annual inspection to the ICP Company.

Currently, there is no national legislation governing the online advertising. The Beijing Administration of Industry and Commerce, or BAIC has released and adopted regulations with respect to online advertising, including the Notice Regarding the Standardization for Qualifications for the Operation of Online Advertising, Notice Regarding Applications by Network Economic Organizations for an Advertising Business License, Mandatory Regulations for the Administration Systems of Advertising Enterprises and Qualification Standards for the Registration of Online Advertising Business.

According to the Notice Regarding the Standardization for Qualifications for the Operation of Online Advertising, companies that have already obtained advertising operating licenses may undertake design, production and agency work in relation to online advertising and may carry out advertising publication business via their own Web sites.

On May 18, 2002, the State AIC issued an advertising operating license to the ICP Company. This license is subject to annual inspection.

Regulations governing international connections for PRC computer networks include:


	•	Measures for the Administration of International Connections to China’s Public Computer Interconnected Networks (1996);

	•	Provisional Regulations of the People’s Republic of China for the Administration of International Connections to Computer Information Networks (1997) and their Implementing Measures (1998);


	•	Reply Concerning the Verification and Issuance of Operating Permits for Business Relating to International Connections for Computer Information Networks and for Public Multimedia Telecommunications Business (1998); and

	•	Administrative Measures for International Communications Gateways (2002).

According to the above regulations, any entity wishing to access international network connections for their computer information networks in the PRC must comply with the following requirements:


	•	be a PRC legal person;

	•	have the appropriate equipment, facilities and technical and administrative personnel;

	•	have implemented and registered a system of information security and censorship; and

	•	effect all international connections through an international communications gateway established with the approval of the MII.

We believe that the companies as described in PRC corporate structure are in proper compliance with these requirements.


	•	The Law of the People’s Republic of China on the Preservation of State Secrets (1988) and its Implementing Rules (1990);

	•	The Law of the People’s Republic of China Regarding State Security (1993) and its Implementing Rules (1994);

	•	Rules of the People’s Republic of China for Protecting the Security of Computer Information Systems (1994);

	•	Notice Concerning Work Relating to the Filing of Computer Information Systems with International Connections (1996);

	•	Administrative Regulations for the Protection of Secrecy on Computer Information Systems Connected to International Networks (1999);

	•	Regulations for the Protection of State Secrets for Computer Information Systems on the Internet (2000);

	•	Notice issued by the Ministry of Public Security of the People’s Republic of China Regarding Issues Relating to the Implementation of the Administrative Measure for the Security Protection of International Connections to Computer Information Networks (2000);

	•	The Decision of the Standing Committee of the National People’s Congress Regarding the Safeguarding of Internet Security (2000); and

	•	Measures for the Administration of Commercial Web Site Filings for the Record (2002) and their Implementing Rules (2002).

These legislations specifically prohibit the use of Internet infrastructure where it may breach public security, provide socially destabilizing content or disclose state secrets. According to these legislations, it is mandatory for Internet companies in the PRC to complete security-filing procedures and regularly update information security and censorship systems for their Web sites with the local public security bureau. .

According to the Detailed Implementing Rules for the Measures for the Administration of Commercial Web Site Filings for the Record, promulgated in July 2002 by the BAIC, websites must comply with the following requirements:


	•	file with the BAIC and obtain electronic registration marks;

	•	place the registration marks on their Web sites’ homepages; and

	•	register their Web site names with the BAIC.

The ICP Company has successfully registered their websites with the BAIC on December 23, 2003. Consequently, SINA’s electronic registration mark is prominently placed on its homepage.

In addition, the State Security Bureau has issued regulations authorizing the blocking of access to any site it deems to be leaking State secrets or failing to comply with the relevant legal legislation regarding the protection of State secrets during online information distribution. Specifically, Internet companies in China with bulletin boards, chat rooms or similar services must apply for the approval of the State Secrets Bureau prior to operating such services. The ICP Company has established an internal security committee, adopted security maintenance measures, employed full-time BBS supervisors and has been exchanging information on a regular basis with the local public security bureau with regard to sensitive or censored information and Web sites. It is in full compliance with the governing legislation.

On October 7, 1999, the State Encryption Administration Commission published the Regulations for the Administration of Commercial Encryption, followed by the First Notice of the General Office of the State Encryption Administration Commission on November 8, 1999. Both of these regulations address the use of software in China with encryption functions. According to these regulations, encryption product purchases must be reported. Violation of the encryption regulations may result in warning, penalty, confiscation of the encryption product, or criminal liabilities.

On March 18, 2000, the Office of the State Commission for the Administration of Cryptography issued a public announcement regarding the implementation of those regulations. The announcement clarifies the encryption regulations as below:


	•	Only specialized hardware and software, the core functions of which are encryption and decoding, fall within the administrative scope of the regulations as “encryption products and equipment containing encryption technology.” Other products such as wireless telephone, Windows software and browsers do not fall within this scope.

	•	The PRC government has already begun to research the laws in question in accordance with WTO rules and China’s external commitments, and will make revisions wherever necessary. The Administrative Regulations on Commercial Encryption will also be subject to such scrutiny and revision.

We believe that the companies described in PRC corporate structure are in proper compliance with these requirements.

According to the Measures for the Administration of Educational websites and Online Education School released on July 5, 2000, to open educational websites and online education schools, application must be made to the administrative department overseeing education. Operation may begin only when inspected and approved by the administrative department. Educational websites and online education schools shall not operate without approval by the administrative department overseeing education.

In compliance with the above regulation, the ICP Company has obtained the aforementioned approvals from Beijing Education Committee on March 26, 2002.

For a description of how the unsettled nature of Chinese regulations may affect our business, please see “Risk Factors — Even if we are in compliance with Chinese governmental regulations relating to licensing and foreign investment prohibitions, the Chinese government may prevent us from distributing content that it believes is inappropriate and we may be liable for such content.”

Our corporate Internet address is http://corp.sina.com. We make available free of charge on or through our web site our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We may from time to time provide important disclosures to investors by posting them in the investor relations section of our web site, as allowed by SEC rules Information contained on SINA’s web site is not part of this report or any other report filed with the SEC. You may read and copy any materials we filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site http://www.sec.gov that contains reports, proxy and information statements, and other information that we filed electronically.

As of December 31, 2003, we had 785 full-time employees, of whom 727 were employed in China, 21 were employed in the United States of America, 12 were employed in Hong Kong and 25 were employed in Taiwan. From time to time we employ independent contractors to support our production, engineering, marketing, and sales departments. Our Chinese employees are members of a labor association that represents employees with respect to labor disputes and other employee matters. We have never experienced a work stoppage or a labor dispute that has interfered with our operations.


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the Fiscal Year Ended December 31, 2003
OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Cayman Islands		52-2236363
(State or other jurisdiction of Incorporation or organization)		I.R.S. Employer Identification Number)


		Page No.

PART I
Item 1.	Business		2
Item 2.	Properties		31
Item 3.	Legal Proceedings		31
Item 4.	Submission of Matters to a Vote of Security Holders		31
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Shareholders Matters and Issuer Purchases of Equity Securities		32
Item 6.	Selected Financial Data		34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		58
Item 8.	Financial Statements and Supplementary Data		60
	Report of Independent Accountants		61
	Consolidated Balance Sheet at December 31, 2003 and 2002		62
	Consolidated Statement of Operations for the years ended December 31, 2003 and 2002 (unaudited), six months ended December 31, 2002 and each of the two years in the period ended June 30, 2002 and 2001		63
	Consolidated Statement of Shareholders’ Equity for the years ended December 31, 2003 and 2002 (unaudited), six months ended December 31, 2002 and each of the two years in the period ended June 30, 2002 and 2001		64
	Consolidated Statement of Cash Flows for the years ended December 31, 2003 and 2002 (unaudited), the six months ended December 31, 2002 and each of the two years in the period ended June 30, 2002 and 2001		66
	Notes to Consolidated Financial Statements		67
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		97
Item 9A.	Controls and Procedures
PART III
Item 10.	Directors and Executive Officers of the Registrant		97
Item 11.	Executive Compensation		97
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matter		97
Item 13.	Certain Relationships and Related Transactions		97
Item 14.	Principal Accounting Fees and Services		98
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8K		98
	SIGNATURES		99
	POWER OF ATTORNEY		99
	EXHIBIT INDEX		100
EXHIBIT 10.7
EXHIBIT 10.8
EXHIBIT 10.9
EXHIBIT 10.10
EXHIBIT 10.11
EXHIBIT 10.37
EXHIBIT 10.38
EXHIBIT 10.39
EXHIBIT 10.40
EXHIBIT 10.41
EXHIBIT 10.42
EXHIBIT 10.43
EXHIBIT 10.44
EXHIBIT 10.45
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2


News and Information	Community	Multimedia Downloads

• Headline news • Financial news • Technology news • Sports news • Weather forecast	• Dating and friendship • Games and quizzes • Educational products	• Ring tones • Logos and pictures • Screen savers


		U.S.		China		Hong Kong		Taiwan		Total


		(In thousands)
Year ended and as of December 31, 2003:
	Revenues	$	2,398	$	108,507	$	1,854	$	1,526	$	114,285
	Long-lived assets		66		7,592		132		856		8,646
Year ended and as of December 31, 2002 (unaudited):
	Revenues	$	2,772	$	32,502	$	1,715	$	1,905	$	38,894
	Long-lived assets		362		5,453		452		1,332		7,599
Six months ended and as of December 31, 2002:
	Revenues	$	1,427	$	19,675	$	1,060	$	1,054	$	23,216
	Long-lived assets		362		5,453		452		1,332		7,599
Year ended and as of June 30, 2002:
	Revenues	$	2,524	$

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Revenue Classification		Advertising (online advertising) Non-advertising (Fee-based services, mobile value-added services, e-commerce, enterprise e-services)