Focus recently posted a net loss of US$5.7 million and a 14 per cent decline in net revenue from continuing operations to $66.7 million. The news came after executive-level and middle-management staff have reportedly departed the company.
Sina initially moved to acquire Focus Media in December in an effort to expand into the digital outdoor media sector. Sources at the time said the acquisition would be worth more than US$1 billion and give Sina access to Focus Media’s out-of-home assets including its LCD display network, comprising 120,000 outdoor digital screens in more than 90 cities across China.
Yet, since that time, the Chinese Ministry of Commerce's Anti-Monopoly Bureau has not yet cleared the takeover.
One industry insider speculates that Focus’ financial performance provides Sina with an opportunity to make an easy exit. “Focus’ results came out two days ago and were disastrous, and it may have become apparent that it doesn’t make sense to combine outdoor media assets with a digital company like Sina,” the source said. “Using the financial problems as an excuse will give Charles [Chao, Sina CEO] a graceful way to get out of this and save face without the Government becoming involved.”
However, other sources within China’s media industry speculate that the latest rumours may be part of a bargaining ploy by Sina. “The deal still may be on course but Sina might be trying to force the price down with a bit of brinksmanship,” a source said.
Scott Spirit, strategy director at WPP, said the deal would be beneficial to the marketing sector. “Our view is that the deal is a good thing. It will drive innovation in the sector and innovation at Focus, which hasn’t been happening. It would be good for our clients.”
Representatives from Sina and Focus Media could not be reached at press time.