It is not just those that failed to go public that are likely to be absorbed. Since many Internet companies received public or private funding in the first few months of the year, before the Spring tech stock meltdown, they've had the cash to postpone the inevitable. We will have to see what benefits ChinaRen brings to Sohu. There's little reason to hurry. Those who wait can pick up bargains, says Matei Mihalca, a Net industry analyst for Merrill Lynch.
Many valuations have nowhere to go but down.
ChinaRen's strength was its stable of online communities, which analysts say balance well with Sohu's superior news content. Sohu chief executive Charles Zhang says he believes that with the ChinaRen merger he can post double-digit ad revenue growth in coming quarters and break even operationally by late 2002. Sohu's plight sums up the accounting puzzle posed by the phenomenon of profitless companies merging with each other. It's difficult to acquire somebody when you're just acquiring burn rate. You have to re-engineer yourself into another type of Internet company.