November 10, 2008 / 11:37 PM / 10 years ago

UPDATE 2-Focus Media Q3 earnings trail Street; Q4 outlook weak

* Q3 EPS, Rev miss estimates

* Forecasts Q4 EPS, Rev below estimates

* CEO: Macro headwind we are facing is the most severe * Shares down 24 pct (Adds analyst’s comments, background)

By Bijoy Anandoth Koyitty

BANGALORE, Nov 10 (Reuters) - Chinese digital advertising company Focus Media Holding Ltd FMCN.O reported a quarterly profit that missed analysts’ expectations, hurt by higher operating expenses, and forecast fourth-quarter results below estimates, sending its shares down 24 percent.

Global advertising spending has shown signs of declining recently as corporations respond to economic growth worries by curtailing their marketing budgets.

“The macro headwind we are facing is the most severe in the modern history of the Chinese advertising industry,” Chief Executive Tan Zhi said in a statement, adding that the company’s “conservative” fourth-quarter outlook reflects the situation.

Sterne, Agee & Leach analyst James Lee said Focus Media missing the Street estimates was “surprising,” as its peers in the Chinese media space had reported comparatively better results.

There must be some company specific reason for Focus Media to post a big revenue miss in the Internet advertising business, Lee said by phone.

“Third quarter for Internet business is the strongest,” he added.

Chinese advertising network operator VisionChina Media Inc VISN.O, which offers digital television advertising services on buses and subways, had reported better-than-expected earnings for the third quarter.

Search engine major Google Inc (GOOG.O) has said its China market share will grow compared to other markets next year, despite the downturn from the global financial crisis.

CEO Tan Zhi said online advertising spending slowed down after the Beijing Olympics, impacting its internet advertising business.

Operating expenses for the third quarter grew about 86 percent to $52.7 million.

Shares of the company were trading down about $4 at $12.28 after the bell. They closed at $16.09 Monday on Nasdaq. (Reporting by Bijoy Koyitty in Bangalore; Editing by Anil D’Silva)

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