March 12, 2012 (Chinavestor) Shares of China's leading online video company, Youku Inc. (NYSE:YOKU), surged over 20% in the first half hours of trading on Monday after the company announced earnings and news that it will merge with Tudou Hold. (NASDAQ:TUDO), China's second largest such company.
But those gains may prove to be illusive as investors look into just cold numbers. Bot Youku Inc. (NYSE:YOKU) and Tudou Hold. (NASDAQ:TUDO) were burning cash due to high bandwidth cost and video content. Youku Inc. (NYSE:YOKU) was scheduled to announce 2011 Q4 earnings on Wednesday but it fast tracked that to Monday to piggyback it on the merger news. That was a good move given the weak fundamentals.
Looking at the cold numbers, Youku Inc. (NYSE:YOKU) reported net revenues of RMB309.3 million ($49.1 million), a significant 103% increase from last year. But net losses widened to RMB49.61 million ($7.9 million) up from RMB37.72 million (5.9 million) on the same time.
Considering that Youku Inc. (NYSE:YOKU) hasn't reported a profitable quarter yet, investors have to be patient before Chinese online video firms turn around. The case resembles to that of Amazon.com Inc. (NASDAQ:AMZN), a company that lost money over five years before turning profitable in 2005.
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