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NetEase.com Reports Robust Growth
2005-8-4 10:31:33      China Daily
Chinese Internet company NetEase.com Inc reported robust growth in the second quarter, and the news boosted the company's American depository share (ADS) price, which saw a sharp increase of 17 per cent yesterday on the high-tech NASDAQ stock market in New York.

Beijing-based NetEase said yesterday in its second quarter financial report that its net profits in the period reached US$29.3 million, almost 60 per cent higher than the first quarter and 150 per cent higher than the same period last year.

Its diluted earnings per share were 83 US cents, up from 53 US cents in the second quarter.

According to Reuters, the results beat the analysts' forecast of 63 US cents polled by Reuters Estimates.

The crisp growth rate led to a sharp rise of NetEase's ADS price on the NASDAQ, which rose by 17 per cent during after-hours trading to US$ 69.96, very close to its record high of US$72 on October 9, 2003.

Ted Sun, acting chief executive officer of the second largest online gaming operator after NASDAQ-listed Shanda, said he was "extremely pleased" with his company's results in the second quarter.

The company reported that its revenues in the quarter grew by 27 per cent quarter-on-quarter to US$50.4 million.

"The results are very impressive, considering the intense competition in the online game market," said Peter Lu, a veteran Internet analyst in Beijing, who has been following NASDAQ-listed Chinese companies since 2000.

NetEase's online gaming business maintained a healthy growth rate of 31 per cent to US$41.5 million in the second quarter from the first quarter, making it the biggest factor in NetEase's quarterly growth.

Michael Tong, chief operating officer of NetEase, attributed the growth of its online game business to enriched contents with expansion sets, increased marketing efforts, and more distribution partners.

Jim Sun, an Internet analyst with Evolution Securities, said that in the first half of this year, the launch of World of Warcraft by Shanghai-based and NASDAQ-listed The9 Ltd on June 7, has led to the delay of launches of many games, due to its huge attraction to players.

Lu said NetEase's games are focused on Chinese historical contents and have their unique users, so the impact of the launch of the long-awaited World of Warcraft was minimal to NetEase.

The Chinese Internet company predicted its revenues from online games in the third quarter would grow by 12 to 15 per cent over those in the second quarter.

NetEase, the third biggest portal player after Sina Corp and Sohu.com, also saw revenues from its advertising business grow by 18 per cent quarter-on-quarter to US$6.5 million, due to enriched contents and partnerships.

Tong said his company did not see the difficulties its rival Sohu saw in the quarter, when Sohu said some of its advertising clients in southern China were not able to complete their contracts due to financial difficulties.

NetEase, also a small player in the wireless value-added service market, saw its revenues from that business line fall slightly from US$2.45 million in the first quarter to US$2.38 million.

The company said the environment for wireless business was turbulent, as regulators and mobile operators stepped up efforts to regulate the market, but company acting CEO Ted Sun said his company was considering "re-entering" the market.

Its forecasts for wireless revenues in the third quarter were flat, or even a slight decrease.

Sun said the company expected its revenues in the third quarter to be between US$58 million and US$59.7 million, with profits between US$32.6 million and US$34.2 million.

NetEase's major rivals, the top Chinese Internet portal Sina Corp and the biggest online game operator Shanda Interactive Entertainment, are expected to announce their results soon.


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v Internet Ad Pioneer Now Shunning Pop-Ups 08-01
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v NetEase Profits Up Amid Competition 04-28

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