NetEase profit surges 29pc on boost from World Cup
Online gaming firm predicts a flatter third quarter due to slackening interest
NetEase.com, China's biggest online gaming company, said profit grew 29 per cent for the second quarter, boosted by better than expected performance of its stable of established online games such as Fantasy Westward Journey and by World Cup-related advertising.
But the company warned that growth would slow in the third quarter due to slacking interest in its games.
The New York-listed company said yesterday that in the three months to June its net profit shot up to US$39 million as revenue jumped 38 per cent from the same period last year to US$71.4 million.
The results were in line with the firm's own forecast for the quarter of US$38.5 million to US$39.8 million net profit on sales of US$69 million to US$70.5 million, but slightly better than analysts' expectations.
Online game sales for the three months climbed 41 per cent from the same period last year to US$60.3 million, accounting for 84 per cent of the company's revenue.
Online advertising sales, which accounted for 12 per cent of revenue, increased 29 per cent to US$8.5 million. The company also sells ring tones, games and other products for handset users.
Net profit for the second quarter grew 6.5 per cent when compared with the first, but the company warned that quarter-on-quarter growth might be little or nothing for the current three-month period, although year on year it expected a jump of 25 per cent, to as high as US$40.5 million.
In a sign that the firm is maturing, that compares with a 137 per cent growth in the third quarter of last year.
'Game revenue will fall or rise by 1 per cent in the current quarter from the second,' Denny Lee, the chief financial officer of NetEase, said yesterday.
In March, NetEase's chairman and founder William Ding, the third-richest man in China, said the company would spend US$420 million in 'the next couple of years' to launch new games.
Last month, it introduced the company's new game Big Tang, but it has yet to catch on.
'Although NetEase achieved a better than expected profit in the second quarter, its profit growth will slow in the coming quarter because its online advertising revenue cannot benefit from the World Cup anymore,' said Dick Wei, an analyst at JP Morgan.
He expected that NetEase's net profit would fall 2.5 per cent to US$38.5 million while sales would rise 1.4 per cent to US$72 million. Mr Wei rated the shares 'neutral' in a report last month.
NetEase's American depositary receipts fell 0.4 per cent to US$18.68 before the earnings report was released and then dropped a further 1 per cent to US$18.50 in after-hours trading.
The stock has so far risen 33 per cent this year, compared with 4.5 per cent for Shanghai-based Shanda Interactive Entertainment.
