Sharp Profit Increase For Chinese Game Firm NetEase

Officials from Chinese online and wireless gaming publisher NetEase have announced the company’s financial results for its second quarter, ended June 30th. During this period, total revenues rose by 90.2 percent, compared to the same period last year, to CNY416.9 million ($50.4m). Net profit after tax for the quarter increased 147.0 percent to CNY242.8 million ($29.3m). Revenue from online game services grew 146.5 percent from the same period in 2004 and 27.2 percent over the previous quarter, with the company citing the continued success of in-house developed games Fantasy Westward Journey and Westward Journey Online II – the latter of which achieved another quarter of double-digit revenue growth. Both titles are amongst the top five most popular massively multiplayer online titles in China, with Fantasy Westward Journey reporting a peak concurrency of approximately 710,000 users and Westward Journey Online II a peak of 486,000. Commenting on the second quarter's results, acting CEO Ted Sun said, "With the first half of 2005 completed, it is clear that NetEase is one of the leading Internet portals in China, with a heavy emphasis on its online game operation and development which continues to be the principal driver of the Company's growth... We hope to achieve healthy growth in the remainder of 2005 as we role out our pipeline of massively multi-player online role-playing games and casual games." Despite the excellent results for the online division, the company’s wireless business has fared less well, with revenues from wireless value-added services and others falling from CNY20.3 million ($2.5m) for the preceding quarter to CNY19.7 million ($2.4m) for the second quarter. This compares to revenues of CNY38.8 million ($4.7m) at the same time last year. The downturn in revenue is blamed on increasing competition in China, and an overall decrease in the popularity of SMS and other related services. As such, the company is continuing to focus on its online MMO games business, with several new games due for launch soon – with at least two titles based on Chinese history and mythology, and a number of casual games.