Chinese Internet and online game provider Netease.com Inc. (NTES), reported a higher profit for the third quarter, helped by a rise in online game services revenue. Earnings for the quarter, as well as revenues missed estimates, however. Following the announcement of results, NetEase shares fell more than 8% in after hours trading.
The Beijing, China-based company's third quarter net profit attributable to the company's shareholders rose to RMB 393.83 million or US$57.69 million from RMB 313.31 million or US$45.9 million last year. Earnings per American Depositary Share or ADS was RMB 3.02 or US$0.44, up from RMB 2.42 for the year-ago quarter.
Total revenues for the third quarter was RMB 879.45 million or US$128.83 million, up from RMB 806.61 million or US$118.2 million in the prior year quarter.
Analysts polled by Thomson Reuters expected the company to report earnings of US$0.49 per ADS on revenue of US$138.65 million for the quarter. Analysts' estimates typically exclude special items.
The company's third quarter net profit included net foreign exchange gain of RMB 25.3 million or US$3.7 million, compared with a net foreign exchange loss of RMB 68.3 million or US$10.0 million for the same period last year.
Commenting on the third quarter performance William Ding, Chief Executive Officer and Director of NetEase said, "Fantasy Westward Journey delivered an outstanding performance highlight for the quarter with record peak concurrent users of 2.5 million on August 2, 2009, which is a clear testament to the ongoing popularity and longevity of this iconic game."
In the preceding second quarter, NetEase reported a net profit attributable to the company's shareholders of RMB 468.1 million or US$68.5 million, up from RMB 438.2 million or US$64.2 million in the prior year second quarter. Earnings per ADS rose to US$0.53 from US$0.50 during the same period last year.
Revenues for the second quarter had increased to RMB872.1 million or US$127.7 million from RMB715.9 million or US$104.8 million in the second quarter of 2008.
For the third quarter under review, total operating expenses rose to RMB 218.9 million or US$32.1 million from RMB 164.6 million or US$24.1 million in the year earlier period.
Segment-wise, the company's revenue from its largest segment, online games rose to RMB775.1 million or US$113.6 million from RMB675.1 million or US$98.9 million in the same period last year.
However, the third quarter revenues from other segments were lower than year-ago period. Advertising services segment revenue dropped to RMB86.0 million or US$12.6 million from RMB113.0 million or US$16.6 million in the year-ago period. The company's smallest segment, wireless value-added services and others segment revenue dropped to RMB18.3 million or US$2.7 million from RMB18.5 million or US$2.7 million a year-ago.
Commenting on the plans for fourth quarter Ding said, "We plan to release four expansion packs for Legend of Westward Journey, Tianxia II, New Fly for Fun and Transformer Online during the fourth quarter of 2009."
"With an eventful game pipeline as well as new service introductions in email, blog and search, we are confident in maintaining our market-leading position in the Chinese MMORPG market and accelerating our position as a portal of choice for the dynamic and growing user community across China," Ding said.
Among others in the industry, Sohu.com Inc. (SOHU) on October 26 reported a decline in third quarter net income to US$37.35 million or US$0.88 per share from US$40.26 million or US$1.02 per share last year. On a non-GAAP basis, net income attributable to the company was US$40.92 million or US$0.96 per share, down from US$42.82 million or US$1.08 per share reported in the previous year.
Sohu's third quarter total revenues grew to US$136.59 million from US$120.68 million in the prior-year quarter.
On October 15, Credit Suisse had upgraded NetEase shares to Outperform from Neutral and increased its price target to US$48 from US$46.70.
Wednesday, NTES closed at US$40.69, down US$1.25 or 2.98%, on a volume of 1.67 million shares on the Nasdaq. In after hours, the stock is currently trading at US$37.40, down US$3.29 or 8.09%.
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