Netease sees record 4th quarter growth

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Last updated at: (Beijing Time) Thursday, February 19, 2004

Netease sees record 4th quarter growth

Chinese Internet company Netease.com Inc reported its second consecutive year of profits and record growth in the fourth quarter and 2003 with a strong boost from its online game business.

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Chinese Internet company Netease.com Inc reported its second consecutive year of profits and record growth in the fourth quarter and 2003 with a strong boost from its online game business.

Netease, one of the big three Chinese Internet companies alongside Sina Corp and Sohu.com Inc - all listed on New York's NASDAQ stock market - said on February 18 its revenues in 2003 reached US$65.5 million, with a 145.4 per cent increase year-on-year.

It also reported net profits of US$39.0 million, or US$1.25 per American Depositary Share, compared to the previous year's net profit of US$2.0 million.

"We have seen a very successful year in 2003," said Ted Sun, acting chief executive officer of the Chinese company, in Beijing on February 18.

Netease's revenues in the past quarter were US$19.5 million, a 16.4 per cent growth over the previous one. Its net profits also reached US$11.4 million in the quarter or 36 US cents per American Depositary Share, an 11.9 per cent quarter-on-quarter and 118.3 per cent year-on-year increase.

It also beat the Reuters Research consensus of 32 cents, although the revenues were short of the consensus of US$20.1 million.

The price of the company's shares on the NASDAQ gained 7.77 per cent to US$44.51 in after-hour trading on February 17 in New York, after announcing the results.

Online games were the biggest revenue source for the company in the fourth quarter with a 32 per cent growth over the third quarter to US$8.5 million, accounting for 44 per cent of the company's total.

Michael Yin, a Shanghai-based Internet analyst, underlined the importance of online games for Netease.

"Netease is an early-starter in the online game industry in China and has its own technology, so its advantage in the area is quite clear."

Netease also reversed the sales drop of its wireless messaging service in the third quarter due to the suspension of some co-operation with third parties in the second quarter by China Mobile, the country's biggest mobile operator.

The company said in its financial report that revenues from wireless value-added and other e-commerce services for the quarter were US$7.8 million, an 8.4 per cent increase over the previous three months, compared with a 20 per cent drop in the third quarter.

Netease's online advertising also saw a slight increase of 3 per cent in the fourth quarter to US$3.2 million, compared with a growth rate of 30 per cent in the third quarter.

Yin pointed out that the slowdown of mobile messages and advertising growth was partly due to bigger revenue bases and intense competition.

However, he warned Netease should pay more attention to the situation and either spend more efforts on the two businesses or try to find new revenue sources.

Sun said his company will release another in-house game this year to expand its presence.

The company already began to charge users of its new game Fantasy Westward Journey, mainly targeting young women.

He said Netease is also considering buying or renting a new office in Guangzhou, where half of its employees work, but it has not yet made a final decision. A previous report said Netease had reserved a 60,000-square-metre plot of land in the city to build a new office building.

Source: China Daily

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