The top Chinese online game operator, Shanda Interactive Entertainment, saw strong growth in revenue in the second quarter of this year.

Shanghai-based Shanda said yesterday that its net profits in the second quarter reached US$26.9 million, almost 60 percent higher than the same period last year and 1.3 percent higher than in the first quarter.

Its earnings per American depositor share (ADS) on the NASDAQ stock exchange in New York stood at roughly the same level, 36 US cents.

"As we look at the remainder of this year, we feel very confident that our diversified portfolio and our strong online games will continue to generate sustainable user and revenue growth," said Chen Tianqiao, chairman and chief executive officer of the Chinese game operator.

Shanda's ADS fell by almost 10 percent yesterday in after-hours trading following the announcement of the results.

Shanda's revenue rose by 88 percent year-on-year and 8.5 percent quarter-on-quarter to US$65.2 million in the quarter ending in June. This was mainly boosted by a 9.3 percent quarter-on-quarter growth of its massive multiple online role play games (MMORPG), which contributed US$43.7 million in revenue.

However, its earnings in the casual game business slowed down in the quarter by 7 percent from the previous one to US$12.7 million.

Chen attributed the decrease to a seasonal change with students, the main group that plays casual games, who were concentrating on examinations rather than going online.

Jim Sun, a technology analyst with Evolution Securities, said Shanda's MMORPG games are at a mature stage so the growth of the casual game sector has become an area where Shanda can achieve high-speed growth.

The company, trying to avoid concentrating too much on MMORPG games and instead penetrate the much bigger home entertainment market, launched a home entertainment strategy last month.

Chen said during a conference call yesterday that his company has been preparing its strategy for more than a year.

Evolution Securities' Sun said in a research note last month that for the rest of this year, Shanda might suffer from fierce competition and a possible slowdown of revenue from its MMORPG games.

Shanda's major competitor, The9, also a NASDAQ-listed Chinese game operator, has launched the World of Warcraft game, which has become fabulously popular in China. It could overtake Shanda's Mir2 and Woool to become the most popular game in China.

Shanghai-listed The9 is expected to announce its results on August 24.

Another competitor, NetEase, has already reported a strong second quarter performance with net profits growing by 60 percent quarter-on-quarter and 150 percent year-on-year.

(China Daily August 11, 2005)