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Online Games Lift NetEase Profit

Netease.COM Inc posted a 11.9 percent rise in net profit in the fourth quarter compared with the previous three months, helped by continuing growth in online games.

For the period ended December 31, the NASDAQ-listed firm reported a net profit of US$11.4 million, or 36 cents per share, up from US$10.2 million, or 33 cents per share, in the third quarter. Its year-earlier net profit totaled US$5.2 million, or 17 cents per share.

Revenue grew to US$19.5 million from US$17.7 million in the third quarter, compared with US$11 million a year ago.

"NetEase's profit came from growth in its online games while its rivals such as Sina Corp and Sohu.com Inc still led in revenues from online advertisement and short message services," said Chen Qiang, an analyst with CCID Consulting Co Ltd.

The company's online game revenue increased 31.8 percent over the third quarter and quadrupled in one year. It accounted for 43 percent of the total revenue in the fourth quarter.

The company's in-house developed game, Westward Journey Online Version 2.0, which has attracted approximately 1.6 million individual users by December 2003, shored up its strong growth in this segment.

"The quarter's result meets our expectation. Online gaming will continue to be a major growth driver in 2004," said Ted Sun, acting chief executive officer of NetEase."The entry threshold for online games is high, so we will maintain our leading position in this area though many companies have been trying to grab market share."

Despite its leadership in online gaming, NetEase's rivals outperformed the firm in online advertisements.

Sina reported US$12.9 million of advertisement revenue in its fourth quarter, almost four times NetEase's US$3.2 million in the same period.

(Shanghai Daily February 19, 2004)

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