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Linktone Announces Expectations Of Q3 2004 Results

Linktone (NASDAQ: LTON), a provider of wireless value-added services to mobile phone users in China, today announced preliminary expectations of its financial results for the third quarter ended September 30, 2004, and its plans to report final results on November 15, 2004.

For the third quarter, Linktone currently anticipates gross revenues of approximately $13.1-13.4 million. This compares with the $12.1 million reported for the second quarter ended June 30, 2004, and with the company's prior third-quarter outlook of approximately $13.7-14.3 million. Linktone attributed its revised revenue expectations to lower than anticipated sales of short messaging services (SMS), due principally to implementation issues associated with mobile operators' roll-out of new service management platforms and increased focus on compliance and new service initiatives. The company estimates that the anticipated shortfall in SMS sales will be partially offset by higher than expected sales of 2.5G and audio-related services, both in absolute terms and as a percentage of gross revenues.

As a result of its revised expectations of gross revenues, as well as planned increases in operating expenses and one-time expenses detailed below, Linktone currently anticipates third-quarter net income of approximately $2.7-2.9 million. This compares with the $3.5 million reported for the second quarter and with the company's prior third-quarter outlook of approximately $4.0-4.2 million. Assuming approximately 27.2 million weighted average American Depositary Shares (ADSs) outstanding on a fully diluted basis, Linktone's revised expectations of third-quarter net income per fully diluted ADS are $0.10-0.11, compared with the $0.13 per ADS reported for the second quarter. Excluding one-time expenses associated with financing activities that were discontinued due to market conditions, as well as office relocation expense, tax planning expense, and non-cash stock-based compensation expense, totaling approximately $950,000, anticipated net income for the third quarter

would have been approximately $3.6-3.9 million, or $0.13-0.14 per fully diluted ADS.

Linktone had provided its previous outlook in reporting second-quarter results on August 4, 2004. At that time, the company had estimated that 2.5G and audio-related services would contribute approximately 15-17% of third-quarter gross revenues, and that gross margin would be approximately 66-69% of third-quarter net revenues (gross revenues minus business tax). Linktone currently expects that 2.5G and audio-related services will account for approximately 20-22% of third-quarter gross revenues, while gross margin will remain in the same range.

The company plans to report its final third-quarter results and provide its outlook for fourth-quarter results after the close of the U.S. financial markets on November 15, 2004. Management has scheduled a conference call at 7:00 p.m. Eastern Standard Time on November 15 (4:00 p.m. Pacific Standard Time on November 15 and 8:00 a.m. Beijing/Hong Kong Time on November 16). The dial-in number for the call is 800-473-6123 for U.S. callers and 973-582-2703 for international callers.

A replay of the call will be available from November 15 to December 14, 2004. To access the replay, U.S. callers should dial 877-519-4471 and enter PIN number 5278144; international callers should dial 973-341-3080 and enter the same PIN number. In addition, a live and archived webcast of this call will be available on the Linktone Web site.

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