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KongZhong's Results Show Ups And Downs

KongZhong (KONG) says its revenue grew 329% year-over-year and 33% sequentially to US$16.49 million as it announced its results for the last full quarter of 2004. 2G revenue grew 127% year-over-year but declined 6% sequentially to US$1.72 million.

The company says under US GAAP, diluted earnings per ADS were $0.19, up from diluted earnings per ADS of $0.06 in the same period of the previous year (4Q03) and up from diluted earnings per ADS of $0.15 in the third quarter of 2004 (3Q04). Net income in the fourth quarter was $6.60 million, an increase from $1.56 million in 4Q03 and $5.33 million in 3Q04.

Commenting on the results, KongZhong's Chairman and CEO, Yunfan Zhou, said, "We are very pleased with our performance in the fourth quarter with record revenue and profit. During the quarter, the wireless value-added services market faced some challenging issues, including the continuing transition of SMS services to the Mobile Information Services Center (MISC) service management platform and an increase in overall competition. Despite these challenges, we were able to successfully grow many of our businesses by continuing to sustain our leadership position in the fast growing 2.5G market in China, diversifying our revenues from different services and distribution channels, expanding our national sales network into more provinces, and partnering with more providers of branded contents such as the film 'Kung Fu Hustle.' As the Chinese market continues to migrate from 2G to 2.5G mobile phones, we believe we are well positioned to capture this long-term growth potential."

Cash flow from operating activities totaled $8.99 million in the fourth quarter of 2004, compared to $0.74 million in the third quarter. In the fourth quarter, the company spent $0.35 million on capital expenditures. The net increase in cash and cash equivalents was $8.64 million.

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