Software

The9 Shows Small Increase In Quarterly Revenue For Online Games

For the fourth quarter 2004, The9 Limited (NCTY) reported net revenues of US$1.0 million, an increase of 0.6% from the third quarter of the year. The company announced these unaudited results today.

For the entire year of 2004, the company says its net revenues increased by 111.9% to CNY34.7 million (US$4.2 million) from CNY16.4 million (US$2.0 million) in 2003, the result of an increase in revenues from game operating support, website solutions and advertisement and SMS services, offset in part by the decrease in revenues from online game services and other products and services.

Online game services revenue primarily represents revenue from the sale of prepaid playing time for The9's proprietary online virtual community game, "The9 City" and does not include MMORPG related revenue. For the fourth quarter 2004, revenues of online game services decreased 35.7% to CNY0.06 million (US$0.01 million) from CNY0.09 million (US$0.01 million) in the third quarter. For the year, online games services revenues declined 47.0% to CNY0.4 million (US$0.04 million).

For the fourth quarter 2004, revenues from game operating support website solutions and advertisement were CNY6.03 million (US$0.7 million), an increase of 1.3% quarter-over-quarter.

For the year, revenues from game operating support website solutions and advertisement increased by 85.2% to CNY24.7 million (US$3.0 million) from CNY13.3 million (US$1.6 million) in 2003.

Revenue from game operating support, website solutions and advertisement is mainly from the provision of game operating support to 9Webzen in connection with the operation of MU in China. The game operating support services provided to 9Webzen mainly include payment collection and processing and user membership management, and production of prepaid MU cards.

Compared to the third quarter, operating expenses increased 66.4% to CNY15.1 million (US$1.8 million), mainly due to continuous development costs relating to The9's first proprietary 2D side-scrolling MMORPG, Joyful Journey West, more advertising and promotion activities relating to Mystina Online which commenced open beta testing in September 2004 and preparation for the launch of WoW's open beta testing in China in 2005.

Operating expenses in 2004 increased 121.9% from CNY15.93 million (US$1.9 million) in 2003 to CNY35.3 million (US$4.3 million) in 2004. The increase in operating expenses in 2004 compared to 2003 also reflects increases in costs associated with product development, preparation for the launch of WoW and Mystina Online.

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