Ninetowns (NINE) provided lowered guidance for the full year ending December 31, 2005, as it reported its second quarter financial results.

Total net revenue for the second quarter of 2005 was US$7.8 million, representing a 38.4% increase as compared to total net revenue of US$5.6 million for the second quarter of 2004.

Net revenue from sales of enterprise software for the second quarter of 2005 was US$6.3 million, representing 80.5% of total net revenue, as compared to 96.9% and 83.1% for the second quarter of 2004 and the first quarter of 2005, respectively.

Net revenue from software development services for the second quarter of 2005 was US$1.5 million, representing 19.5% of total net revenue, as compared to 3.1% and 16.9% for the second quarter of 2004 and the first quarter of 2005, respectively.

Net income for the second quarter of 2005 was US$5.1 million, representing a 47.1% increase as compared to net income of US$3.5 million for the second quarter of 2004. Net income for the first quarter of 2005 was US$5.9 million. Diluted earnings per share/ADS for the second quarter of 2005 were US$0.14, compared to diluted earnings per share/ADS of US$0.13 and US$0.16 for the second quarter of 2004 and the first quarter of 2005, respectively.

The Company generated US$5.7 million in cash from operations in the second quarter of 2005, resulting in a debt free balance sheet, and a cash and short- term investment balance of US$109.3 million at the end of the second quarter of 2005. The Company's unearned revenue balance at the end of the second quarter was US$11.6 million, which is expected to be recognized as revenue over the next twelve months.

For the full year ending December 31, 2005, Ninetowns now estimates that its total net revenues will be in the range of US$26.5 million to US$30.5 million, operating margin will be in the range of 52% to 58% and diluted earnings per share/ADS will be in the range of US$0.44 to US$0.50, based on a diluted share count of 36 million shares/ADSs. Previously, the Company had estimated that its full year 2005 total net revenues would be in the range of US$31.4 million to US$36.2 million, operating margin would be in the range of 65% to 70% and diluted earnings per share/ADS would be in the range of US$0.60 to US$0.70.

For the third quarter ending September 30, 2005, the Company expects that its total net revenues will be in the range of US$7.1 million to US$7.4 million, net income will be in the range of US$3.8 million to US$4.3 million and diluted earnings per share will be in the range of US$0.11 to US$0.12, based on a diluted share count of 35.6 million shares/ADSs.