CDC Corporation (CHINA) today announced its unaudited financial results for the second quarter of 2005 and also warned investors of possible near term adverse effects on the financial results of the company due to restructuring and additional investment.

The company reported revenues of US$64.6 million, an increase of 44% from US$44.9 million in Q2 2004. Second quarter 2005 gross profit was US$36.0 million, up 39% from US$25.9 million in Q2 2004.

In a company statement, CDC said that in order to improve its long term financial results, the company has recently embarked upon a strategic evaluation of its businesses and will take steps that may include the standardization of certain policy and procedures, reduction of operating expenses, incurrence of charges such as restructuring charges, additional investment, impairment of assets and discontinuation of operations together with the attendant gains or losses from such impairments or disposals. These initiatives may result in a near term adverse effect on the financial results of the company.

Gross margin for the quarter was 56%, compared to 58% in Q2 2004. Operating income was US$1.2 million compared to an operating loss of US$2.0 million in Q2 2004. Income before taxes was US$2.9 million compared to a loss before taxes of US$0.5 million in Q2 2004. Net income was US$36,000 compared to a net loss of US$2.0 million in Q2 2004. Basic earnings per share was less than 1 US cent compared to loss per share of 2 US cents in Q2 2004.

Total software revenue in Q2 2005 was US$42.5 million, up 76% from US$24.1 million in Q2 2004 due significantly to the company's acquisition of Ross Systems in August 2004.

Total mobile services and applications ("MVAS") revenue for Q2 2005 was US$8.6 million, up 18% from US$7.3 million in Q1 2005 and up 13% from US$7.6 million in Q2 2004.

Operating expenses totaled US$34.8 million, an increase of 24% from US$28.0 million reported in Q2 2004. The year-on-year increase in operating expenses is partially due to the company's acquisition of Ross Systems and the consolidation of its results, including its operating expenses, since such time.

As of June 30, 2005, the company had approximately 111 million common shares outstanding.


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