Linktone's (LTON) newly announced financial results for the second quarter ended June 30, 2005, show the company's gross revenues at $17.5 million, up 16% quarter-on-quarter.

Linktone's second quarter 2005 net income included $0.5 million of non-cash stock-based compensation expense. Excluding the effect of this expense, adjusted net income for the second quarter was $4.3 million, or $0.15 per fully diluted American Depositary Share (ADS).

Linktone's second quarter sales of 2.5G and audio-related services were $6.9 million, or 40% of gross revenues, compared with $5.3 million, or 35%, for the first quarter of 2005.

Multimedia messaging services (MMS), wireless application protocol services (WAP), and Java games remained relatively steady, accounting for 13% of second quarter gross revenues, compared with 14% for the first quarter of 2005.

Audio-related services, including interactive voice response services (IVR) and ring-back services (RBT), generated 27% of gross revenues, up sequentially from 21%. Linktone attributes the increase to successful sales promotions, effective cross-selling, and the penetration of new provinces with China Netcom and China Telecom.

The company's second quarter sales of short messaging services (SMS) were $10.4 million, up from $9.8 million in the prior quarter. This represented 59% of total gross revenues, compared to 65% for the prior quarter, demonstrating Linktone's continued diversification of product offerings. The sequential growth resulted primarily from increased promotional activity.

Linktone estimates that it averaged approximately 7.3 million paying users per month for the second quarter of 2005, which was largely unchanged from the estimate for the first quarter of 2005. The company estimates that average revenue per user (ARPU) was approximately $0.71 per month for the second quarter of 2005, an increase compared to approximately $0.69 from the previous quarter. Linktone attributes the increase in ARPU to its continued diversification of product offerings and effective cross-selling strategies.

Linktone's gross margin for the second quarter of 2005 was 66% of net revenues, or gross revenues minus business tax, which was unchanged compared with 66% for the first quarter of 2005 and 68% for the second quarter of 2004.

On June 30, 2005, Linktone's balance sheet included cash, cash equivalents and short-term investments available for sale totaling $77 million.


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