AsiaInfo (ASIA) has announced fourth quarter and full year results for the period ended December 31, 2005.

Net revenue for the fourth quarter was US$16.5 million, a decrease of 20% year-over-year and a 18% decrease sequentially.

The company says the shortfall in net revenue for the quarter was the result of significantly lower than expected shipment volume for the Lenovo-AsiaInfo business unit's security products.

Steve Zhang, AsiaInfo's President and Chief Executive Officer, said, "Clearly the disappointing performance of the Lenovo-AsiaInfo security business significantly impacted our results this quarter. We have initiated an inquiry into the issues that affected performance at Lenovo-AsiaInfo during the fourth quarter and we may take further actions as appropriate based upon the results of our inquiry. We believe that with its new management team, Lenovo-AsiaInfo has a strong future as the market for security products and services in China continues to grow rapidly."

Gross revenues for the fourth quarter were US$19.8 million, representing a decrease of 31% year-over-year and a decrease of 15% sequentially.

Gross margins declined to 24% in the fourth quarter compared to 39% in the year-ago period and 47% in the previous quarter.

Revenue from software products and solutions for the fourth quarter was US$12.7 million, a decrease of 17% from the year-ago period and a decrease of 15% sequentially. Service revenue was US$3.7 million, a 24% decrease year-

over-year and a 25% sequential decrease. Third-party hardware revenue in the quarter fell to US$3.5 million as the company continued its focus on high margin software products and solutions.

During the fourth quarter, the Lenovo-AsiaInfo business unit's contribution to the company's net revenue was nominal due to the business unit's revenue shortfall. Lenovo-AsiaInfo contributed 26% to the company's net revenue in the previous quarter.

Due to the disappointing performance of the Lenovo-AsiaInfo business unit, AsiaInfo recorded a US$21.2 million non-cash charge for impairment of goodwill and acquired intangible assets for the fourth quarter. Reflecting this charge, operating loss was US$29.5 million, compared to an operating profit of US$0.6 million in the year-ago period and an operating loss of US$0.8 million in the previous quarter.

Net loss from continuing operations for the fourth quarter was US$28.1 million, or US$0.61 per basic share. Net income in the year-ago period was US$1.2 million, or US$0.03 per basic share, and US$1.5 million or US$0.03 per basic share in the previous quarter.


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