In your article 'Linktone's Big Brother' published on April 29,2004, we have found a number of wrong information and partial perceptions.
To name a few: a)Linktone doesn't have banner revenue. But the article attrubites banner sales as our revenue engine by mistake. b) China mobile is our business partner instead of customer. Linktone's customer is the 290 million mobile phone users currently available in China. c) Linktone has no debt. But the article reported us booking $164,000 bad debt expense, again by mistake. There are many other mistakes and misunderstandings in our business found in this article. We are a listed company, taking great effort in building up investors creditibility and confidence. Any mistakes and misunderstanding in publication like yours could send wrong messages to the public investors and ultimately hurt our public image. Please take proper action to correct the wrong information in this article and the possible influence already! caused by this article. We sincerely suggest that you clarify with us by checking our website (www.linktone.com) or consult with our Investors Relations department ([email protected]) for our company profile and other business facts before you publish article concerning our company.
Investor Relation Specialist
Harbour Ring Plaza, 6th Floor,
18 XiZangZhong Road, Shanghai, 200001, PRC
Hello Ms Chen,
Thank you for your message and we hope to answer your queries.
We thought that because Linktone had such a great year in 2003, it could be considered a banner year for the company. I believe you might have misread the article and thought that we inferred that Linktone made money off of "banner ad sales" which are the multimedia ads used on Web-based sites to monetize their content. The word "banner" has many meanings and we believe it was fairly clear in the article that we were stating Linktone had a fantastic (i.e. "banner") year. If this is not the case and Linktone would like to go on record as saying that it was not a banner year for the company, please let us know.
The article never meant to suggest that China Mobile was a customer. The point of the article is that it is a "big brother". On semantics though, one could say that China Mobile was Linktone's customer. Usually the way service providers and China Mobile relate to each other are thus: a) an enduser pays their mobile phone bill and China Mobile gets the funds; b) China Mobile takes out the part of that fund that should go to the service provider (i.e. Linktone) and then gives Linktone that money; c) because Linktone has just been given money, they must issue a value-added or service receipt to China Mobile to document the money transfer. Therefore, because China Mobile is providing money to Linktone and Linktone then gives back a receipt, from an accounting position one can see how China Mobile could be construed as Linktone's client. Though, again, the purpose of the article was to only show the China Mobile was a big brother.
Bad debt means you sell to a customer on credit and they don't pay. It has no connection in the article to a company borrowing money. Please see the extraction from Linktone's financials which show US$160,000 of provision for bad debt (the US$164,000 used in the article comes from rounding of numbers, but that is only a difference of less than a percentage point). This can be found on page F-6 of their prospectus which you can find here:
I hope this answers your questions.