Chinese wireless company Linktone (LTON) says it is disappointed by its fourth quarter of 2005 unaudited financial results.

Linktone's net income for the fourth quarter was $1.5 million, or $0.05 per fully diluted ADS, compared with $4.1 million, or $0.15 per ADS, for the third quarter of 2005 and $1.9 million, or $0.07 per fully diluted ADS, for the fourth quarter of 2004.

Acting Chief Executive Officer and Chief Financial Officer Colin Sung said, "While we are disappointed with the financial results of the fourth quarter, we have begun 2006 by undertaking a transition designed to take Linktone to the next level through strengthening our financial performance and position in the wireless value-added services industry in China."

Linktone's CEO Raymond Yang resigned last Friday, enabling Colin Sung to become Acting Chief Executive Officer.

Linktone attributes the lower than expected GAAP net income for the fourth quarter primarily to additional costs associated with increased revenue share payments to content providers, failed marketing programs, and increased expenditures.

The company had gross revenues of $20.6 million, rising from $20.5 million in the third quarter of 2005 and an increase of 32% from $15.5 million in the fourth quarter of 2004. GAAP net income registered at $1.5 million, down 64% from $4.1 million in the third quarter of 2005 and down 22% from $1.9 million in the fourth quarter of 2004.

Linktone estimates that it averaged approximately 7.8 million paying users per month for the fourth quarter of 2005, down from 8.3 million in the third quarter and higher than the 7.3 million reported in the second quarter, primarily due to the high user turnover associated with certain marketing partnerships undertaken in the third quarter. ARPU remained steady at $0.71 per month for the fourth quarter of 2005.

The company's fourth quarter sales of short messaging services (SMS) decreased to $12.9 million, from $13.7 million in the prior quarter. This represented 63% of total gross revenues, compared to 66% for the prior quarter.

Linktone's fourth quarter sales of 2.5G and audio-related services rose to $6.9 million, or 34% of gross revenues, compared with $6.2 million, or 30%, for the third quarter of 2005.

Fourth quarter operating expenses totaled $10.0 million, compared with $8.3 million for the third quarter of 2005 and $8.2 million for the fourth quarter of 2004.

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