AsiaInfo (ASIA) has announced first quarter results for the period ended March 31, 2006.

Exceeding guidance, net revenue for the first quarter was US$19.7 million, a decrease of 5% year-over-year, and an increase of 20% sequentially.

The rise in net revenue for the quarter was the result of a strong performance in AsiaInfo's high-margin telecom business, which posted net revenue growth of 11% year-over-year and 8% sequentially, and the better than expected performance of Lenovo-AsiaInfo's security products and services business.

Gross revenues for the first quarter were US$27.5 million, representing an increase of 3% year-over-year and an increase of 39% sequentially. Gross margins were 36% in the first quarter compared to 41% in the year ago period and 23% in the previous quarter.

"During the first quarter, we saw strong growth in our telecom business as we continued to focus on this core market," said Steve Zhang, AsiaInfo's President and Chief Executive Officer. "We continue to develop high-value solutions for our telecom customers, and are encouraged by the growth potential of this market."

Revenue from software products and solutions for the first quarter was US$16.1 million, an increase of 4% from the year-ago period and an increase of 27% sequentially.

Service revenue was US$3.2 million, a 34% decrease year-over-year and a 12% sequential decrease. Third-party hardware revenue for the quarter was US$8.2 million, a 29% increase over the year ago period and an increase of 134% sequentially.

During the first quarter, the Lenovo-AsiaInfo business unit contributed approximately 9% to net revenue, including a 10% contribution to software products and solutions revenue and a 7% contribution to service revenue.

Lenovo-AsiaInfo contributed 22% to the Company's net revenue in the year-ago period and nominally in the previous quarter.

Total operating expenses for the quarter were US$10.4 million, an increase of 7% year-over-year and a 69% decrease sequentially. The large sequential decrease was mainly due to the large non-cash charge for impairment of goodwill and acquired intangible assets relating to Lenovo-AsiaInfo in the fourth quarter of 2005. Lenovo-AsiaInfo contributed 23% to total operating expenses for the first quarter of 2006.

Net income from continuing operations for the first quarter was US$0.4 million, or US$0.01 per basic share. Net income in the year-ago period was US$1.7 million, or US$0.04 per basic share, while net loss was US$28.1 million or US$0.61 per basic share in the previous quarter.

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