Shanda's (SNDA) unaudited financial results for the second quarter ended June 30, 2006 show gross margin was 56.5% in the second quarter of 2006, down from 56.8% in the first quarter of 2006 and from 68.4% in the second quarter of 2005.

The company's total net revenues increased 18.8% quarter-over-quarter and decreased 24.8% year-over-year to CNY405.7 million.

The number of active paying accounts for MMORPGs was 2.23 million in the second quarter of 2006, compared to 2.47 million in the first quarter of 2006. The average monthly revenue per active paying account for MMORPGs increased to CNY45.5 in the second quarter of 2006, up from CNY30.4 in the first quarter, due to increased purchases of in-game premium features.

Shanda reported income from operations of CNY91.3 million in the second quarter of 2006 compared to income from operations of CNY18.4 million in the first quarter of 2006 and CNY243.8 million in the second quarter of 2005. The company says the sequential improvement was principally the result of lower operating expenses.

In the second quarter of 2006, Shanda had net income of CNY133.6 million, compared to net income of CNY11.8 million in the first quarter of 2006 and CNY223.0 million in the second quarter of 2005. Earnings per diluted ADS were CNY1.86, compared to earnings per diluted ADS of CNY0.16 in the first quarter of 2006 and CNY3.06 in the second quarter of 2005.