Chinese Internet company NetEase.com (NTES) says total revenues for the first quarter of 2008 were CNY651.9 million, compared to CNY622.1 million and CNY554.6 million for the fourth and first quarters of 2007, respectively.

Net profit for the first quarter of 2008 totaled CNY269.4 million, compared to CNY389.8 million and CNY301.5 million for the fourth and first quarters of 2007, respectively. The quarter-over-quarter and the year-over-year decrease in net profit were primarily due to the increase in tax charges reported for the first quarter of 2008.

As the company anounced its unaudited financial results for the quarter ended March 31, 2008, William Ding, CEO of NetEase stated, "The key to our success in 2008 and beyond will be our continued ability to evolve as we anticipate the ever-changing dynamics of the Chinese Internet market. We believe that diversification in our product offerings will allow us to achieve our goals. During the first quarter of 2008, we continued to intensify our focus on the development of item- and fee-based games and remain on schedule to start closed beta testing of Tianxia II, which will be our first 3D item-based game."

Revenues from online games were CNY555.9 million for the first quarter of 2008, compared to CNY507.0 million and CNY481.9 million for the fourth and first quarters of 2007, respectively. Revenues from advertising services were CNY77.1 million for the first quarter of 2008, compared to CNY98.1 million and CNY56.2 million or the fourth and first quarters of 2007, respectively. Revenues from wireless value-added services and others were CNY18.9 million for the first quarter of 2008, compared to CNY17.0 million and CNY16.6 million for the fourth and first quarters of 2007, respectively.

Gross profit for the first quarter of 2008 was CNY532.0 million, compared to CNY488.0 million and CNY430.1 million for the fourth and first quarters of 2007, respectively. Gross margin for the online game business for the first quarter of 2008 was 90.2%, compared to 90.7% and 89.6% for the fourth and first quarters of 2007, respectively. Gross margin for the advertising business for the first quarter of 2008 was 45.8%, compared to 52.0% and 35.7% for the fourth and first quarters of 2007, respectively. Gross loss margin for the WVAS and others business for the first quarter of 2008 was 6.2%, compared to 19.5% and 36.1% for the fourth and the first quarters of 2007, respectively.

Total operating expenses for the first quarter of 2008 were CNY127.6 million, compared to CNY152.8 million and CNY117.7 million for the fourth and first quarters of 2007, respectively. The quarter-over-quarter decrease in selling and marketing expenses was primarily due to decreased promotion costs for the online game and advertising businesses during the first quarter of 2008.

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