Chinese wireless value-added services firm KongZhong (KONG) announced its unaudited second quarter 2008 financial results and says total revenues increased 10% sequentially to USD23.52 million.

Total WVAS revenues for the second quarter increased 9% sequentially to USD23.13 million. Revenues from 2.5G services accounted for approximately 33% of total WVAS revenues and revenues from 2G services represented the remaining 67%. Revenues from 2.5G services, which include services delivered using WAP, MMS, and Java technologies, increased 15% sequentially to USD7.72 million. WAP revenues in the second quarter of 2008 were USD2.97 million, a decrease of 3% sequentially. MMS revenues in the second quarter of 2008 were USD4.43 million, an increase of 54% sequentially. Java revenues in the second quarter of 2008 were USD0.33 million, a decrease of 58% sequentially.

Total mobile advertising revenues, which were mainly generated from KongZhong's wireless Internet sites, was a pitiful USD357,000 in the second quarter of 2008, perhaps showing that China is not nearly ready for mobile advertising services.

Revenues from 2G services, including SMS, IVR, and color ring back tone, increased 7% sequentially to USD15.40 million in the second quarter of 2008. SMS revenues in the second quarter of 2008 increased 7% sequentially to USD10.30 million. IVR revenues in the second quarter of 2008 increased 10% sequentially to USD3.15 million. CRBT decreased 1% sequentially to USD1.95 million.

The aggregate revenues from China Unicom, China Telecom and China Netcom accounted for approximately 26% of the total second quarter WVAS revenues, while revenues from China Mobile accounted for the remaining 74%.

The WVAS cost of revenues in the second quarter of 2008 totaled USD12.53 million, an increase of 8% sequentially. WVAS gross margin in the second quarter of 2008 was 46% compared to 45% in the first quarter of 2008. Total WVAS operating expenses in the second quarter of 2008 were USD8.50 million, an increase of 15% sequentially. Product development expenses were USD1.93 million and represented 8% of revenues. Sales and marketing expenses were USD3.74 million and represented 16% of revenues. General and administrative expenses were USD2.82 million and represented 12% of revenues.

Operating expenses related to the company's wireless Internet sites were USD2.80 million, which included USD1.34 million in marketing and advertising expenses. The company's total headcount increased from 817 as of March 31, 2008 to 855 as of June 30, 2008.

As of June 30, 2008, KongZhong had USD130.63 million in cash and cash equivalents. Cash in-flows from operating activities totaled USD4.65 million in the first six months of 2008. The company expects total revenues for the third quarter of 2008 to be between USD23.5 million and USD24.5 million.


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