Chinese wireless value-added services firm Linktone (LTON) stated that its revenues for the third quarter ended September 30, 2008 rose slightly to USD20.3 million, compared with USD19.1 million in the second quarter of 2008 and USD13.3 million in the third quarter of 2007.
The WVAS company announced its unaudited financial results for the third quarter ended September 30, 2008 and showed a GAAP net loss of USD2.3 million, compared with net loss of USD10.6 million in the second quarter of 2008 and net loss of USD2.8 million in the third quarter of 2007. However, for the fourth quarter ending December 31, 2008, Linktone expects gross revenue to be approximately USD16.5 million to USD17.5 million. The lower revenue projection revenue compared to total revenue for the third quarter is mainly due to the reduction of its advertising revenue.
Michael Li, Linktone's CEO, tried to be upbeat about these figures on the day the Dow dropped 7.7% in the United States: "Our number one priority remains returning Linktone to profitability. This quarter we took decisive action to further streamline operations and increase our focus on our core WVAS business. We terminated our exclusive advertising partnership with Tianjin Satellite Television, following our decision to end our relationship with the Chinese Youth League Internet, Film and Television Centre with regard to Qinghai Satellite Television. This further reduced our exposure to the traditional media business in China, which is facing strong headwinds from the slowing global economy. We took an impairment charge of USD0.6 million this quarter related to TJSTV."
Data-related services revenue was USD10.2 million, representing 50% of total revenues, compared with USD6.9 million or 36% for the second quarter of 2008. The sequential increase in revenue was primarily due to an improved business environment. Sales in the company's SMS services in the third quarter more than doubled quarter-over-quarter, due to the seasonal popularity of SMS services during the summer school vacation months as well as increased sales and marketing efforts to promote SMS services during the quarter.
Advertising service revenue accounted for 18% or USD3.7 million of total revenues in the third quarter of 2008, compared with 24%, or USD4.6 million for the second quarter of 2008. The sequential decrease was primarily due to the termination of partnership agreements with QSTV.
As previously announced, the company's affiliated companies terminated their agreements with TJSTV in September 2008. The termination of these agreements resulted in an impairment charge of USD0.6 million with respect to the company's investment in TJSTV, which is reflected in the company's consolidated statement of operations and comprehensive income for the third quarter.
Linktone's gross margin was 32% of net revenues, or gross revenues minus business tax, compared with 9% for the second quarter of 2008 and 40% for the third quarter of 2007. Operating loss was 12% of net revenues, compared with operating loss of 58% for the second quarter of 2008 and operating loss of 22% in the third quarter of 2007. The sequential decrease in operating loss was primarily due to an impairment charge of USD6.0 million incurred in the second quarter of 2008 in connection with the termination of the partnership agreements with QSTV.
Days sales outstanding, the average length of time required for the company to receive payment for services delivered, were 77 days at the end of the third quarter of 2008, compared with 69 days at the end of the second quarter of 2008.