Internet Ads And Online Games: Quarterly Revenue Drop But Annual Increase For NetEase In China

February 26, 2009

Editorial Staff

Chinese Internet company NetEase.com has announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2008.

NetEase's total revenues for the fourth quarter of 2008 were CNY801.7 million, compared to CNY806.6 million and CNY622.1 million for the preceding quarter and the fourth quarter of 2007, respectively. Revenues from online games were CNY672.5 million for the fourth quarter of 2008, compared to CNY675.1 million and CNY507.0 million for the preceding quarter and the fourth quarter of 2007, respectively. Revenues from advertising services were CNY111.8 million for the fourth quarter, compared to CNY113.0 million and CNY98.1 million for the preceding quarter and the fourth quarter of 2007, respectively. Wireless value-added services and others were CNY17.4 million for the fourth quarter of 2008, compared to CNY18.5 million and CNY17.0 million or the preceding quarter and the fourth quarter of 2007, respectively.

Total revenues for fiscal year 2008 were CNY3.0 billion, compared to CNY2.3 billion for the preceding year. Revenues from online games were CNY2.5 billion for fiscal year 2008, compared to CNY1.9 billion for the preceding fiscal year. Revenues from advertising services were CNY405.9 million for fiscal year 2008, compared to CNY305.1 million for the preceding fiscal year. Revenues from WVAS and others were CNY71.7 million for fiscal year 2008, compared to CNY68.0 million for the preceding fiscal year.

William Ding, CEO of NetEase, stated: "As fiscal 2008 drew to a close amid the global economic downturn, we are pleased with the solid performance of NetEase's online game business in the fourth quarter of 2008. The performance of Fantasy Westward Journey continued to demonstrate its robust popularity and extensive community of users among time-based online games in China. In addition, Tianxia II, our first 3D item-based game, achieved positive growth during the fourth quarter in terms of both the number of players and consumption level, following the launch of a new expansion pack on September 24, 2008."

Gross profit for the fourth quarter of 2008 was CNY639.0 million, compared to CNY631.3 million and CNY488.0 million for the preceding quarter and the fourth quarter of 2007, respectively. NetEase' total operating expenses for the fourth quarter of 2008 were CNY168.5 million, compared to CNY164.6 million and CNY152.8 million for the preceding quarter and the fourth quarter of 2007, respectively.

Net profit for the fourth quarter of 2008 totaled CNY575.9 million, compared to CNY313.3 million and CNY389.8 million for the preceding quarter and the fourth quarter of 2007, respectively. Gross profit for fiscal year 2008 was CNY2.5 billion, compared to CNY1.8 billion for the preceding fiscal year. Net profit for fiscal year 2008 totaled CNY1.6 billion, compared to CNY1.3 billion for the preceding fiscal year.

NetEase' total operating expenses for fiscal year 2008 were CNY610.4 million, compared to CNY592.2 million for the preceding fiscal year.

As of December 31, 2008, the NetEase's total cash and time deposit balance was CNY5.6 billion, compared to CNY4.2 billion as of December 31, 2007.