Business, Internet

Online Game Profit Vaporizes In China For Giant Interactive

Proving that hype surrounds the maxim that online game companies can mount profit offensives in even the worst economic times, Chinese online game developer Giant Interactive Group Inc. has reported a sequential profit drop of 20.1% as it announced its unaudited financial results for the first quarter ended March 31, 2009.

While the company's overall net revenue increased 5.8% quarter-over-quarter to CNY373.5 million, net income decreased 20.1% quarter-over-quarter to CNY231.9 million and and a year-over-year decrease of 31.5% from CNY338.7 million. Giant Interactive reports that the sequential decrease is attributable to a tax expense of CNY25.9 million in the first quarter 2009, compared to a tax benefit of CNY34.9 million in the fourth quarter 2008. Net income declined year-over-year due to the disruptions caused by the adjustments to ZT Online's monetization structure during the third quarter 2008. Net income margin was 62.1% for the first quarter 2009, compared to 82.2% in the fourth quarter 2008 and 71.8% in the first quarter 2008.

In a bid to add some gloss to its earnings, and for what it is worth, the company did say its gross profit increased 5.9% quarter-over-quarter to CNY313.9 million. Gross profit margin for the first quarter 2009 was 84.0%.

Shi Yuzhu, Giant's chairman and CEO, reiterated the cheerfulness: "Despite economic headwinds, we began 2009 on sound footing, with our results in-line with guidance. On a sequential basis, both revenue and gross profit showed improvement as gamers continued to adapt to the monetization structure and the enhanced features of our flagship game ZT Online. I believe the changes we have implemented provide us with a more balanced revenue model to extend the lifecycle of ZT Online. So far in the first two quarters of 2009, we focused most of our efforts on product development, rather than on sales and marketing campaigns. As a result, we plan to launch the largest expansion pack to date for ZT Online in July 2009."

As of March 31, 2009, Giant's cash, cash equivalents and short-term investments totaled CNY5.21 billion, compared to CNY5.07 billion as of December 31, 2008.

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