Business, Telecom & Wireless

Linktone's Revenue Plummets As Business Focuses Away From China

With only USD13.9 million in gross revenues for the first quarter ended March 31, 2011, Linktone's just-released financial results show a precipitous drop year-on-year from USD19 million it recorded in 2010 and a decline of about USD2.2 million from the previous quarter ended December 31, 2010.

To add flavor to the poor results, the company's CEO Hary Tanoesoedibjo stated: "We have effectively transitioned Linktone from being solely a mobile value-added content and service provider in the PRC, to a diversified media and entertainment company operating in multiple markets. While our first quarter revenue fell below expectations based largely on weaker than anticipated data-related services due to ongoing policy tightening and other changes at the telecom network operators in the PRC, we continued to shift our product mix beyond data and audio-related services, which accounted for 66% of revenue in the 2011 first quarter, compared with 98% of revenue in the same period in 2010."

The company says gross revenues declined due primarily to further constraints implemented by the telecom network operators in China regarding SMS services. Low box office sales from theatrical titles distributed by the company's majority owned subsidiary InnoForm Group and an increase in competition from parallel DVD imports from lower cost distributors also hit the company's revenue.

However, Linktone's GAAP profitability improved from its net loss of USD1.4 million in the previous quarter to a net income of USD0.9 million in the first quarter ended March 31, 2011.

The company says profitability improved largely as a result of improved gross margins and reduced operating expenses associated with increased operational efficiency, a gain of USD0.2 million from the open market sale of USD10 million of senior secured notes in Aerospace Satellite, and the reversal of a provision against trade receivables in the first quarter of 2011 in the amount of USD40,000, compared with a USD1.2 million provision related to a loan receivable recorded in the fourth quarter of 2010.

That said, the company forecasts the second quarter ending June 30, 2011, to be flat, at best, but most likely to sink further. Linktone anticipates gross revenues to be in the range of USD12 million to USD14 million.

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