Shanda Entertainment reveals mixed results in Q3 financial report

Chinas' largest online gaming company, Shanda Entertainment, has released its Q3 financial results, showing an increase in year-on-year revenues, but falling share prices due to a decline in concurrent online game users.

Net revenue, posted at RMB 499.7 million (EURO 52.8 million), showed an increase of 41.4 per cent compared with the same period last year. However, the figure was 7.4 per cent lower than the results for the second quarter of 2005.

MMORPG revenue, accounting for 66.3 per cent of total revenues for the company increased by 23.3 percent year-on-year, but showed a quarter-over-quarter decline of 8.4 per cent, reaching RMB331.5 million (EURO 35.4 million).

The number of concurrent users of Shanda's MMORPG titles decreased to approximately 630,000, compared to 763,000 in the previous quarter. The company attributes this decline to the waning interest in its Mir II game, which has lost almost 150,000 users compared to the second quarter.

Tianqiao Chen, Shanda's CEO commented: "While the circumstances with Mir II have led to quarter-over-quarter revenue decline, we are pleased to see that the rest of our game portfolio performed well during the summer season. This is an evidence of the strength of a diversified content platform, which we continued to expand during the last two years.

In addition to three new in-house developed casual games that we intend to launch in the fourth quarter this year, we expect to launch Dungeons & Dragons and three new games from Actoz in 2006." which are expected to contribute new revenue streams starting from the fourth quarter of 2005."

The company is also set to move into the hardware market, with the launch of its Shanda EZ Series, including the EZ Mini, EZ Pod and EZ Station, which Chen believes will "contribute new revenue streams starting from the fourth quarter of 2005."

Stock price fell following the financial report, and currently rests at USD 20.20. The release of D&D Online is expected to produce stronger revenues in the final quarter, in addition to a diversification of products which the company continues to demand.

"We believe our home entertainment strategy is well positioned and we will continue to invest in such initiatives in order to take Shanda through the next phase of growth," Chen concluded.