MOSTLY CHINA

[Jang-A-Lang]

Thanks MT. NTES and NCTY are two more Chinese online gaming stocks. NTES beat by .11

6:03PM Netease.com beats by $0.11, beats on revs (NTES) 18.90 +0.22 : Reports Q4 (Dec) earnings of $0.41 per share, $0.11 better than the First Call consensus of $0.30; revenues rose 15.1% year/year to $85.3 mln vs the $75.9 mln consensus.

NCTY reports tomorrow after the bell. I think they will do well also.

52 week high at 52.44 in July, so the chart is in a nasty downtrend, and I believe the reason to be because their marketing was excessive(lower net income past two Q's...) coupled with some dilution. I don't know whether they have cut back on marketing or not, but they have stopped the dilution since September.... If you look at the chart you can see it firm up a bit towards the end of Sept going into the 3rd Q's earnings. Too bad they missed, and caused yet another downward push. The stock has been increasing revenue the entire time, just spending too much. I think this one might be worth a look... IMO

From the last 10Q:

Revenues

For the third quarter of 2007, The9 reported total gross revenues of RMB333.3 million (US$44.5 million), which increased by 17% compared to RMB284.6 million (US$38.0 million) in the second quarter of 2007 and by 36% compared to RMB245.8 million (US$32.8 million) in the third quarter of 2006. Total net revenues were RMB316.0 million (US$42.2 million), which increased by 17% compared to RMB270.0 million (US$36.0 million) in the second quarter of 2007 and by 35% compared to RMB233.4 million (US$31.1 million) in the third quarter of 2006. The increase in total revenues was a combined result of increased online game services revenues and other revenues, offset slightly by decreased revenues from game operating support, website solutions and advertisement.

Gross Profit

Gross profit for the third quarter of 2007 increased by 15% quarter-over-quarter and 23% year-over-year to RMB132.2 million (US$17.6 million). The sequentially increase of gross profit was in line with the increase in net revenues. Gross profit margin for the third quarter 2007 remained stable at 42% compared to the previous quarter. In the third quarter of 2007, considering the nature of the assets, server specifications of games to be launched, and industry practice, the depreciation lives of servers were changed to a consistent period of four years. This is accounted for as a change in accounting estimate and prospectively from July 1, 2007, quarterly depreciation charge relating to servers is estimated to decrease by approximately RMB12.6 million (US$1.7 million).

Operating Expenses

For the third quarter of 2007, operating expenses were RMB88.5 million (US$11.8 million), representing a 19% increase from RMB74.5 million (US$9.9 million) in the previous quarter and a 99% increase from RMB44.6 million (US$5.9 million) in the same period of last year. The sequential increase in operating expenses was primarily due to increased sales and marketing expenses relating to the launch of Blizzard’s World of Warcraft: The Burning Crusade expansion pack, increased general and administrative expenses mainly due to full-quarter effect of share-based compensation expenses for options granted in May 2007, offset in part by decreased product development expenses relating to SUN post-commercialization whereby direct costs relating to pre-commercialization of a game are classified under product development.

Share based compensation was RMB17.2 million (US$2.3 million) in the third quarter of 2007, compared to RMB9.2 million (US$1.2 million) in the second quarter of 2007 and RMB4.5 million (US$0.6 million) in the third quarter of 2006. The increase of share based compensation from the second quarter of 2007 was mainly due to options granted in May 2007.

If the bold has come and passed, it could get jiggy. IMO