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Shanda posts loss, shares plunge
(Reuters)
Updated: 2006-02-28 15:44 Shanda Interactive
Entertainment Ltd. , China's top online game operator, on Monday said it swung
to a quarterly loss and missed Wall Street revenue targets as online game sales
flagged, sending shares down after hours as much as 23 percent.
Shanda,
which arrived early to the market, has seen the popularity of its online game
"The Legend of Mir II" fade in popularity and has begun offering a free-to-play
model for some of its major multi-player online role-playing games as it also
has been grappling with increased competition.
The Shanghai company had a net loss of 538.9 million yuan ($66.8 million) or
7.58 yuan (94 cents) per American Depositary Share, compared with year-earlier
net income of 231.4 million yuan.
A year earlier the company posted net income of 231.4 million yuan or 3.12
yuan per ADS.
The company said the loss was primarily due to a noncash impairment charge of
521.5 million yuan ($64.6 million), or 90 cents per ADS, to reflect the fair
value of Shanda's 38 percent stake in South Korean game developer Actoz.
Net revenue fell 16.3 percent to 360.5 million yuan ($44.7 million) as online
game revenue, including multi-player online role-playing games and casual games,
fell just over 20 percent year over year.
Analysts, on average, had expected the company to have revenue of $58.4
million, according to Reuters Estimates.
China is one of the world's top online gaming markets, generating revenue of
nearly $600 million in 2005, and is expected to grow to $758 million this year,
according to an estimate from DBS.
Rival The9 Ltd. recently reported a more than tenfold year-on-year gain in
fourth-quarter profit, largely on the strength of "World of Warcraft," the
blockbuster online game marketed by a unit of Vivendi Universal S.A. , which
The9 hosts in China.
Shares of Shanda, which closed at $16.93 on the Nasdaq, fell 19.7 percent to
$13.60 in extended trade on Inet.
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