NetEase's Revenue Surges as Chinese Internet Portal Expands Email, E-Commerce Operations

   By Maria Armental 
 

Chinese gaming and Internet giant NetEase Inc.'s (NTES, K3MD.SG) revenue surged in the fourth quarter driven by a three-fold increase in its expanding email, e-commerce business.

Responding to China's thriving mobile and e-commerce markets, the Beijing company--which still generates the bulk of its revenue from online gaming--has been bolstering its business beyond gaming and advertising.

NetEase operates Activision Blizzard Inc.'s (ATVI) "World of Warcraft" and other franchises in China along with gaming platform battle.net.

China, the most populous country with more than 1.3 billion people, last year overcame the U.S. to became the world's largest online retail sales market, based on dollars spent, according to U.S. and Chinese government data.

NetEase, which last year closed its microblog service and launched an online payment platform, recently launched a cross-border e-commerce platform, Kaola.com, taking on the likes of e-commerce giant Alibaba Group Holding Ltd. (BABA). Chinese shipper Sinotrans Ltd. (SNOTY, 0598.HK) is to handle Kaola's international shipping logistics.

For the most recent period, NetEase posted a profit of $1.27 billion yuan ($204,892 million), or 39 yuan ($9.67) an ADS, up from 1.24 billion yuan, or 38 yuan ($9.48) an ADS, a year earlier.

Net revenue jumped 43%, to 3.46 billion yuan ($558,134 million).

Analysts surveyed by Thomson Reuters were expecting a profit of $9.64 yuan an ADS with revenue of 3.23 billion yuan.

Revenue from online games rose 36%; advertising revenue rose 23; and revenue from its email, e-commerce and other services segment again more than tripled to 380.8 million yuan ($61.4 million).

Gross margin improved to 71.8% from 71.3% a year earlier.

Operating expenses nearly doubled reaching 1.24 billion yuan ($199.8 million) in the latest period as NetEase ramped up marketing and hired more workers.

The company has approved a dividend of 39 cents an ADS for the quarter, which is expected to be paid on March 6.

Dollar conversions were based on the noon buying rates specified by the Federal Reserve on Dec. 31.

Shares rose 1.39% to $108.43 in recent after-hours trading.

Through Monday's close, the company's stock--which set a 52-week-high of $118.47 on Feb. 4--had risen 47% over the past 12 months.

--Kathy Chu contributed to this article.

Write to Maria Armental at [e-mail]

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