NetEase Quarter Profit Rises on Growth From Online Games, Advertising

   By Maria Armental 
 

NetEase Inc.'s (NTES, K3MD.SG) second-quarter profit rose nearly 10% as the Chinese Internet portal reported sustained revenue growth from online games and advertising, which benefited from the FIFA World Cup.

The company operates the popular World of Warcraft, StarCraft and Diablo franchise games in China under a license with Activision Blizzard Inc. (ATVI).

Company officials said they are seeing growth from complimentary mobile offerings to its online games and have been increasing engagement with users on its social messaging platform, YiChat, through the integration of mobile games and other additions, such as Crowd Ask, a community-driven Q&A platform, and Rideshare, a social carpooling service. The company next plans to add an online payment system.

For the most recent period, NetEase posted a profit of 1.2 billion yuan ($193.8 million), or 9.18 yuan ($1.48) an ADS, up from 1.1 billion yuan, or 8.41 yuan ($1.37) an ADS, a year earlier.

Pre-tax revenue jumped 22%, to 2.95 billion yuan ($475.8 million).

Analysts polled by Thomson Reuters were expecting a profit of $1.45 an ADS, and revenue growth of about 16%, to $426.6 million.

Revenue from online games, which accounts for the largest share of revenue, rose 13%, while advertising revenue jumped 43%. Revenue from its e-mail, e-commerce and other services segment more than tripled to 226.3 million yuan ($36.5 million). As of June 30, the company reported more than 680 million e-mail users and about 200 million mobile phone mailbox users.

Operating expenses were up 32%, to 823.7 million yuan ($132.8 million).

NetEase changed its quarterly dividend policy this year to set it at an amount equivalent to about 25% of the company's anticipated net income after tax in each fiscal quarter. As such, the board has approved a dividend of 37 cents per ADS for the second quarter.

Dollar conversions were based on the noon buying rates specified by the Federal Reserve on June 30.

Shares edged up to $84.10 in recent after-hours trading. Through Wednesday's close, the stock was up 7% for the year.

Write to Maria Armental at [e-mail]

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