Editorial Summary

The BaBaoDex increased 1.88 percent to 1,431 on Thursday, with thirteen winners and seven losers.

DataLogic International on Thursday announced that its wholly owned subsidiary IPN Communications has entered into an agreement with Sina (SINA) to cooperate in marketing VoIP phones. Sina jumped 10.7 percent to US$37.96 on the announcement.

Ctrip (CTRP) dropped 6.8 percent to close at US$45.78 when its third quarter profits only hit the low-end of estimates of US$3.9 million. WR Hambrecht upgraded Ctrip's rating from "hold" to "buy."

HC International (8292.HK) released quarter three results recording January to September operational revenue of 322 million Yuan, up 40 percent year on year; gross profit rate increased from 36 percent to 38 percent. HC International dropped 0.6 percent to HKD1.79.


China Media, Entertainment & Technology Wrap Â?November 8 to November 12

Online gaming giant Shanda (Nasdaq: SNDA) and Internet and wireless services company Tom Online (Nasdaq: TOMO) reported third quarter earnings this weekÂ?Shanda reported strong growth on US$44.9 million in profits; Tom saw profits drop by 28 percent after a clamp down by Mobile carriers forced wireless service providers to exercise caution, even those that were not sanctioned.

Shanda released results on November 9. The companyÂ?s revenues increased 23 percent quarter on quarter (QoQ) and 133 percent year over year to US$44.9 million. Profits hit US$20 million, which was a 17 percent increase on quarter two (Q2). ShandaÂ?s gaming revenues now account for 91.8 percent of total revenues, down from 94.8 percent in Q2. Casual games brought in seven percent of revenues.

Casual gaming could receive more attention from China gaming companies that have primarily focused on MMORPGs. Shanghai based online gaming company 9you general manager Takeshi Oji believes casual gaming will continue to grow in popularity and will help to expand online gamingÂ?s user base. Many Internet users do not want to spend hours and hours playing RPGs, and so they turn to casual gaming. These games are often free, with game operators selling virtual items to use in the games for a small charge. MMORPGs are handicapped by plug-ins and private servers; casual games by their nature are not affected by these problems.

In other gaming news, NC SinaÂ?s Lineage II began charging on November 9. The joint venture between the gameÂ?s Korean developer NC Soft and Sina has sold 880,000 of the gameÂ?s prepaid cards worth 22 million Yuan had been sold since sales began on October 1.

A rumor surfaced this week that Sina was in negotiations to acquire China search engine Zhongsou. SinaÂ?s searching services are notoriously bad, and Zhongsou has provided the Internet portal with searching services for the last year and a half. On Tuesday Zhongsou claimed it had heard nothing about the rumor.

Good news for gaming companies as well as Internet cafes came out yesterday when Ministry of Culture announced that Internet cafes would be permitted to stay open until two in the morning, two hours later than current rules allow. Another regulation will reclassify Internet cafes as part of the service industry, meaning cafes will only have to pay five percent income tax, compared with the 25 they pay now as part of the entertainment industry. These regulations, along with the release of blockbuster titles like Lineage II, should give Internet cafes a boost. Internet cafes, along with the rest of us, continue to await the release of this yearÂ?s biggest title, World of Warcraft, which The9 has said will begin beta testing before the end of this year.

Other Internet companies reporting this week were Nasdaq listed Tom Online, Ctrip (Nasdaq: CTRP) and China Finance Online (Nasdaq: JRJC). Tom Online saw a 28 percent decline in profits for the quarter, down to US$7.3 million from US$10.1 million in the second quarter. Tom blamed the decrease on a much more tightly controlled market for its wireless value added services (VAS). While not sanctioned itself, the general atmosphere in the industry after many other service providers were sanctioned made it necessary for Tom Online to reduce the range of services it offered. Ninety percent of Tom OnlineÂ?s revenues come from VAS. Tom Online is predicting revenue growth of five to eight percent in the fourth quarter.

China Finance Online saw revenues jump 25 percent quarter on quarter US$1.67 million. China Finance Online shares surged to US$13.13 on the release of earnings news, but have since settled back to US$11.81, still below its October 15 IPO price of US$13.00.

Online travel service provider Ctrip reported US$10.9 million in net revenues, and a net income of US$4.6 million. However, profit came in at the low end of expectations at US$3.9 million. Ctrip is expecting fourth quarter revenues to be flat as the end of the year is not a strong travel season in China.

Ebay CEO Meg Whitman visited China this week to check up on the companyÂ?s Chinese subsidiary eBayEachnet. On Friday, Shao Yibo stepped down as eBayEachnet CEO, but retained his position as chairman of the board of directors. ShaoÂ?s successor has not been named. In eBayÂ?s third quarter report, the company reported that eBayEachnetÂ?s registered users had grown to 8.6 million and that 2004 trade volume would hit US$340 million. However, industry insiders questioned the relevancy of these numbers, saying that active usersÂ?those that had completed at least one trade in the last yearÂ?numbered less than three million, about the same number as eBayEachnetÂ?s biggest competitor Taobao. Insiders also said that since EachnetÂ?s website and payment system were integrated with eBayÂ?s, the website has become much more difficult to navigate. The payment method has become complicated enough to drive customers to competitors.

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