* Q4 adj profit $0.75/ADS vs est $0.83
* Q4 rev $89.1 mln, up 46 pct
* Sees 2 pct-6 pct sequential growth in Q1 rev
* Shares fall 10 percent (Adds analyst's comments, background and updates share movement)
BANGALORE, March 1 (Reuters) - Chinese online game developer Perfect World Co Ltd's PWRD.O quarterly profit missed analysts' estimates, as higher expenses and a one-time charge weighed on margins, sending its shares down by 10 percent.
Fourth-quarter profits were hit by higher sales and marketing expenses linked with its new game "Fantasy Zhu Xian" and an expansion pack for "Perfect World II," the company said.
A toughening competitive environment and rising advertising rates has resulted in higher sales and marketing expenses for Perfect World, ThinkEquity analyst Atul Bagga said.
China is one of the world's fastest growing online game markets, with about 80 million gamers in a market worth about $4 billion.
China's online game market is becoming increasingly cut-throat, forcing industry players to rely more on marketing and promotional schemes to get the attention of Chinese gamers.
"Companies that can grow their revenue faster than the growth in their expenses will be the ones that are successful," Bagga said.
The launch of "Fantasy Zhu Xian," and the release of expansion packs for some of the company's existing games helped raise fourth-quarter online game operation revenue by 49 percent to $79.4 million.
However, the related increase in advertising and promotional expenses resulted in sales and marketing expenses more than doubling to $18.3 million.
Fourth-quarter profit was also hurt by a $2.6 million special charge related to change in the estimated useful lives of certain intangible assets bought from InterServ, the company said.
In Feb. 2009 Perfect World bought the entire equity interest of InterServ Caymans.
The acquisition helped Perfect World to further strengthen its game development capabilities through two subsidiaries of InterServ Caymans located in Shanghai and Chengdu.
Perfect World, whose self-developed portfolio includes its namesake game and "Legend of Martial Arts," also forecast a 2 percent to 6 percent sequential growth in first-quarter revenue.
The company said it has a number of new and diversified games and expansion packs that are scheduled to be launched in 2010.
"With just their existing games the company can drive a growth of 20 percent to 25 percent in 2010 revenue," Bagga said.
On a conference call with analysts, the company also said there is a possibility that first-quarter margins may improve since it does not foresee any one-time charges in the near future.
Perfect World had seen its fourth-quarter gross margin slide to 86.6 percent down from 88.2 percent last year.
For the fourth quarter, net income attributable to the company's shareholders was $39.7 million, or 75 cents per American depository share (ADS).
Revenue rose 46 percent to $89.1 million. Operating expenses rose 14 percent to $36.6 million. Analysts on average were looking of earnings of 83 cents per ADS, on revenue of $88.1 million, according to Thomson Reuters I/B/E/S.
The company's shares, which have gained 229 percent over the last 52 weeks were at $35.95, down 9 percent in afternoon trade, Monday on Nasdaq. (Reporting by Saqib Iqbal Ahmed in Bangalore; Editing by Jarshad Kakkrakandy)