UPDATE 2-Shanda Q1 net soars on strong game revs
(Adds details, Q2 guidance)
By Sophie Taylor and Scott Hillis
SHANGHAI/SAN FRANCISCO, May 23 (Reuters) - Chinese online game operator Shanda Interactive Entertainment Ltd. (SNDA.O) said its quarterly profit soared as revenues from its online role-playing games nearly doubled and expenses fell.
Shanghai-based Shanda forecast further revenue growth later this year as it released additional content for existing games and introduced new titles.
Shanda, whose game titles include "The Legend of Mir II" and "Woool", has adopted free-to-play models for some of its games whose popularity has faded. Under the model, users play for free but can pay for extra features.
Shanda and rival Netease.com Inc. (NTES.O) compete in China's fast-growing but highly competitive online game market with a number of other home-grown players, including The9 Ltd. (NCTY.O) and Tencent Holdings Ltd. (0700.HK).
Shanda's net revenue target for the second quarter -- typically a weak season for online gaming companies -- was $70.9 million to $72.9 million, the company said.
"We feel very confident that our new expansion packs for existing games and our strong game pipeline will continue to generate sustainable user and revenue growth," CEO Tianqiao Chen said during a conference call.
Shanda's Nasdaq-listed American depositary shares rose over 3 percent in extended trading. The company's market value is around $2 billion.
First-quarter net profit jumped to 448.8 million yuan ($58 million), or 6.14 yuan per share (80 cents per ADS) from 11.8 million yuan, or 0.16 yuan per ADS, a year earlier.
Revenue in the quarter grew 56 percent to 532.3 million yuan, driven by revenue from online role-playing games which boomed during Chinese public holidays and hit 414 million yuan in the quarter, compared with 225 million yuan a year earlier.
Shanda cut operating expenses by 30 percent, with product development costs almost halved and sales and marketing costs dropping by 54 percent.
Shanda, which had pursued a more diversified entertainment platform with products such as PC accessories, is shifting back to a more online games-centered approach.
China's online gaming revenue is expected to grow 25-30 percent during 2007 and 2008, according to Piper Jaffray.
