Shanda's (SNDA) financial results for the fourth quarter and full year ended December 31, 2005 show quarterly net revenues decreased 16.3% year-over-year and 27.8% quarter-over-quarter to CNY360.5 million.

Online game revenues, including MMORPG and casual games, decreased 20.1% year-over-year and 28.8% quarter-over-quarter to CNY311.9 million.

However total peak concurrent users for all Shanda games in commercial service increased to 2.68 million from 2.55 million in the third quarter of 2005 and 2.0 million in the fourth quarter of 2004.

Shanda's net loss was CNY538.9 million, compared to net income of CNY231.4 million in the fourth quarter of 2004 and CNY261.1 million in the third quarter of 2005.

Shanda says the fourth quarter net loss was primarily due to a non-cash impairment charge of CNY521.5 million, or CNY7.32 per diluted ADS, to reflect the fair value of Shanda's 38% stake in Actoz, a South Korean online game company.

Gross margin was 59.9% in the fourth quarter of 2005, down from 67.1% in the fourth quarter of 2004 and from 68.9% in the third quarter of 2005. The company says the decrease is mainly due to the decline in revenues as well as the relatively lower gross margin on EZ Pod sales compared to online game operations, and was partially offset by a decrease in the cost of services.

For the full year 2005, the gross margin was 67.6%, up from 63.7% in the full year 2004.