Shanda's (SNDA) unaudited financial results for the third quarter ended September 30, 2006 show total net revenues decreased 12.6% year-over-year to US$ 55.2 million.
The company's online game revenues also decreased 6.6% year-over-year to US$ 51.7 million.
In the third quarter of 2006, Shanda reported net revenues of US$55.2 million, representing a 7.7% increase compared to the second quarter of 2006 and a 12.6% decrease from the third quarter of 2005.
Online game revenues in the third quarter of 2006 increased 9.4% quarter- over-quarter and declined 6.6% year-over-year to US$51.7 million. Total peak concurrent users for all Shanda games in commercial service in the third quarter of 2006 decreased 8.0% to 2.06 million from 2.24 million in the second quarter of 2006. The sequential decline of peak concurrent users was primarily due to the launch of a larger-scale campaign to combat robot-cheating programs in our MMORPGs in the third quarter to improve the integrity of the game experience as well as reduce server leasing and maintenance costs.
Revenues from MMORPGs in the third quarter of 2006 increased 9.1% quarter- over-quarter and were flat year-over-year at US$42.0 million, accounting for 76.1% of total revenues. The sequential growth in MMORPGs revenues is primarily due to increased revenues from Mir II and Magical Land, as well as initial contributions from ArchLord.
The number of active paying accounts for MMORPGs was 2.14 million in the third quarter of 2006, compared to 2.23 million in the second quarter of 2006. The reduction in active paying accounts was primarily caused by the implementation of anti-robot-cheating techniques to improve game experience and reduce operating costs. Average monthly revenue per active paying account for MMORPGs increased to CNY51.6 in the third quarter of 2006 from CNY45.5 in the second quarter, due to increased consumption of in-game premium features. In the third quarter, Shanda continued to improve upon its virtual shopping malls and value-added services.
Revenues from casual games in the third quarter of 2006 increased 10.7% quarter-over-quarter and decreased 27.9% year-over-year to US$9.7 million. The sequential increase in revenues from casual games was primarily due to the improved performance of Maple Story, BNB, and GetAmped, as well as seasonality related to the summer holiday during this quarter.
Shanda's other revenues in the third quarter of 2006 decreased 12.5% quarter-over-quarter and 55.1% year-over-year to US$3.5 million. The sequential decrease was primarily due to a seasonal decline in EZ Products sales in the third quarter of 2006.
Gross margin was 56.2% in the third quarter of 2006, down from 56.5% in the second quarter of 2006 and 68.9% in the third quarter of 2005.
Operating income for the third quarter of 2006 was US$14.2 million, representing a 23.4% increase compared to CNY91.3 million in the second quarter of 2006 and a 25.7% decrease compared to CNY151.7 million in the third quarter of 2005.
In the third quarter of 2006, Shanda had net income of CNY143.5 million (US$18.1 million), compared to net income of CNY133.6 million in the second quarter of 2006 and CNY261.1 million in the third quarter of 2005. Earnings per diluted ADS were CNY 1.98(US$ 0.26), compared to earnings per diluted ADS of CNY 1.86 in the second quarter of 2006 and CNY 3.56 in the third quarter of 2005.
