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NetEase 4th-quarter profit beats expectations
Published on: 2010-02-25
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SAN FRANCISCO (Reuters) - NetEase.com Inc (NTES.O) beat Wall Street's profit and revenue expectations in the fourth quarter, amid a recovering economy and improved prospects for the Chinese online game operator after it resolved a dispute over one of its hit titles.

NetEase shares, which have rallied nearly 16 percent in recent weeks, were down as much as 2.8 percent in after hours trading on Wednesday before regaining ground to trade at $38.25, roughly flat from the closing price.

Roth Capital Partners analyst Adam Krejcik said NetEase's better-than-expected revenue was driven in large part by its online advertising business, which saw revenue double quarter-over-quarter to $26.9 million.

"Perhaps investors don't think that business is as sustainable, or they would rather have seen a beat from online games," which account for the brunt of NetEase's business, Krejcik said.

Net revenue excluding business taxes in the three months ended December 31 rose to $183.1 million from $116 million in the year-earlier period and above the average analyst expectation of $179.3 million.

Netease said fourth-quarter net income dipped to $83.8 million, or 64 cents per American Depository share, compared with $84.4 million, or 65 cents per share, a year ago. On average, analysts polled by Thomson Reuters I/B/E/S had expected earnings of 59 cents a share.

NetEase shares have risen roughly 16 percent from about $33 on February 8, after it became clear it would win approval to operate the latest version of Activision Blizzard Inc's (ATVI.O) hit title World of Warcraft in China, ending a tussle with government regulators.

NetEase CEO William Ding said in a statement on Wednesday that the company was "committed to the continued success of World of Warcraft."

He also said China's No. 3 online game operator company was "cautiously optimistic about the course of our advertising business in 2010."

NetEase competes with Tencent Holdings (0700.HK), Shanda Games Ltd (GAME.O) and Changyou.com Ltd (CYOU.O) in China's $4 billion online games market. China has about 80 million gamers.

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