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The9 Tries Mobile Internet Investing To Revitalize Its China Business

Months after reporting sliding revenues and losing valuable relationships, Chinese online game company The9 is trying to rejuvenate itself via a deal to invest in mobile startups.

The9 has reportedly entered into a non-binding memorandum of understanding with Chengwei Ventures, ChinaRock Capital Management and China Renaissance K2 Ventures to form a USD100 million investment fund named Fund9. Those investors are maybe hoping that the combined heft of their reputations will help steer The9 to a better future.

Fund9 will focus on investments in both domestic and overseas mobile Internet application and platform developers. All mobile internet application and platform project proposals can be directly submitted online to the fund investment committee for evaluation. Fund9’s fund investment committee will be composed of members appointed by the four fund investors.

In fact, The9 has already started investing in other firms. In March 2010, the company invested USD20 million for a majority stake in U.S.-based Red 5 Studios.

But the last few quarters have still been difficult for The9. The company did not renew the contract for its president, Chen Xiaowei, when it expired in May 2010, and then The9 stated its net revenues for the second quarter of 2010 increased by 15% quarter-over-quarter but decreased by 91% year-over-year to CNY25.4 million. Net loss for the second quarter of 2010 decreased by 13% quarter-over-quarter and decreased by 17% year-over-year to CNY65.8 million.

That poor showing mimicked a CNY79.2 million net loss in the second quarter ended June 30, 2009. Zhu Jun, chairman and CEO of The9 stated at that time: “After the cease of the WoW [World of Warcraft] operation upon expiration of the license, our revenue has been significantly reduced. However, we believe we will soon recover from the challenging time and continue to leverage the tremendous growth of China’s online game market.” The9 seems to have a history of relying on other firms to boost its financial future, and the three investment companies are the newest round of partners to pick up the reins.

Most recently, The9 announced this month that it is ending operations for one of its games. The9 announced that it has entered into mutual agreement with Electronic Arts for early termination of EA Sports Fifa Online 2 license and commercial operation of the game in China in the second calendar quarter of 2011. There was no specific mention for the reason for this early dismissal in the brief announcement from The9.

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