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NetEase.com Says Almost All Of Its China Revenue Derived From Online Games

Chinese Internet portal and online game service provider NetEase.com Inc. announced its unaudited financial results for the third quarter ended September 30, 2010.

Net profit for the third quarter of 2010 totaled CNY585.3 million, compared to CNY485.7 million and CNY393.8 million for the preceding quarter and the third quarter of 2009, respectively. Total revenues for the third quarter of 2010 were CNY1.4 billion, compared to CNY1.3 billion and CNY879.4 million for the preceding quarter and the third quarter of 2009, respectively.

Revenues from online games were CNY1.3 billion for the third quarter of 2010, compared to CNY1.2 billion and CNY775.1 million for the preceding quarter and the third quarter of 2009, respectively. Revenues from advertising services were CNY162.0 million for the third quarter of 2010, compared to CNY145.9 million and CNY86.0 million for the preceding quarter and the third quarter of 2009, respectively. Revenues from wireless value-added services and others were CNY20.9 million for the third quarter of 2010, compared to CNY19.9 million and CNY18.3 million for the preceding quarter and the third quarter of 2009, respectively.

Gross profit for the third quarter of 2010 was CNY959.2 million, compared to CNY878.4 million and CNY627.0 million for the preceding quarter and the third quarter of 2009, respectively. The quarter-over-quarter increase in gross profit was primarily attributable to increased game revenues from Fantasy Westward Journey during the third quarter of 2010, as well as increased advertising services revenue and non-recurrence of certain event-based information costs incurred in the prior quarter.

Gross profit margin for the advertising services business for the third quarter of 2010 was 54.2%, compared to 46.4% and 23.1% for the preceding quarter and the third quarter of 2009, respectively.

Total operating expenses for the third quarter of 2010 were CNY372.2 million, compared to CNY268.7 million and CNY218.9 million for the preceding quarter and the third quarter of 2009, respectively.

NetEase.com recorded a net income tax charge of CNY91.3 million for the third quarter of 2010, compared with CNY75.5 million and CNY65.5 million for the preceding quarter and the third quarter of 2009, respectively. The effective tax rate for the third quarter of 2010 was 13.7% as compared to 13.4% and 14.3% for the preceding quarter and the third quarter of 2009, respectively.

As of September 30, 2010, the company’s total cash and time deposit balance was CNY8.8 billion, compared to CNY7.0 billion as of December 31, 2009.

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