NetEase.com reports 1st quarter unaudited financial results

NetEase.com, Inc. (NASDAQ: NTES), one of China's leading Internet and online game services providers, announced its unaudited financial results for the first quarter ended March 31, 2011 on Thursday.

William Ding, Chief Executive Officer and Director of NetEase, stated, "For the first quarter, total revenues from online games increased by approximately 28% year-over-year, driven by higher revenue contributions from our self-developed games, namely Heroes of Tang Dynasty, Fantasy Westward Journey, Westward Journey Online II and Tianxia II, along with continued revenue growth from World of Warcraft , a game licensed from Blizzard Entertainment.

Online game revenue decreased by 3% quarter-over-quarter mainly due to seasonality. Fantasy Westward Journey and Westward Journey Online II continued to perform well due to well-received promotional campaigns during the first quarter, along with favorable response to the latest expansion pack for Fantasy Westward Journey released in January 2011.

As a game in its eighth year of commercial operation, we were tremendously pleased with Westward Journey Online II's new record quarterly revenue in the current quarter as well as a new record number of peak concurrent users, resulting from players' positive response to the promotional activities held during the recent Labor Day holidays in China.

We plan to keep working hard to make the game a continued success. Our newer games Heroes of Tang Dynasty and Tianxia II also continued to show solid growth. Moreover, we concluded the open beta test for Blizzard Entertainment's StarCraft II in China during the first quarter and commenced commercial operation on April 6, 2011. StarCraft II holds the record for fastest-selling strategy game of all time, and we are delighted to bring this exciting gaming experience to Chinese players.

"A new expansion pack for Tianxia II was released in April 2011, and we plan to launch an advanced version for this game in the third quarter of 2011. In addition, we are currently on schedule to release the next expansion packs for Heroes of Tang Dynasty and Westward Journey Online II during the second quarter of 2011 and the next expansion pack for Legend of Westward Journey and Westward Journey: Genesis during the third quarter of 2011.

In view of the outstanding user statistics performance during the limited closed beta testing for Ghost in the first quarter, we started the unlimited closed beta testing for this game in April and also plan to launch its next new expansion pack in the second half of 2011. Next, I would like to talk about our new 2.5D turn-based MMORPG, Legend of Fairy which has just entered limited closed beta testing in early May. In this game, players can enjoy an exciting and adventurous journey in a European- styled fantasyland. Unlike traditional online games, this new game allows players to freely change characters, skills and attributes, allowing for evolving combat experiences as the game progresses. We plan to proceed with its unlimited closed beta in the second half of 2011."

Mr. Ding continued, "Advertising services revenue grew 39% year-over-year due to increasing demand for advertising services, particularly from the automobile and Internet services sectors. The quarter-over-quarter revenue decline of approximately 46% from our strong fourth quarter 2010 reflects typical industry seasonality and the non-recurring impact from our 2010 Asian Games sponsorship. During the first quarter of 2011, we were pleased to launch our newly developed mobile news application software for smart-phones, which instantly became a top app download. We remain committed to addressing advertisers' growing demand by offering unique content innovation, service integration and new product development."

Mr. Ding concluded, "We regret to announce that Mr. Zhonghui Zhan has resigned from his position as the Company's Chief Operating Officer effective May 15, 2011 for personal reasons. Zhonghui has been a valuable member of our management team and has made significant contributions to our business over the years. He first joined NetEase in 1999, holding various positions culminating in Co-Chief Operating Officer in May 2006 and Chief Operating Officer in March 2009. I am personally grateful to him for his leadership, expertise and dedication."