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[March 01, 2007]

NetEase Faces Challenges in Game Business

(Comtex Business Via Thomson Dialog NewsEdge) BEIJING, Mar 01, 2007 (SinoCast China IT Watch via COMTEX) --NetEase.com, Inc. (NASDAQ: NTES) on February 27 announced better-than-expected performance for the fiscal year ended December 31, 2006, along with pleasant fourth-quarter results as well as encouraging online game business for the year, which drove the company's share price up over 3% in after-hours trading at Nasdaq on the day.


Its total revenues for the year grew 30.9% year on year to CNY 2,217.2 million, or USD 284.1 million, and the online game revenues climbed 34.5% year on year to CNY 1,856.1 million, or USD 237.8 million.

For the fourth quarter of the year, it reported total revenues of USD 69.2 million, representing a growth of 11% from the same period of a year ago, and the revenues from online game service went up 12.6% to USD 57.9 million.

Beijing-based NetEase, one of China's leading Internet and online game services providers, had seen its game revenues slip for the first time in the third quarter last year, mainly resulted from the reduction of users of its most famous game Fantasy Westward Journey.

But the condition later got a rebound in the fourth quarter, with the game's maximum online players registered at 1.335 million, and besides, its another principal game Westward Journey also witnessed a new record in the quarter after its players reached 603,000 ones.

Thanks to the series of activities held for players, as well as the effective implementation of measures to prevent players' registered ID from being stolen that the company carried out in December, NetEase's above-said two major games saw their online users reaching new climax in the fourth quarter, expressed William Ding, Chief Executive Officer and Director of NetEase.

For the company's game business outlook in 2007, Ding showed his optimism, betting on the popularity of its next- generation 3D game Tianxia II, which has been developed for three years and is to be offered for beta testing from March 1, since the game was specially designed for Chinese game players.

In addition, its Westward Journey III now has entered the final phase of development and is scheduled to go into internal closed beta testing in the second quarter of this year, followed by open beta testing in the third quarter.

As to the mode of payment of its games, NetEase expressed that it would insist on its previous modes, such as paying by playing times.

However, NetEase's paid-for game operation is facing visible challenges with the stiffening of market competition, and the free-game mode getting more prevailing in the country's online game sector, without mentioning its new game DaTang did not bring the company expected revenues growth.

Yet, Ding said its Westward Journey III would not be offered for free, and the company also had no plan to provide free games for now.

At China's present online game arena, NetEase's biggest rivals are still market bellwethers including Shanghai-based Shanda and The9 Limited, but the emerging player Tecent, a famous online instant message provider in the country, has become a strong potential competitor for NetEase, so it will be hard for NetEase to maintain its leadership in the domestic market for long, analysts pointed out.

From www.cnstock.com, Page 1, Wednesday, February 28, 2007
info@SinoCast.com

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