China’s Kingsoft net profit drops 25% in Q1 as games decline

2 June 2011 10 h 32 min 6 comments

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Software Chinese Internet company Kingsoft has published its unaudited financial results for the first quarter of 2011, stating that its net operating revenue declined by 6% year-on-year from CNY245 million to CNY231 million; and its net profit declined by 25% from CNY89.74 million to CNY66.89 million.

According to the report, Kingsoft’s revenue in the first quarter was 71% contributed by entertainment software and 28% contributed by application software.

RMB’000                                                              For the 3 months ended March 31     Change
(unaudited)                                                         2011                                2010                     (%)

Revenue                                                               231,276                         245,698               (6)
 -Entertainment software                              163,376                         161,742                1
 -Applications software                                    64,297                           82,233               (22)
 -Others                                                                      3,603                              1,723               109

Gross profit                                                          198,486                          214,931               (8) 

In the first three months of 2011, Kingsoft’s income from entertainment software was CNY163 million, a decrease of 1% compared with the previous quarter and an increase of 1% compared with the same period of last year

Evolution of the Kingsoft’s games activities

                                                                                                   Q1 2011                                     Q1 2010                                  Evol°

Revenues                                                                             CNY163 m.                                                                                     +1%

Daily average peak number of concurrent

users of Kingsoft’s online games                                 680,000                                                                                          -25%

Monthly average number of paid users                  1.26 million                                                                                      -14%

Monthly average consumption

of each paid users                                                             CNY43                                                                                                +19%


Entertainment Software review and forecast

Due to the decrease of revenue from Vietnam, revenue from the entertainment software business slightly decreased by 1% quarter-over-quarter. However, attributable to the steady performance of existing games in Mainland China, the revenue increased year-over-year slightly by 1% to RMB163.4 million. Daily average peak concurrent users decreased by 25% year-over-year to 0.68 million. Monthly average paying users also dropped by 13.6% year-over-year to 1.26 million. The sequential decrease in daily average peak concurrent users and monthly average paying users was mainly due to the underperformance of games in Vietnam. The monthly average revenue per paying user (“monthly ARPU”) for the Company’s online games increased by 5% quarter-over-quarter and 19% year-over-year to RMB 43.

In the second quarter of 2011, the company will launch tests for new games and updated versions of existing games. On May 13, 2011, limited close beta testing for the “Legend of Moon”, the masterpiece of Westhouse studios, was launched. Rush team is targeting to begin unlimited close beta testing on May 31, 2011. Limited close beta testing for “Dream Fantasy” is expected to be launched in June. We also released an expansion pack for “JX Online III” on May 19, 2011. In the later second quarter of 2011, updated versions of “JX Online II” and “JX world”, with enhanced contents and features, are expected to be released. We believe all these would support the growth of revenue of online games.

Kingsoft’s revenue from application software was CNY64.3 million, a decrease of 21% compared with the previous quarter and a decrease of 22% compared with the same period of last year. The main reasons for the revenue decrease were because the seasonal factors for the sales of Kingsoft’s WPS Office software and the launch of Kingsoft’s free-edition network security product since November 2010.


Mr Pak Kwan Kau, Chairman and Chief Executive Officer of Kingsoft, commented, “Looking ahead, while maintaining a stable user retaintion rate of our existing games, we are confident that the new games to be introduced will boost the revenue of our entertainment software business. Meanwhile, the strong support from the Central Government towards the software industry would facilitate the growth of our application software business. Since we launched the free version of Kingsoft Internet Security, the number of free service users has increased gradually, which would further boost the number of paid service users. We have implemented our management performance incentive schemes by restructuring the business of Westhouse and issuing new shares to the key management of Kingsoft Internet Security. We believe that the initiatives would enhance the operational efficiency and support the long-term sustainable growth of the Company in the highly competitive internet industry.”

About Kingsoft Corporation Limited

Kingsoft is a leading Internet-based developer, distributor and service provider of entertainment software, Internet security and application software in China. Since the commercial launch of its first office applications software, WPS 1.0, in 1989 followed by over 20 years of innovative endeavors, Kingsoft has become well recognized as a leading software brand in China. Kingsoft’s main business encompasses on-line games, Internet security and application software. Kingsoft is currently building a converged user platform for its diversified product portfolio and providing a variety of value-added services. The Company distributes certain entertainment software products in Vietnam, Taiwan, Malaysia, Thailand, Cambodia and the U.S., as well as certain Internet security and application software products in Japan, Hong Kong, Macau, Thailand and Vietnam. Headquartered in Beijing, Kingsoft has R&D centers in Chengdu, Dalian, Zhuhai and Beijing.  

SOURCES: Kingsoft, ChinatechNews (1/6/11)

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