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Tickers in this Article: SNDA, BIDU
With the Chinese online population growing larger by the minute, game producer Shanda Interactive Entertainment (Nasdaq:SNDA) is looking at a bright future. Shanda recently reported that its 2007 net revenue jumped 51.8% and its Q4 earnings per share outpaced expectations by 29%, and shareholders continue to profit from Chinese economic growth.

Grab Those Gamers
Shanda is involved in a number of gaming arenas, from online casual games to a variety of board games. However, Shanda's marquee product line is what online gamers call MMORPGs (Massively Multiplayer Online Role-Playing Games). These are games that bring thousands of people together to interact in a virtual world. Games like "The World of Legend" and "Dungeons & Dragons Online" are wildly popular with Chinese online gamers and are gaining momentum by the minute.

Revenues from the MMORPG side of Shanda's business grew by 59.4% in 2007 and 9.3% quarter over quarter to $89.6 million. Revenue from the casual gaming side of the business jumped 19% in 2007 and 4.4% quarter over quarter to $11.7 million. Fueled by a 12.7% quarter over quarter increase in active paying accounts, the company's operating income increased 79.7% during 2007 and 8.1% quarter over quarter to $38.2 million.

No matter how you spin it, these are very impressive numbers. Shanda has obviously latched on to an explosive industry and is riding the crest of an extremely profitable wave. With the Chinese population on the modernization fast track, the online industry is growing my leaps and bounds. Take Baidu (NYSE:BIDU) for example - a Chinese based search engine comparable to Google; this stock has grown by more than 150% since its IPO in 2005. (For additional insight, check out Re-Evaluating Emerging Markets.)

Piloting Profitable Partnerships
On February 19, Shanda Interactive announced that it would be partnering with NCsoft, Korea's leading online game developer, to operate the game "Atrix" in China starting in early 2009. NCsoft's "Atrix", a casual online fighting game with eye-popping scenery, was released to an eager public in June 2007. The game has been a hit ever since. With China's huge online gaming population, "Atrix" is almost certain to be a commercial success and rake in the money for Shanda.

This kind of partnership arrangement goes to show that Shanda is open to new ideas and has its head in the profit game. As the revenue start to trickle in from "Atrix", Shanda's earnings are going to increase even further and the share price will be sure to follow.

The Bottom Line
I think it is pretty clear that Shanda Interactive is making the right moves and the numbers are there to back that up. Shanda has a stranglehold on the MMORPG market in China and is making millions off feeding the gamers demands. It's also not afraid to strike partnerships with outside companies to make a buck. This shows investors that Shanda has the necessary ambition to sustain long-term growth.

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