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 Netease (NASDAQ:NTES)

Thursday, February 13, 2014
Comments & Business Outlook

Fourth Quarter 2013 Financial Results

  • Total revenues for the fourth quarter of 2013 were RMB2,585.1 million (US$427.0 million), compared to RMB2,514.3 million and RMB2,326.7 million for the preceding quarter and the fourth quarter of 2012, respectively.
  • NetEase reported basic and diluted earnings per ADS of US$1.57 each for the fourth quarter of 2013. The Company reported basic and diluted earnings per ADS of US$1.33 each for the preceding quarter, and reported basic and diluted earnings per ADS of US$1.27 each for the fourth quarter of 2012.

"Our focus on quality and innovation across our Internet games and services has been the cornerstone of our success, propelling our dynamic growth in 2013," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "Throughout the year we expanded and diversified our offerings with comprehensive upgrades of our popular online games, Fantasy Westward Journey, Westward Journey Online II and Ghost, the launch of several new online games in diversified genres, and our entrance into the mobile gaming and social networking markets. Our total revenue increased by 16.6% in 2013, led by a 14.0% increase in online games revenue and 28.8% growth in advertising services revenue. We finished the year with a solid fourth quarter, growing our total revenues by 11.1% year-over-year and 2.8% quarter-over-quarter."

"Through our advanced technology, unified R&D process and the continuous optimization of our products and services, we are actively growing our loyal community of users. During the quarter, Fantasy Westward Journey II celebrated its 10-year anniversary, marking the game's longstanding popularity. Since the exciting comprehensive upgrade of this game and the launch of the mobile version in July, both the mobile and PC versions have demonstrated outstanding performances that are indicative of the resilience of our self-developed games. Other standout performances for the year were led by Kung Fu Master, New Westward Journey Online II, Heroes of Tang Dynasty II and Ghost II. In the fourth quarter, we also launched new expansion packs for Kung Fu Master, Heroes of Tang Dynasty II, Tianxia III and Legend of Fairy. Our small-scale commercial introduction of Legend of Tibet and Burst Sky in the fourth quarter was in-line with our expectations, and we plan to cultivate additional users for these two games. Burst Sky is a western fantasy style, side scrolling shooter game, and we are looking for opportunities to launch this game in overseas markets."

"Our online games business continues to grow at a steady pace. In January, we released expansion packs for Fantasy Westward Journey II, New Fly for Fun and New Westward Journey Online III. We also launched open beta testing in mainland China of Blizzard Entertainment's Hearthstone™: Heroes of Warcraft™ in January, and this free-to-play digital strategy card game has been highly popular with players. We currently expect to release new expansion packs for Tianxia III and Kung Fu Master in the first half of the year. We also have plans to release our first person shooter game, Crisis 2015, later this year and launch initial small-group testing of Revelation, our 3-D epic fantasy MMORPG that is currently under development. We are augmenting the success of our online games with our mobile initiatives, offering players a new medium through which to enjoy NetEase's games. We have already released three mobile games, and in 2014 we plan to launch a number of new mobile games, including mobile versions of our existing online games, to further enrich our portfolio."

"With regard to advertising services, our strong pipeline of mobile applications rounds out our mobile Internet offerings and we plan to introduce several new mobile Internet applications later this year. As of December 31, 2013, we had more than 200 million installations of our leading Mobile News application, which is proving to be highly appealing to our advertisers. For the fourth quarter, our advertising services revenue increased by 19.9% quarter-over-quarter and 38.0% year-over-year, primarily driven by the automobile, Internet services, financial services and real estate sectors. We are also making substantial inroads with YiChat, which continues to gain traction in China's social networking market. We are building on this platform as we introduce new features including games and mobile payment solutions. To make our e-mail services and popular mobile applications even more attractive to users, we made a number of other improvements during the fourth quarter to enhance user experience, including integration of our e-mail services with YiChat. These efforts to increase the quality and functionality of our products and services are attracting more users and, as of December 31, 2013, we had approximately 620 million registered e-mail users."

"In 2014, we will continue to diversify and optimize our games and services to address our audiences' demands for both PC and mobile services. As part of our multi-platform strategy, we plan to not only introduce new online and mobile games and features in mainland China, but also to further develop our social networking platform, perpetuate our portfolio of existing mobile applications and further explore opportunities in online games markets overseas. These combined efforts are designed to serve our dedicated community with high-quality content and features that drive growth across our traditional and mobile Internet businesses and enhance returns for our shareholders as we work to increase the value of our Company. In addition, we are happy to announce that our board of directors has approved an annual cash dividend of US$1.41 per ADS, along with a US$100 million share repurchase program," Mr. Ding concluded.


Thursday, November 14, 2013
Comments & Business Outlook

Third Quarter 2013 Financial Results

  • Total revenues for the third quarter of 2013 were RMB2,514.3 million (US$410.8 million), compared to RMB2,413.8 million andRMB2,044.9 million for the preceding quarter and the third quarter of 2012, respectively.
  • NetEase reported basic and diluted earnings per ADS of US$1.32 and US$1.31, respectively, for the third quarter of 2013. The Company reported basic and diluted earnings per ADS of US$1.38 and US$1.37, respectively, for the preceding quarter, and reported basic and diluted earnings per ADS of US$1.01 each for the third quarter of 2012.

"We continue to broaden the platforms for our traditional and mobile Internet product and service offerings," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "During the third quarter we completed key upgrades for two of our most popular games, increased our investment in the mobile Internet business and entered the mobile instant messaging space with the launch of YiChat. These critical advancements support our growth objectives, and for the third quarter we increased our revenues by 23.0% year-over-year, with revenues from our online games and advertising services increasing by 21.0% and 22.9%, respectively."

"Our self-developed traditional and mobile game offerings are resonating well with our audiences. During the third quarter, one of our most popular games, Fantasy Westward Journey II, delivered an excellent performance following the early July launch of its comprehensive upgrade, along with the game's accompanying pocket mobile version. This pocket mobile version has extended the reach of our game from the PC to mobile platforms, and user feedback continues to be favorable. In addition, the exciting new version we launched for Westward Journey Online II in September -now known as New Westward Journey Online II- was a significant upgrade for this classic game, which is stimulating players' enthusiasm and demonstrating positive user trends."

"Our newer games are also performing in-line with our expectations. The expansion pack launched in June for Heroes of Tang Dynasty II was well received by players and contributed to our revenue growth for the period. For our other game titles, we expect heightened interest in the coming periods as we introduced new expansion packs for Ghost II and Kung Fu Master in September and October, respectively, and have expansion packs planned in the fourth quarter for Heroes of Tang Dynasty II, Tianxia III and Legend of Fairy. Our development schedule is also progressing smoothly. User feedback has been encouraging following our initial commercial launch of Heroes of Three Kingdoms in April and Dragon Sword in August. Large-scale promotional activities were launched for those two games in September and November, respectively, and earlier this month, we commercially launched Legend of Tibet, a 2.5D MMORPG. Before the end of year, we also expect to introduce several high quality mobile games. For 2014, we currently plan to release our first person shooter game, Crisis 2015, in the first half of 2014 and we are preparing to introduce another new game: Revelation, a 3-D epic fantasy MMORPG that we have been developing for the past three years. Revelation features exceptional computer-generated graphic effects using cutting-edge technology and integrates traditional MMO styles with enhanced action elements to provide young players with cool and fast-paced fighting experiences."

"The upcoming open beta test in mainland China of Blizzard Entertainment's highly anticipated Hearthstone�: Heroes of Warcraft�will become another important milestone. This new free-to-play online collectible card game featuring legendary heroes, spells and minions from the Warcraft universe, is simple to play yet highly engaging, and we look forward to providing our players with this great gaming experience."

"Turning to our portal, our advertising services revenue increased both sequentially and year-over-year with the largest revenue contributions coming from the automobile, Internet services and fast moving consumer goods sectors. We now have a number of fast growing mobile applications, which provide an important platform for delivery of our value-added services and advertisements. YiChat has been one of our most exciting new additions, and we are extremely pleased to have partnered with China Telecom to launch this instant messaging application. Attracting considerable attention from the Chinese community, downloads for YiChat exceeded 1 million on the first day of its launch in August, and it had reached more than 30 million users by the end of October. YiChat significantly advances our mobile Internet strategy, and we continue to grow our community of loyal users across our robust portals. As ofSeptember 30, 2013, we had over 590 million e-mail users and 160 million installations of our leading Mobile News application."

"We see a great opportunity to integrate and expand our traditional online games and services with complementary mobile Internet offerings that broaden our customer base. We will continue to develop our mobile social networking platform and introduce new products and games to support this strategy. As a pioneer in China's Internet market, we are dedicated to providing our community with competitive products and services that honor our commitment to quality, while simultaneously creating additional value for our shareholder partners," Mr. Ding concluded.


Monday, August 19, 2013
Joint Venture

BEIJING, Aug. 19, 2013 /PRNewswire/ -- China Telecom Corporation Limited ("China Telecom") and NetEase, Inc. (NASDAQ: NTES) today announced that they have established a joint venture which is launching "YiChat", a proprietary social instant messaging application for smart phones.

YiChat differentiates itself from other social instant messaging applications through the integration of various unique technologies. For example, YiChat users can enjoy sending free text and voice messages to any mobile phone or free voice messages to fixed lines, without the need for YiChat to be installed on the receiving devices. Among its specially developed and distinctive features, YiChat offers proprietary environmental noise reduction technology, high-quality photo messaging and various original stickers and emoticon designs. Moreover, all China Telecom users can enjoy additional free data promotional packages with their use of YiChat.

"The joint venture with NetEase and the launch of YiChat is a crucial step in China Telecom's strategic transformation," said Jie Yang, President and COO of China Telecom. "It demonstrates China Telecom's commitment to mobile Internet development. Aiming to make YiChat one of the most popular social instant messaging applications for young people in China, China Telecom will work towards the success of the joint venture and YiChat with the most sincere determination."

"Our strategic joint venture with China Telecom aims to provide a superior social instant messaging application for smart phone users," said William Ding, CEO and founder of NetEase. "This partnership signals the start of NetEase's entry into the mobile instant messaging space, and is the one of the key components of our mobile Internet strategy. Going forward, YiChat will have our full support in its development, utilizing our cutting-edge technological capabilities to offer users a product with the highest quality experience."


Thursday, August 15, 2013
Comments & Business Outlook

Second Quarter 2013 Financial Results

  • Total revenues for the second quarter of 2013 were RMB2.4 billion (US$393.3 million), compared to RMB2.3 billion and RMB2.0 billion for the preceding quarter and the second quarter of 2012, respectively.
  • Gross profit for the second quarter of 2013 was RMB1.7 billion (US$276.6 million), compared to RMB1.5 billion and RMB1.3 billionfor the preceding quarter and the second quarter of 2012, respectively.
  • Gross profit margin for the online game business for the second quarter of 2013 was 80.9%, compared to 77.8% and 73.3% for the preceding quarter and the second quarter of 2012, respectively.
  • Basic and diluted earnings per ADS of US$1.37 each for the second quarter of 2013. The Company reported basic and diluted earnings per ADS of US$1.34 and US$1.33, respectively, for the preceding quarter, and reported basic and diluted earnings per ADS of US$1.09 and US$1.08, respectively, for the second quarter of 2012.

"We are actively growing our community of loyal users by expanding our portfolio of Internet games, products and services for traditional online and mobile users," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "Our strong second quarter results were led once again by our self-developed online games and advertising services. During the second quarter we increased our total revenues by 20.4% year-over-year to RMB2.4 billion, with revenues from our online games and advertising services increasing by 18.2% and 33.3%, respectively."

"We made a number of advancements with our online games in the second quarter. We commercially launched a new 3D real-time strategy game, Heroes of Three Kingdoms, and also introduced new expansion packs for Tianxia III, Westward Journey Online II and Westward Journey Online III as well as a comprehensive update of Ghost. This exciting new version, titled Ghost II, reached record high PCUs in April and achieved record revenue in the second quarter. Fantasy Westward Journey and Westward Journey Online III delivered solid performances during the second quarter following the price adjustments that were implemented in February for these games, as well as the launch of an item-based version of Westward Journey Online III in May. The performance of Westward Journey Online II also remained steady. Kung Fu Master has also been well received by audiences since its launch, with a major marketing campaign initiated at the end of March stimulating its excellent performance during the second quarter."

"To complement our diverse online games, I am very pleased to announce that in early July we introduced Fantasy Westward Journey II, a comprehensive upgrade with an accompanying pocket mobile version of one of our longest operating and most popular games, Fantasy Westward Journey. Mobile devices present a terrific platform for us to extend the reach of our games from PC to mobile players and enhance the user experience. We plan to build on this momentum by releasing further new and exciting mobile games that leverage our research and development expertise in the coming months."


Thursday, May 16, 2013
Comments & Business Outlook

First Quarter 2013 Financial Results

  • Total revenues for the first quarter of 2013 were RMB2.3 billion (US$363.6 million), compared to RMB2.3 billion and RMB2.0 billion for the preceding quarter and the first quarter of 2012, respectively.

  • Gross profit for the first quarter of 2013 was RMB1.5 billion (US$248.9 million), compared to RMB1.6 billion and RMB1.3 billion for the preceding quarter and the first quarter of 2012, respectively.

  • Basic and diluted earnings per ADS of US$1.32 each for the first quarter of 2013. The Company reported basic and diluted earnings per ADS of US$1.24 for the preceding quarter, and reported basic and diluted earnings per ADS ofUS$1.16 and US$1.15, respectively, for the first quarter of 2012.

"We have built a formidable and growing portfolio of self-developed games that continues to drive our growth," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "Our total revenues for the first quarter increased by 12.7% year-over-year, with improvements across our business segments including an increase of 11.3% in revenues from our online games and 15.3% from our advertising services.

"For the first quarter, we saw healthy growth across our principal self-developed games, which was partially offset by decreased revenues from our licensed games. A price increase that we implemented in February 2013 for Fantasy Westward Journey and Westward Journey Online II, as well as strong reception to our newer games Heroes of Tang Dynasty II and Kung Fu Master, were the main contributors to our year-over-year increase in online game revenues. Tianxia III and Ghost also performed well during the first quarter, following recent promotional activities.

"We launched a new expansion pack for New Fly for Fun during the first quarter, and we also initiated large-scale marketing activities for Kung Fu Master to support the game's growth at the end of March. The second quarter will be marked by a robust release schedule of new games and expansion packs that diversify our portfolio and build on the success of our existing online games. We commercialized our 3D real-time strategy game, Heroes of Three Kingdoms, on April 10, and we introduced expansion packs for Westward Journey Online II and Westward Journey Online III, as well as released Ghost II, a new version of Ghost, at the end of April. Since these launches, user feedback has been positive, and we are pleased with these games' performances. In the coming months, we plan to introduce expansion packs for Warsong of Westward Journey and Tianxia III, as well as leverage the 10 years of Fantasy Westward Journey's success by introducing a comprehensive upgrade.

"Our dynamic pipeline for the second half of the year will further broaden the types of games we offer as we plan to introduce Dragon Sword, our next generation 3D MMORPG, and Legend of Tibet, a 2.5D MMORPG that follows a unique story based on Tibetan mythology, followed by a first person shooter game. Additionally, our current release schedule includes new expansion packs for Kung Fu Master, Soul of the Fighter and New Fly for Fun. In the near future, we may also carefully consider and explore the opportunity of introducing our popular online games such as Ghost II to overseas markets and intend to consider our existing business partners when selecting our licensees.

"Our advertising services continued to grow year-over-year. Automobile, fast-moving consumer goods and financial services were the top performing sectors in the first quarter. Our comprehensive web portal, mobile applications and e-mail services continue to attract new users and expand our reach within our loyal community. As of March 31, 2013, we had more than 550 million e-mail users and there were 75 million installations of our industry leading Mobile News application with 29 million daily active users. Youdao Dictionary continued to increase in popularity, reaching 300 million cumulative users at the end of the quarter, with over 50 million monthly active users. Youdao Cloudnote also had approximately 12 million installations. We also released NetEase Cloud Music, a music SNS application that gives musicians and music fans the ability to discover and share music. As we advance our traditional and mobile Internet offerings, add new features and optimize the user experience, we believe we can further cultivate this rapidly growing audience.

"Returning value to our shareholders remains a top priority. Our ability to drive high levels of operating cash flow provides us with ample financial flexibility, and I am pleased to announce that following our special cash dividend that was paid in January, our board of directors has approved the adoption of an annual dividend policy which is discussed in greater detail later in this announcement.

"In 2013, we plan to introduce additional new content and services that address the needs of our users across our business segments. In line with this strategy, we plan to leverage our deep expertise as an online innovator to introduce several mobile games that complement our online games platform. We see the development of mobile games as an opportunity to expand our game offerings as we continue to fuel the growth of our business," Mr. Ding concluded.


Thursday, February 7, 2013
Comments & Business Outlook

Fourth Quarter 2012 Financial Results

  • Total revenues for the fourth quarter of 2012 were RMB2.3 billion (US$373.5 million), compared to RMB2.0 billion and RMB2.1 billionfor the preceding quarter and the fourth quarter of 2011, respectively.
  • Gross profit for the fourth quarter of 2012 was RMB1.6 billion (US$258.1 million), compared to RMB1.4 billion and RMB1.5 billion for the preceding quarter and the fourth quarter of 2011, respectively.
  • Net profit for the fourth quarter of 2012 totaled RMB1.0 billion (US$161.9 million), compared to RMB811.9 million and RMB898.6 millionfor the preceding quarter and the fourth quarter of 2011, respectively.
  • Basic and diluted earnings per American depositary share ("ADS") of US$1.23 each for the fourth quarter of 2012. The Company reported basic and diluted earnings per ADS of US$0.99 each for the preceding quarter, and basic and diluted earnings per ADS of US$1.10 each for the fourth quarter of 201

William Ding, Chief Executive Officer and Director of NetEase, stated, "2012 marked another strong year for NetEase as we continued to enhance our games and services, as well as introduce new products and services throughout the year. Our 12.1% growth in total revenues was primarily due to an 11.2% increase in our online games business and a 6.9% increase in our advertising services business. We finished the year with a solid fourth quarter, growing our total revenues by 8.3% year-over-year and 13.8% quarter-over-quarter, as well as year-over-year and quarter-over-quarter growth in revenue from our online games business."

"The growing popularity of our self-developed games and the newly launched expansion pack for Blizzard Entertainment's World of Warcraft contributed to our 13.6% quarter-over-quarter increase in online game revenues, supported by the launch of new gamesKung Fu Master, Soul of the Fighter and Heroes of Tang Dynasty II. 2012 has been a remarkable year for our self-developed online games. The continued growth from our flagship games, new game launches, and exciting expansion packs and upgrades drove our 11.2% year-over-year increase in online game revenues. Highlights for the year include Fantasy Westward Journey and Westward Journey Online II reaching record high PCU levels in August, Ghost and Tianxia III delivering solid performances during the year, andKung Fu Master and Heroes of Tang Dynasty II receiving positive feedback following their launches in October and November, respectively."

"Robust game expansion and pipeline development remains a core theme for the anticipated growth of our online game services in 2013. These initiatives are proceeding well in the first quarter of 2013, with expansion packs for Westward Journey Online III and New Fly for Fun planned to kick-off our online game release schedule. For the second quarter of 2013, our current plan includes the launch of expansion packs for Westward Journey Online II, Tianxia III, Heroes of Tang Dynasty II, Kung Fu Master and Soul of the Fighter and the new version of Ghost."

"As we continue to build on our successful game platforms, we are working to diversify our portfolio into new genres, with the development of our 3D action real-time strategy game Heroes of Three Kingdoms and a first person shooter game. Moreover, we plan to introduce two additional new games that further augment our extensive game portfolio, Dragon Sword, our next generation 3D MMORPG, and Legend of Tibet, a 2.5D MMORPG that follows a unique story based on Tibetan mythology. The development of these games is well underway, with plans for commercialization in the second half of the year."

"With regard to advertising services, our revenues for the fourth quarter grew by 6.8% quarter-over-quarter with automobile, financial services and Internet services as the three highest performing sectors. We continued to enhance our online offerings with the strategic development of our mobile initiatives, which have proved to be highly popular with our users. As of December 31, 2012, we had over 50 million installations for our Mobile News application with over 22 million active users on a daily basis, 8.5 million installations for Youdao Cloudnote and 128 million installations for Youdao Dictionary on mobile devices. As we move through 2013, we are cautiously optimistic that we will see continued spending and growth in our advertising business as we work to increase traffic to our portals with a focus on both traditional and mobile Internet."

"2012 marked the 15th anniversary of our mailbox services, where we continue to be one of China's leading e-mail service providers. With the launch of our new e-mail 5.0 services in August, the number of new users and user activity increased substantially in 2012. As of December 31, 2012, we had approximately 530 million registered e-mail users. We continue to optimize these services to enhance their appeal to our users."

"We remain focused on bringing games and content to the Internet market that showcase our innovation and leadership. Our strategic initiatives are designed to build on our established online games, portal and e-mail businesses through the introduction of high quality content, leading technology and optimization. In 2013, we will work to achieve growth across our businesses with enhancements to our games and services that underscore our commitment to driving content, community, communication and commerce in China's growing online market," Mr. Ding concluded.


Thursday, November 15, 2012
Comments & Business Outlook

Third Quarter 2012 Financial Results

  • Total revenues for the third quarter of 2012 were RMB2.0 billion (US$325.4 million), compared to RMB2.0 billion for both the preceding quarter and the third quarter of 2011.
  • Net profit for the third quarter of 2012 totaled RMB811.9 million (US$129.2 million), compared to RMB875.3 millionand RMB825.8 million for the preceding quarter and the third quarter of 2011, respectively.
  • Basic and diluted earnings per ADS of US$0.98 each for the third quarter of 2012. The Company reported basic and diluted earnings per ADS of US$1.06 each for the preceding quarter and reported basic and diluted earnings per ADS of US$1.01 and US$1.00, respectively, for the third quarter of 2011. Basic and diluted earnings per ADS for the third quarter of 2012 reflect a one-time accrued withholding tax, as described below, which has the effect of reducing such earnings per ADS.

William Ding, Chief Executive Officer and Director of NetEase, stated, "For the third quarter, total online game revenues were RMB1.7 billion with increased revenue contribution from our self-developed games. We advanced our online game business by introducing new games, launching expansion packs and conducting key promotional activities. Most recently, we launched unlimited beta testing for our newest games, Soul of the Fighter and Kung Fu Master, in September and October, respectively. Both new games have received exceptionally positive reception among gamers in China, and we are delighted with the user feedback thus far. As a result of the promotional activities for our flagship games, Fantasy Westward Journey and its latest expansion pack, and Westward Journey Online II, these games achieved record-high PCU levels in August. We also introduced a new expansion pack for Westward Journey Online III in August, as well as a new 3DX expansion pack for Tianxia III in late September."

"The October 2nd release of the highly anticipated fourth expansion pack of Blizzard Entertainment's World of Warcraft: Mists of Pandaria in mainland China was another important milestone during this period. With elements that appeal to Chinese culture, Mists of Pandaria has proven to be especially engaging, and we believe that it is being widely embraced by China's gaming community."

"As we enter the remaining months of 2012 and move into 2013, we will focus on introducing new games and expansion packs that will build on the popularity of our existing games, and furthering our strategy of diversifying our portfolio offering. We plan to launch Heroes of Tang Dynasty II, a comprehensive update of Heroes of Tang Dynasty, on November 16, and in the coming months, we plan to introduce two new games, Heroes of Three Kingdoms, our 3D action real-time strategy game, and Dragon Sword, our next generation 3D MMORPG."

"As one of the first and largest Internet companies in China, the popularity of our portal continues to drive our advertising services revenues. During the third quarter, our advertising services revenues grew 10.2% year-over-year and 19.0% quarter-over-quarter with automobile, fast moving consumer goods and financial services as the top performing sectors. Our advertising business benefited from the popularity of our leading mobile news application as well as our broadcast of the London Olympics. The coverage of the latter yielded an unprecedented number of downloads and portal activity that exceeded our results from the Beijing Olympics in 2008."

"Our e-mail services also continued to grow, and as of September 30, 2012, we had approximately 510 million registered e-mail users. The integration of our traditional and mobile Internet services is continually being furthered and enhanced. We have more than 60 million registered mobile e-mail users and 27 million installations for our Mobile News application."

"We are working to achieve healthy growth that furthers our leading position in China's thriving Internet community. Historically, we have developed some of the most long-lasting and popular online games in China, and our large community of loyal users is growing across our business segments. Focusing on premium quality remains our top goal as we further build and diversify our portfolio of online games and enhance our content and value added services for our leading portal and burgeoning mobile Internet businesses. In addition, we have always been committed to creating value for our shareholders. As our revenue continues to grow, generating strong free cash flow from operations, we are happy to announce that our board of directors has approved a special cash dividend of US$1.00per ADS, along with a US$100 million share repurchase program. We believe that these actions reflect our sound financial position and will enhance our shareholders' return as we work to increase the value of our Company," concluded Mr. Ding.


Special Dividend

Special Cash Dividend

The Company today announced that its board of directors declared a special cash dividend of US$0.04 per ordinary share, which is equivalent to US$1.00 per ADS (each ADS represents 25 ordinary shares). The special cash dividend is payable to shareholders of record as of January 15, 2013 and is expected to be paid on January 18, 2013. The board of directors declared this special cash dividend in order to give value back to shareholders, as the Company's revenues continue to grow, generating strong free cash flow from operations. The total amount of cash distributed is expected to be approximately US$131 million.


Thursday, August 16, 2012
Comments & Business Outlook

Second Quarter 2012 Financial Results

  • Total revenues for the second quarter of 2012 were RMB2.0 billion (US$315.5 million), compared to RMB2.0 billion and RMB1.8 billion for the preceding quarter and the second quarter of 2011, respectively.
  • Gross profit for the second quarter of 2012 was RMB1.3 billion (US$208.0 million), compared to RMB1.3 billion and RMB1.2 billion for the preceding quarter and the second quarter of 2011, respectively.
  • Net profit for the second quarter of 2012 totaled RMB875.3 million (US$137.8 million), compared to RMB941.7 million and RMB772.5 million for the preceding quarter and the second quarter of 2011, respectively.
  • NetEase reported basic and diluted earnings per ADS of US$1.05 each for the second quarter of 2012. The Company reported basic and diluted earnings per ADS of US$1.13 each for the preceding quarter, and reported basic and diluted earnings per ADS of US$0.93 each for the second quarter of 2011.

William Ding, Chief Executive Officer and Director of NetEase, stated, "We place great emphasis on setting standards of excellence for China's Internet audience. The merits of this strategy can be found in our continued growth and loyalty in our user base. For the second quarter of 2012, our total revenues increased 12.7% year-over-year, with online games growing by 10.8% and advertising services increasing by 20.4%."

"In the second quarter, we continued to advance our self-developed games with certain standout performances. Ghost achieved record revenue in May, gaining traction from its open beta testing launch in April. Fantasy Westward Journey demonstrated a stable increase in revenue driven by positive user response to new content for this game. During the second quarter, we also launched open beta testing for Tianxia III, as well as released new expansion packs for Warsong of Westward Journey in April, Heroes of Tang Dynasty in May and Westward Journey Online II at the end of June. We expect the effect from the new launches for our self-developed games to be reflected in upcoming periods."

"Although playing time for Blizzard Entertainment's World of Warcraft declined during the second quarter, leading to a quarter-over-quarter decrease of online game revenues, World of Warcraft continues to have a very enthusiastic community of players in China. We look forward to releasing Blizzard's Mists of Pandaria, the fourth expansion pack for World of Warcraft, as soon as possible to build on the game's large and passionate player base in China."

"In the second half of the year, we will focus on launching several new games and introducing expansion packs to existing games such as Fantasy Westward Journey, Tianxia III, Ghost and Westward Journey Online III. Our newest games under development are progressing well. In response to growing market demand for action games, we launched initial closed beta testing for two such games in July: Kung Fu Master, formerly called Wu Hun, as well as Soul of the Fighter, formerly called Soul of Warrior. Early feedback for both games has been encouraging, and we are preparing for their commercial launch in the second half of the year. In addition, our next generation 3D MMORPG Dragon Sword and 3D action real-time strategy game Heroes of Three Kingdoms are being developed to the highest standards of quality, and we will be performing technical tests this year to obtain user feedback on those games."

"Content innovation, new product development as well as service integration among mobile platforms continues to attract new advertising customers. Revenues from advertising services grew 42.3% quarter-over-quarter, led by the automobile, fast moving consumer goods and financial services sectors. Our recent focus has been on high profile sporting events, such as Euro Cup 2012 and the London Olympics. In the second quarter, we were pleased to secure a strategic partnership with China Network Television to broadcast the London Olympic Games as well as the opening and closing ceremonies on our portal and our top-ranking mobile news application."

"Mobile access and the introduction of new attractive content are contributing to continued user growth in our portal and e-mail business. In the second quarter, the registered number of users for our micro-blogging service increased by 48.8% sequentially to 180 million. Mailbox services also increased to 495 million registered users as of June 30, 2012. We continue to advance both services by introducing new content and enhancing the user experience to broaden our existing community."

"Our robust games portfolio, industry leading portal and growing search business are built on the success of providing a highly differentiated platform that caters to quality and optimizing user experience. We continue to build our products and services to meet customers' demands for new content with a robust pipeline of games and activities planned for the second half of the year," Mr. Ding concluded.


Thursday, May 17, 2012
Comments & Business Outlook
First Quarter 2012 Unaudited Financial Results
  • Total revenues for the first quarter of 2012 were RMB2.0 billion (US$318.2 million), compared toRMB2.1 billion and RMB1.5 billion for the preceding quarter and the first quarter of 2011, respectively.
  • Gross profit for the first quarter of 2012 was RMB1.3 billion (US$211.4 million), compared toRMB1.5 billion and RMB985.0 million for the preceding quarter and the first quarter of 2011, respectively.
  • Net profit for the first quarter of 2012 totaled RMB941.7 million (US$149.5 million), compared toRMB898.6 million and RMB737.4 million for the preceding quarter and the first quarter of 2011, respectively.

William Ding, Chief Executive Officer and Director of NetEase, stated, "The growing popularity of our self-developed games continues to drive our revenues. For the first quarter, our total online games revenue increased 31.4% year-over-year, with dynamic growth from our newer games Ghost and Tianxia III and increasing contribution from several of our flagship games, Fantasy Westward Journey, Westward Journey Online II and Heroes of Tang Dynasty."

"Our online games revenue has been driven by the successful execution of our strategy to continuously improve user experience and has been further demonstrated by Ghost's rapid growth since the launch of its full scale closed beta testing in September 2011. In the second quarter, we introduced a series of new features for Ghost in its open beta testing, which has been well received by users. Benefiting from the innovative game play mode, our newest game, Tianxia III, achieved record high revenue in the first quarter. We plan to continue developing new exciting content and launch open beta testing for Tianxia III in the second quarter."

"Moreover, players continue to respond enthusiastically to expansion packs for our long running self-developed games, Fantasy Westward Journey and Westward Journey Online II. We plan to launch new expansion packs combined with large-scale promotional activities for these games in the second and third quarters. Other expansion packs or new versions planned for the second quarter include Heroes of Tang Dynasty, Westward Journey Online III and Warsong of Westward Journey."

"Diversification through the introduction of self-developed games is a key theme in 2012. We are on track to commercialize a number of new titles this year that showcase innovative content and leading technology. In the second and third quarters of 2012, we plan to initiate beta testing of several highly anticipated games in our pipeline, including 3D ARPG, Soul of Warrior, 2.5D MMORPG, Wu Hun, 3D action real-time strategy (or DotA) game, Heroes of Three Kingdoms, and a next generation 3D action MMORPG, Dragon Sword. With respect to our licensed games, we are pleased to have renewed our contract with Blizzard Entertainment to continue our existing cooperation on Blizzard Entertainment's World of Warcraft� in mainland China. We look forward to releasing Mists of Pandaria, the fourth expansion to World of Warcraft, in mainland China as soon as possible."

"Our advertising revenue grew 13.1% year-over-year, with automobile, Internet services and food and beverage services as the top performing sectors. Advertising revenues declined 48.5% quarter-over-quarter, which reflects the typical industry seasonality. We expect the usual uptick in advertising revenues in the second quarter and through the second half of 2012. We remain committed to increasing our appeal to users by offering content innovation, synthesizing user feedback and providing service integration between different mobile device platforms. To leverage the opportunities offered by the upcoming 2012 London Olympics, we have secured a number of partnerships with content providers to offer comprehensive, accurate and in-depth reporting to our portal and mobile Internet users."

Mr. Ding concluded, "Portal traffic grew steadily in the first quarter as we continued to optimize our user experience and mobile access by introducing leading applications and cutting edge technology. Usage of our micro-blogging services is also expanding. In the first quarter, the number of micro-blogging users reached 121.0 million, up 24.0% from December 31, 2011. As the leading free email provider in China, our mailbox services also performed well as we continued to optimize services through mobile access and upgrades to enhance users' experience. As of March 31, 2012, we had approximately 480 million registered email users, up 6.7% quarter-over-quarter. In addition, the number of users and paying subscribers for our corporate mailbox services have grown in their third year of operation. During the first quarter, we were named one of the top corporate mailbox service providers in China.

"With continued execution on expanding and diversifying our game portfolio and user base, as well as driving innovation in content, technology and entertainment across all demographics inChina, we look forward to another great year for NetEase in 2012," Mr. Ding concluded.


Thursday, February 16, 2012
Comments & Business Outlook

Fourth Quarter 2011 Financial Results

  • Total revenues for the fourth quarter of 2011 were RMB2.1 billion (US$341.4 million), compared to RMB2.0 billion and RMB1.7 billion for the preceding quarter and the fourth quarter of 2010, respectively.
  • NetEase reported basic and diluted earnings per American depositary share ("ADS") of US$1.09 each for the fourth quarter of 2011. The Company reported basic and diluted earnings per ADS of US$1.00 each for the preceding quarter, and basic and diluted earnings per ADS of US$0.87 each for the fourth quarter of 2010.

William Ding, Chief Executive Officer and Director of NetEase, stated, "2011 was a year of strong growth for our company. Providing our loyal and growing community of users with the highest quality content continues to fortify NetEase's industry leadership. Our success was highlighted by a 32.0% increase in total revenues for 2011, driven by an increase in online game services revenue of 32.5%, followed by strong growth in our advertising services revenue of 25.6% for the year."

"Our approach to technology innovation and product diversification to satisfy user demand is the core of our 2012 growth strategy. In the first half of 2012, we plan to enhance our portfolio of popular games with numerous expansion packs, including updates for Heroes of Tang Dynasty, Westward Journey Online II, Warsong of Westward Journey, New Fly For Fun and Legend of Fairy, as well as commence open beta testing for Ghost and Tianxia III. We also have two new self-developed games in process that are scheduled for beta testing in mid-2012."

Mr. Ding continued, "Internet advertising is rapidly increasing as a dominant media platform for advertisers in China. In 2011, revenue growth from our advertising services segment was consistently strong, led by the financial services, food and beverage products, and Internet services sectors. Seasonality and increased recognition by advertisers of our innovative content, service integration, and NetEase's user appeal drove a 26.3% sequential increase and a 19.2% year-over-year increase in advertising services revenue for the fourth quarter of 2011."

"We continue to evaluate the market and enhance our products and service offerings to meet the demands of a dynamic and competitive market. As the No. 1 free email provider in China, registered email users grew to 450 million as of December 31, 2011, an increase of 4.7% over the third quarter. The number of micro-blogging users grew to 97.6 million users, an increase of 10.3% over the third quarter."

Mr. Ding concluded, "We hold a long history of innovation and community in China's Internet market. Our main priority for 2012 is to continue to satisfy the demand of Internet users by providing high quality and innovative products and services to the market."


Thursday, December 1, 2011
Notable Share Transactions

BEIJING, Dec. 1, 2011 /PRNewswire-Asia-FirstCall/ -- NetEase.com, Inc. (NASDAQ: NTES), one of China's leading Internet and online game services providers, today announced that its board of directors has approved a new share repurchase program of up to US$50 million of the company's outstanding American Depositary Shares (ADSs) for a period not to exceed three months.  

Under the terms of the approved program, NetEase may repurchase its issued and outstanding ADSs in open-market transactions on the NASDAQ Global Select Market. The timing and dollar amount of repurchase transactions will be subject to Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that such repurchases will be effected pursuant to a plan in conformity with SEC Rule 10b5-1. NetEase plans to fund repurchases made under this program from available working capital.


Wednesday, November 16, 2011
Comments & Business Outlook

Third Quarter 2011 Financial Results

  • Total revenues for the third quarter of 2011 were RMB2.0 billion (US$314.8 million), compared to RMB1.8 billion and RMB1.4 billion for the preceding quarter and the third quarter of 2010, respectively.
  • Net profit for the third quarter of 2011 totaled RMB825.8 million (US$129.5 million), compared to RMB772.5 million and RMB585.3 million for the preceding quarter and the third quarter of 2010, respectively. During the third quarter of 2011, the Company reported a net foreign exchange loss of RMB65.0 million (US$10.2 million), compared to a net foreign exchange loss of RMB3.0 million and a net foreign exchange gain of RMB54.3 million for the preceding quarter and the third quarter of 2010, respectively.
  • The quarter-over-quarter and year-over-year foreign exchange gains/losses were mainly due to the exchange gains/losses arising from the Company's Euro-denominated bank deposit balances as of September 30, 2011 as the exchange rate of the Euro against the RMB fluctuated over the periods.
  • NetEase reported basic and diluted earnings per American depositary share ("ADS") of US$0.99 each for the third quarter of 2011. The Company reported basic and diluted earnings per ADS of US$0.93 each for the preceding quarter, and basic and diluted earnings per ADS of US$0.71 and US$0.70, respectively, for the third quarter of 2010.

The year-over-year increase in gross profit was primarily attributable to increased revenues from both the online games and advertising businesses, partially offset by increased cost of revenues related mainly to the online games business. The year-over-year increase in online games revenue was primarily driven by increased revenues from the Company's self-developed games, as well as increased revenue from World of Warcraft. Revenues from self-developed games increased primarily as a result of various expansion packs and promotional activities in the third quarter of 2011, as well as the unlimited closed beta testing of Ghost starting in April 2011 and the open beta testing of Heroes of Tang Dynasty starting in June 2011. The year-over-year increase in revenue from World of Warcraft was mainly due to the release of the game's two expansions, Wrath of the Lich King™ and Cataclysm™, in mainland China in August 2010 and July 2011, respectively. The year-over-year increase in cost of revenues for the online games business was mainly due to increased royalties and consultancy fees related to World of Warcraft and StarCraft II operations and increased staff-related costs, resulting from increased headcount in 2011. The year-over-year increase in advertising services revenue was primarily due to continued rising demand for advertising services, primarily from food and beverage products, financial services and Internet services sectors.


Wednesday, August 17, 2011
Comments & Business Outlook

Second Quarter 2011 Financial Results

  • Total revenues for the second quarter of 2011 were RMB1.8 billion (US$275.1 million), compared to RMB1.5 billion and RMB1.3 billion for the preceding quarter and the second quarter of 2010, respectively.
  • Net profit for the second quarter of 2011 totaled RMB772.5 million (US$119.5 million), compared to RMB737.4 million and RMB485.7 million for the preceding quarter and the second quarter of 2010, respectively. During the second quarter of 2011, the Company reported a net foreign exchange loss of RMB3.0 million (US$0.5 million), compared to a net foreign exchange gain of RMB25.3 million and a net foreign exchange loss of RMB67.8 million for the preceding quarter and the second quarter of 2010, respectively.
  • The quarter-over-quarter and year-over-year foreign exchange gains/losses were mainly due to the translation gains/losses arising from the Company's Euro-denominated bank deposit balances as of June 30, 2011 as the exchange rate of the Euro against the RMB fluctuated over the periods.
  • NetEase reported basic and diluted earnings per American depositary share ("ADS") of US$0.92 and US$0.91, respectively, for the second quarter of 2011. The Company reported basic and diluted earnings per ADS of US$0.88 and US$0.87, respectively, for the preceding quarter and basic and diluted earnings per ADS of US$0.58 each for the second quarter of 2010.

The year-over-year increase in gross profit was primarily attributable to increased revenues from both the online games and advertising businesses, partially offset by increased cost of revenues related mainly to the online games business. The year-over-year increase in online games revenue was primarily driven by increased revenues from the Company's self-developed games as well as increased revenue from World of Warcraft. Revenues from self-developed games increased primarily as a result of various expansion packs and promotional activities in the second quarter of 2011, as well as the unlimited closed beta testing of Ghost starting in April 2011. The year-over-year increase in revenue from World of Warcraft was mainly due to the release of Blizzard Entertainment's Wrath of the Lich King™ expansion pack in August 2010. The year-over-year increase in cost of revenues for the online games business was mainly due to increased royalties and consultancy fees related to World of Warcraft and StarCraft II operations and increased staff-related costs, resulting from increased headcount in 2011.

The year-over-year increase in advertising services revenue was primarily due to continued rising demand for advertising services, primarily from Internet services, food and beverage products and financial services sectors.


Sunday, June 26, 2011
Liquidity Requirements
We believe that our current levels of cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need additional cash resources if we experience changed business conditions or other developments. We may also need additional cash resources if we find and wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar action. If we determine that our cash requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain a credit facility.

Thursday, May 19, 2011
Comments & Business Outlook

First Quarter Results:

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.

  • Total revenues for the first quarter of 2011 were RMB1.5 billion (US$234.9 million), compared to RMB1.7 billion and RMB1.2 billion for the preceding quarter and the first quarter of 2010, respectively.
  • Gross profit for the first quarter of 2011 was RMB985.0 million (US$150.4 million), compared to RMB1.1 billion and RMB772.4 million for the preceding quarter and the first quarter of 2010, respectively
  • Net profit for the first quarter of 2011 totaled RMB737.4 million (US$112.6 million), compared to RMB712.5 million and RMB452.3 million for the preceding quarter and the first quarter of 2010, respectively.
  • NetEase reported basic and diluted earnings per American depositary share ("ADS") of US$0.86 each for the first quarter of 2011. The Company reported basic and diluted earnings per ADS of US$0.84 and US$0.83 for the preceding quarter and US$0.53 each for the first quarter of 2010.

Thursday, February 24, 2011
Comments & Business Outlook

Fourth Quarter Highlights:

  • Total revenues for the fourth quarter of 2010 were RMB1.7 billion (US$254.5 million), compared to RMB1.4 billion and RMB1.3 billion for the preceding quarter and the fourth quarter of 2009, respectively.
  • Gross profit for the fourth quarter of 2010 was RMB1.1 billion (US$168.7 million), compared to RMB952.0 million and RMB838.4 million for the preceding quarter and the fourth quarter of 2009, respectively.
  • Net profit for the fourth quarter of 2010 totaled RMB712.5 million (US$108.0 million), compared to RMB585.3 million and RMB571.8 million for the preceding quarter and the fourth quarter of 2009, respectively.
  • NetEase reported basic and diluted earnings per American depositary share ("ADS") of US$0.83 each for the fourth quarter of 2010. The Company reported basic and diluted earnings per ADS of US$0.68 each and US$0.67 each for the preceding quarter and the fourth quarter of 2009, respectively.

William Ding, Chief Executive Officer and Director of NetEase, stated, "We ended 2010 with strong fourth quarter results in both online games and advertising services, delivering solid sequential and year-over-year revenue growth.  Fourth quarter online game revenues increased 13% quarter-over-quarter and 31% year-over-year, driven primarily by the Wrath of the Lich King(TM) expansion pack launched on August 31, 2010 for World of Warcraft(R), a game licensed from Blizzard Entertainment, and the outstanding performances from our fastest growing self-developed games, Tianxia II, Heroes of Tang Dynasty and Westward Journey Online II.

Mr. Ding concluded, "In conjunction with our online games strategy for 2011, for our portal business, we will focus on new product applications in mobile phones and will explore new advertising formats and marketing models to attract premier advertisers and stimulate ad spending. We are working to achieve healthy growth across our business in 2011 in line with anticipated market expansion in order to maintain our leading position in China's burgeoning Internet community."


Wednesday, November 17, 2010
Comments & Business Outlook

Third Quarter 2010 Financial Results

  • Total revenues for the third quarter of 2010 were RMB1.4 billion (US$215.1 million), compared to RMB1.3 billion and RMB879.4 million for the preceding quarter and the third quarter of 2009, respectively.
  • Net profit for the third quarter of 2010 totaledRMB585.3 million (US$87.5 million), compared to RMB485.7 million and RMB393.8 millionfor the preceding quarter and the third quarter of 2009, respectively. During the third quarter of 2010, the Company reported a net foreign exchange gain ofRMB54.3 million (US$8.1 million), compared to a net foreign exchange loss of RMB67.8 million in the preceding quarter and a net foreign exchange gain of RMB25.3 million in the third quarter of 2009.  The quarter-over-quarter and year-over-year changes in foreign exchange gains/losses were mainly due to the translation changes arising from the Company's Euro-denominated bank deposit balances as of September 30, 2010, as the exchange rate of the Euro against the RMB fluctuated over the periods.  
  • NetEase reported basic and diluted earnings per ADS of US$0.67 each for the third quarter of 2010.  The Company reported basic and diluted earnings per ADS of US$0.56 each and US$0.45each for the preceding quarter and the third quarter of 2009, respectively.