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KongZhong Q4 2010 Profit Up 149% YoY

PR Newswire Asia, 3/03/11

Chinese mobile Internet and online gaming company KongZhong (Nasdaq: KONG) today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010, with total revenues for the quarter up 5% YoY to USD 36 mln. Total revenue for the full year grew 14% to USD 149.58 mln.

Net income for the quarter surged 330% QoQ and 149% YoY to USD 5.01 mln. Net income for the full year dropped 5.2% YoY to USD 11.92 mln, compared to net income of USD 12.58 mln in the same period last year.

Wireless value-added services (WVAS) revenues in Q4 2010 reached USD 17.32 mln, down 17% QoQ and 36% YoY. Relative to prior USD 18.5 mln guidance for WVAS revenues in Q4 2010, the shortfall was due to a slightly more restrictive policy environment than previously anticipated, but KongZhong now expects a recovery in the WVAS business in the coming quarters as the WVAS operating environment has stabilized.

In Q4 2010, 2G revenues represented 89% of total newly reported WVAS revenues, while 2.5G services made up 11% of total WVAS revenues. WVAS made up 48.1% of total revenues in the quarter.

Total mobile gaming revenues in Q4 2010 reached USD 12.76 mln, up 74% YoY but down 8% QoQ.

Revenues from downloadable mobile games in Q4 2010 reached USD 12.32 mln, representing an increase of 89% YoY, but a decrease of 6% QoQ. In Q4 2010, downloadable mobile game revenues were impacted by the ongoing reduction in marketing activities by the company's mobile operator partners as well as year-end subscriber confirmation notices, which led to higher than prior period churn rates.

In Q4 2010, average monthly mobile game subscribers remained at approximately 2 mln per month.

Mobile multi-player online games (MMO) (online mobile games) revenues in Q4 2010 reached USD 450,000, down 49% QoQ, and 46% YoY. All three of KongZhong's online mobile games experienced a sequential decline in revenue due to product lifecycle and competitive issues.

Downloadable mobile game revenues made up 97% of total mobile game revenue, compared to 94% in Q3 2010. Online mobile gaming revenues made up roughly 3% of total mobile game revenue, compared to 6% in Q3 2010.

Mobile game revenues made up 35.4% of total revenues in Q4 2010.

Online gaming revenues in the Q4 2010 reached USD 5.92 mln, up 100% QoQ. The increase was due to the strong performance of Shanghai-based online game operator subsidiary Dacheng Network's self-developed 3D fantasy MMORPG Trinity Blood, and the licensing of the company's online games to overseas markets such as Taiwan, SE Asia, Hong Kong, Korea, Japan and North America. During the quarter, Dacheng's 3D MMORPG Loong, 3D martial arts MMORPG Xia Ke Xing and Trinity Blood license fees all contributed to overseas revenues.

KongZhong's in-house development team has started making improvements to the action gameplay component of Trinity Blood, which has led to better user acceptance and retention. The company expects that in the future, a key differentiator of 3D online games in China will be the ability for game developers to incorporate more and more complex action special effects into MMORPG games and it has started to focus future development efforts towards this.

Total overseas revenues as a percentage of total online gaming revenues in Q4 2010 were 39%, compared to 18% in Q3 2010.

In Q4 2010, mainland China online game operations achieved average concurrent users (ACUs) of 81,000 compared to 69,000 in Q3 2010 and aggregate paying accounts (APAs) of 120,000 with quarterly ARPU of RMB 201 compared to 69,000 APAs with quarterly ARPU of RMB 240 in Q3 2010.

Online gaming revenues made up 16.5% of total revenue in Q4 2010.

As of February 28, 2011, licensed TPS (Third Person Shooter) World of Tanks achieved over 900,000 registered users and over 90,000 PCU during closed beta testing. KongZhong's self-developed 3D MMORPG Kung Fu Hero began technical closed beta testing on February 28, and open beta testing is scheduled to begin in Q3 2011. KongZhong's self-developed 3D MMORPG Demon Code 2 (E'mo Faze 2) is scheduled to begin open beta testing by the end of 2011.

In Q4 2010, KongZhong recognized a gain of USD 338,000 from various government subsidies related to the development of both Internet and mobile games.

KongZhong expects total revenues for Q1 2011 to be within the range of USD 38.5 mln to USD 39.5 mln, with business unit revenues at the mid-point expected to be WVAS revenues of USD 20.3 mln, mobile game revenues of USD 13.5 mln and online gaming revenues of USD 5.2 mln.

To view KongZhong's full earnings report, please click here.

Keywords: operating rights APA Kung Fu Hero Demon Code 2 Dacheng Loong mobile gaming online gaming ARPU guidance Internet overseas profit revenue wireless MMORPG WVAS PCU Kongzhong registered users KONG mobile Internet Q4 2010 Xia Ke Xing Trinity Blood World of Tanks TPS self-developed game 3D game fiscal report ACU government subsidy

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