Shanda Interactive Entertainment yesterday said net profit dropped to a two-year low in the second quarter due to a lack of blockbuster titles and a lukewarm game market in the period.

Shanda, China's No. 2 online game firm, also announced several other deals, including the US$95 million acquisition of a South Korean game studio, to compete with arch rivals Tencent Inc and NetEase.com Inc.

In the second quarter, Shanda's net profit fell 60 percent to US$24.8 million, or 40 US cents per American Depositary Share, less than analysts' estimates of 53 US cents a share.

Revenue rose 10.8 percent to reach US$200.6 million in the period.

Shanda Games, the company's online game unit that contributes more than 80 percent of its total income, posted a 7 percent decline in profit as titles such as Woool and Mir II declined in popularity.

"Excluding Mir II and Woool, Shanda Games may only have three or four blockbusters, implying a low 'hit ratio,'" Richard Ji, a Morgan Stanley analyst, said in a recent note.

Quarterly decline

Mir II and Woool, which account for over 70 percent of its total revenue, have been operating for six to nine years. This is longer than most popular online games in China, according to Ji.

In the second quarter, China's online game market revenue was 7.78 billion yuan (US$1.15 billion), dropping 0.5 percent quarter on quarter, the first quarterly decline since the beginning of 2008, according to Analysys International, a Beijing-based IT consulting firm.

Fierce competition and a free business model hurt growth in the market but it's expected to bounce back in the second half, according to Analysys.

In the domestic market, Tencent had the biggest market share at 27.2 percent, following by Shanda with 15.9 percent and NetEase with 15.2 percent, according to online research firm iResearch.

Meanwhile, Nasdaq-listed Shanda announced yesterday it acquired South Korea-based Eyedentity Games, the developer of Dragon Nest, for approximately US$95 million in cash.

Shanda also said it will establish a joint venture with China Network Television.

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