Two Chinese online games operators announced sharp increases in profits in last quarter, proving prospects of sustained growth in the online games sector in China, while a few other major Internet concerns had some difficulty in the same period.

NASDAQ-listed Chinese games operator The9 Limited reported its net profits in the fourth quarter grew almost 150 percent over the previous quarter to US$940,000, although its revenues only rose slightly by 0.6 percent quarter-on-quarter to about US$1 million.

Earnings per share of The9's American depository shares (ADSs) were 5 US cents.

It is the first time Shanghai-based The9 has released financial results since its initial public offering on the high-tech-laden NASDAQ in New York on December 15.

The9's stocks rose by 4.29 percent to US$21.90 on Wednesday.

The Chinese games operator's annual revenues in 2004 also more than doubled to US$4.2 million as net profits stood at US$2.96 million.

"The year 2004 has been a very important year for us, as we transformed from a single-title operator to a multi-title operator and our progress in owning our proprietary development capability," said The9 Chairman and CEO Zhu Jun Thursday.

Jim Sun, an analyst with London-headquartered Evolution Securities, pointed out that it is good to see that The9's fourth quarter results saw some improvement over the third quarter, which was mainly due to an increase in gaming zones for the The9's pillar game MU.

NASDAQ-listed Chinese Internet company Netease.com Inc also reported strong growth in the fourth quarter on Wednesday.

Beijing-based Netease saw revenues from online games grow by 22.6 percent quarter-on-quarter to US$23.8 million.

Its total revenues in the quarter also grew by 9.7 percent over the previous quarter to US$31.6 million.

"Netease continues to leverage the marketing power of its highly popular Chinese websites to drive growth to the top line revenue," said Ted Sun, acting CEO of the company.

Netease also booked net profits of US$15.7 million in the quarter or 45 US cents per diluted ADS, compared with US$13.2 million and 38 US cents respectively.

Netease's annual revenues rose by almost 60 percent to US$109 million in 2004.

Evolution Securities' Sun said in a research note that Netease's revenues from online games exceeded market expectations.

Its average revenue per user was about 0.37 yuan (4 US cents) per hour, more than 70 percent higher than the country's biggest online game operator Shanda Interactive Entertainment.

He maintained his "buy" rating for Netease stock, but reduced the target price from US$55.70 to US$50.40, mainly due to intensifying competition.

"We think fierce competition in the massive multiplayer online role player game market is the biggest risk for Netease, as the company is fully dependent on two major game titles in the next three quarters," said Sun in the note.

(China Daily February 25, 2005)