The Ancient Art of Warcraft

Things continue to look up for Chinese gaming upstart The9 (Nasdaq: NCTY  ) . Since the company introduced its licensed version of Blizzard's World of Warcraft, the company has recorded healthy chunks of profitability as it becomes a true online gaming force in the world's most populous nation.

Wednesday night's report covering the company's quarter ended in March pretty much sums up the transformation process. A year ago, The9 was a speck on the scene. It was saddled with struggling Korean game maker Webzen (Nasdaq: WZEN  ) and putting out poorly received ported titles. Revenue clocked in at just $1.5 million -- attached to a small loss -- in the March quarter of 2005.

What a difference a year makes. Thanks to its deal with Vivendi's (NYSE: V  ) Blizzard Entertainment, The9 has been able to sign up 4.3 million paying accounts. Nearly 300,000 gamers in mainland China are playing the multiplayer fantasy adventure at the same time, with its peak usage this past quarter maxing out at 610,000 diehard players.

That may pale compared to the 1.3 million concurrent players that NetEase (Nasdaq: NTES  ) recorded at the peak period of its Fantasy Westward Journey game, but it's still impressive.

Ultimately, The9 earned $0.30 a share on $26.5 million in revenue this past quarter. The9 may be a one-trick pony, with World of Warcraft accounting for all but $0.3 million of that top-line sum, but that's one heckuva trick.

Online gaming is big in China, and it's only going to get more prolific as disposable income trickles higher. After all, NetEase was recommended to Rule Breakers newsletter service subscribers a little over a year ago, and the shares have gone on to soar 67.7% higher.

Trading in The9 has been a bit more lethargic since it went public in 2004, but that may change if the game's popularity continues to grow. Production didn't grow sequentially, and that was disheartening, but it's more important for The9 to maintain its presence as it uses its newfound popularity to introduce another hit game or two.

The only thing better than a one-trick pony is a two-trick stallion.

Longtime Fool contributor Rick Munarriz believes in the sector, but he does not own shares in any of the companies mentioned in this story.The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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