If the recession is global, try telling that to die-hard gamers in China.
Online gaming pioneer Shanda Interactive (Nasdaq: SNDA ) delivered yet another strong quarter. Revenue grew by 42% to $162 million, fueled by a 47% increase in Shanda's bread-and-butter multiplayer role-playing games. They account for 85% of the company's revenue, so it's good to see that Shanda grows that component with every passing quarter.
Earnings grew by a more modest 25%, but on a per-share basis rose 35% to $0.78 per ADS (American depositary share); Wall Street's expectations were a profit of $0.74 a share on $155.7 million in revenue.
This doesn't mean that the company, based in Shanghai, is necessarily immune to the worldwide weakness. The monthly revenue per account fell 12% from the previous quarter. The company made up for it in volume, posting top- and bottom-line gains over the fourth quarter. It continues to attract a larger pool of players. However, let's hope that the spending blip is simply a matter of Chinese gamers trying to save a little money, instead of a larger trend away from online gaming.
The months of January, February, and March were tough on most companies at the mercy of disposable income. Online gaming in China held up well. Rivals Perfect World (Nasdaq: PWRD ) , NetEase.com (Nasdaq: NTES ) , Changyou.com (Nasdaq: CYOU ) , and Giant Interactive (NYSE: GA ) all beat analyst expectations for the quarter. They also happen to trade at attractive valuations, given the industry's growth.
Shanda still has a few investors scratching their heads over its plans to spin off the Cayman Islands-based operator of its online gaming business. It made sense when diversified new media darling Sohu.com (Nasdaq: SOHU ) went that route earlier this year with Changyou, but Shanda is all about gaming. Its stock also trades at a richer earnings multiple than most of its peers, so it's not as if the market is likely to value Shanda's parts as greater than its whole.
However, it's hard to dismiss Shanda's growth during what was a rough quarter for most sectors. Well played, Shanda.
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