Linktone falls as 1Q loss widens

Shares of Linktone Ltd. sank Friday after the Shanghai-based mobile content provider said its first-quarter revenue rose but its loss widened as interest income declined and the company reported an income tax expense in the period.

Its American Depositary Shares shed 22 cents, or 9.4 percent, to $2.13. In the past year, the stock has traded between $2.03 and $4.40, and is off 31 percent since the start of the year.

For the quarter ended March 31, Linktone reported a loss of $4.2 million, or 18 cents per ADS, compared with a loss of $3.4 million, or 14 cents per ADS, in the year-ago quarter.

The company's comprehensive loss, which includes $1.6 million in other comprehensive income, narrowed year over year to $2.6 million from $3 million.

On an adjusted basis, Linktone earned 17 cents per ADS.

Linktone's revenue jumped 44 percent to $20.5 million, helped by growth in wireless value-added services, or WVAS, and advertising services.

Linktone reported much lower interest income, however _ $84,981, compared with $239,830 in the same quarter last year. The company also reported an income tax expense of $382,114, compared with a benefit of $317,966 last year.

In the second quarter, Linktone expects revenue to rise to $16.5 million to $18 million, compared with $11.7 million in revenue during the second quarter of 2007.

In a note to clients, Piper Jaffray analyst Michael J. Olson kept his "Neutral" rating and lowered his price target for the stock to $3 from $3.50. That target implies growth of 27.7 percent over its closing price Thursday of $2.35.

The analyst called Linktone's first-quarter results "mixed" and said its wireless value-added services business is stabilizing. He said the company is becoming more diverse and utilizing the WVAS business "as a building block for its cross media strategy."

"We believe the WVAS business will remain the primary revenue generator for Linktone in the next several quarters," he said.

He also said that Linktone's advertising services investment may be the next major driver of the company's growth, but noted that "significant" rollout costs are hurting the company's earnings in the near term. He doesn't expect a material impact from ad services until late 2008 or early 2009.