Shanda Interactive (NASDAQ:SNDA) may be a pioneer in online gaming in China, but it's showing up fashionably late to the quarterly earnings party.
The company's market-topping numbers are certainly nice, but you can't blame Mr. Market for having wasted its best "surprise" cheers on earlier guesstimate-thumpers like Perfect World (NASDAQ:PWRD), Giant Interactive (NYSE:GA), and The9 (NASDAQ:NCTY). Only NetEase.com (NASDAQ:NTES) fell short on the bottom line, but made up for it by blowing away analysts on the top line.
Does that make Shanda's win anticlimactic and somewhat predictable? Sure, but there's nothing wrong with that.
For the quarter, Shanda posted a 47% gain in revenue to $111.1 million, powered by speedy growth with its multiplayer fantasy games. Earnings per diluted American depositary share (ADS) fell to $0.56, but it was a dip only because Shanda took a huge gain last year after selling its stake in SINA (NASDAQ:SINA). Operating profits actually rose by 39% during the period.
Wall Street was looking for a profit of only $0.51 a share on $106.9 million, but you already know what happens when hoarse throats try to belt out one final "surprise" at the party.
|
Q1 est. |
Q1 actual | |
|---|---|---|
|
$0.31 |
$0.30 | |
|
$0.16 |
$0.20 | |
|
$0.32 |
$0.46 | |
|
$0.35 |
$0.38 | |
|
Shanda Interactive |
$0.51 |
$0.56 |
Shanda is positioned well, even though the shares are trading lower today. Why the drop? Investors may have been taken by surprise over the suddenly higher 25% tax rate that Shanda will be paying this year in China. Then again, Shanda still beat estimates. Its fashionably late arrival also should have broken in investors who have been hearing the same thing from its peers.
Shanda's active paying accounts climbed by 19%, now topping 6 million users. The company also has $462.6 million in cash, which will come in handy if consolidation comes a-knocking or if Shanda sees growth opportunities in smaller gaming companies.
That last point is important, because an influx of new developers will test the industry's ability to expand without sacrificing the growth of established players. Shanda went through a growth lull two years ago. NetEase appears to be kicking out of a slump right now. Money has a way of buying solutions to those problems.
If not, there will be even more people at the next surprise party with even hoarser throats.
