Bloomberg News

Shanda Plans to Add Social Games to Tencent, Sina Websites

June 01, 2011

(Adds analyst’s comment in fourth paragraph.)

June 1 (Bloomberg) -- Shanda Games Ltd., China’s third- biggest provider of online games, plans to provide games for websites run by Tencent Holdings Ltd. and Sina Corp., Chief Executive Officer Alan Tan said.

Shanda plans to introduce 10 social and mobile games in the coming year, as well as 18 of its traditional online games in the next 12 to 18 months, Tan said in an interview in Shanghai today. Shanda will roll out games on Renren Inc.’s social network site in the second half of the year, he said.

As the company expands beyond its traditional online games like “Mir 2,” Shanda will look for opportunities to acquire developers of games for social networking sites including Facebook Inc.’s, Tan said. China’s social mobile game market will more than quadruple to 27 billion yuan ($4.2 billion) by 2015, according to estimates from Mirae Asset Securities.

“The future of games is going to be in the social area,” Eric Wen, a Hong Kong-based analyst with Mirae said today. “It’s a good move for Shanda to move in that direction because their existing games can’t be shared socially.”

Mobile games will outpace overall growth of the gaming market in China, and should account for 10 percent of the company’s total revenue in about three years, Shanda’s Tan said. Mirae estimates China’s traditional online game market will double by 2015 to 72 billion yuan, Wen said.

Positive Development

“The listing of social networking sites like Renren is a positive development” for the industry and Shanda, Tan said. It shows China’s social network market is “robust and will bring in more potential users,” he said.

The unit of Shanda Interactive Entertainment Ltd. has gained 11 percent this year in Nasdaq Stock Market trading. Tencent, China’s biggest online games company, has climbed 33 percent in Hong Kong and NetEase.com Inc., the second largest, has risen 28 percent in the U.S.

Tencent, China’s biggest Internet company by market value, and Sina, operator of the Twitter-like Weibo service, are now trying to add games and other features to their microblogging sites as they battle for users.

Tencent has 160 million microblogging users, President Martin Lau said last month. Catherine Chan, a spokeswoman for Tencent, didn’t immediately respond to calls for comment on Tan’s remarks today. Sina said last month it had 140 million users of its microblog. Sina spokeswoman Catherine Peng didn’t immediately return calls today.

Profit Falls

New game development costs brought Shanda’s profit down in the first quarter, according to the company. Net income fell 4.9 percent to 312.9 million yuan, below the 317 million yuan average of six analyst estimates compiled by Bloomberg. Sales rose 9.6 percent to 1.25 billion yuan.

Second-quarter sales will be between 4 percent and 5 percent higher than the previous three months, Shanda spokeswoman Ellen Chiu said in an e-mail today, citing a forecast by Chief Financial Officer Richard Wei.

Shanda also plans to expand in the near term into Southeast Asian markets such as Thailand, Vietnam and Malaysia, as well as into Europe in the next few years, Tan said. The company, which generates most of its sales in China, is targeting the overseas business to make up 20 percent of total revenue in three years, he said.

--Edmond Lococo, Huiwen Yang, Editors: Young-Sam Cho, Suresh Seshadri

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Huiwen Yang in Shanghai at hyang66@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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