China.com stumbles to second-quarter loss

Chinese internet and software firm CDC has surprised investors by reporting a loss in the second quarter.

The company operates the China.com internet portal as well as online games and mobile services, although the bulk of its revenue now comes from enterprise software.

CDC reported a quarterly net loss of $3.2m on revenue of $103.9m. Income was down sharply from the $8m profit in the same period last year, although revenue was 53 per cent higher.

The company blamed the loss on development and marketing costs for new games, together with dwindling revenues at its mobile information and entertainment services division, which has been hit by stringent new government regulations.

"Lower operating and net margins were primarily due to the impact of lower revenues at China.com's mobile division as well as the launch of Special Force and expenses relating to other marketing initiatives at CDC Games," the company said in a statement.

"The launch of a new game requires a substantial marketing investment to grow the base of registered users and subsequent ongoing revenue streams."

CDC was originally formed to take advantage of the China.com domain name, but failed to expand its audience as rapidly as competing portals.

The firm's internet portal services have taken a back seat to its enterprise software division in recent years, with software licences forming an increasingly important part of revenue.

"We believe our software business has never been stronger," said CDC chief executive Peter Yip.

"We are now ranked among the 12 largest enterprise and supply chain management application vendors in the world by revenues, according to a recent publication. In the quarter, our software revenues grew 54 per cent."

CDC is preparing to launch new online games, including Lord of the Rings Online, in China.