NetEase 3Q results miss estimates, shares fall

Chinese online gaming company NetEase.com Inc. said Wednesday that its third-quarter profit rose on higher revenue from online games.

However, the results fell below analyst expectations, sending NetEase's American Depositary Shares tumbling $3.69, or 9.1 percent, to $37.10 in after-hours trading. They closed earlier down $1.25, or 3 percent, at $40.69.

NetEase said that revenue from online games rose to $113.6 million from $98.9 million last year, though advertising service revenue slipped to $12.6 million from $16.6 million.

The company saw a jump in operating expenses due to nationwide promotion activities for its games during the summer and for the relaunch of the hugely popular multiplayer fantasy game "World of Warcraft" in September. It also spent more on advertising and exhibitions to promote its portal business, and boosted research and development spending, all of which crimped profit margins.

For the quarter that ended Sept. 30, Beijing-based NetEase said its profit rose to 393.8 million yuan ($57.7 million) from 313.3 million yuan ($45.9 million) in the year-ago quarter. The company earned 44 cents per ADS, up from 35 cents per share in the year-ago period.

Revenue rose to 879.4 million yuan ($128.8 million) from 806.6 million yuan ($118.2 million) in the year-ago quarter.

Analysts polled by Thomson Reuters had expected a higher profit of 50 cents per share on revenue of $142.1 million.

Chinese regulators earlier this month said NetEase.com failed to get the administration's permission to bring "World of Warcraft" into China. It said the company should stop signing up customers and apply for approval.

On Wednesday, NetEase.com said it is "currently seeking clarification from the relevant governmental authorities regarding this statement ... and look forward to a speedy resolution from the government authorities."