Shanda's back in action

[photopress:legend_of_mir.jpg,full,alignright]The online-game producer is in the black again. Back in late 2005, Chinese online game purveyor Shanda Interactive (SNDA) made a huge strategic gamble when it made several of its most hugely popular, subscription-based, online role-playing games free.

Shanda’s founder and billionaire chairman Tianqiao Chen analyzed China’s vast universe of youthful gamers and decided this crowd wanted more — much more — from its gaming experience.

So Shanda experimented with free admission to its games, hoping to reap revenues from the sale of virtual goods. In other words, users could alter a character’s appearance and prowess by purchasing clothes or, say, high-powered weaponry.
Shanda pretty much pioneered the market for multi-player, online, role-playing games with the commercial launch of The Legend of Mir II back in 2001, but it’s now No. 2 in the field behind NetEase.com (NTES) for leadership in China’s roughly $1 billion market.

Shanda lost money on a net basis in the fourth quarter of 2005. And the Nasdaq-listed company’s shares fell 51% to a 52-week low of $12.36 per share last April, just five months after the remake of its business model.

Now it looks as if Shanda has turned a corner. The company has reported better-than-expected fourth quarter earnings and 2006 results. Shanda earned $22.2 million in the October to December period last year (compared to a fourth quarter loss in 2005 of $69 million), excluding the proceeds from the sale of part of its equity stake in Chinese Net portal Sina (SINA). Shanda still owns 3.9% of Sina.
Source: Business Week