Netease discusses new online gaming regulations; issues Q3 guidance (NTES 2Q05 conf call quotes)

Netease (ticker: NTES) reported Q2 2005 results yesterday. Here are key quotes attributed to CEO Ted Sun, CFO Denny Lee and COO Michael Tong from management's earnings results conference call:

On wireless services

....our Wireless Value Added Services and Other business continues to face enhanced competition and declining popularity of SMS products.

On regulation of the online gaming industry

....people have been talking about what has been called a fatigue system, or the anti-eviction system.

....1 very important point is that there will not be any mandatory lock off in the games. That means that the scheme is that basically for the first few hours the users receive the normal experience points and then for the next few hours they users will receive less of experience points.

....There will be time required for the testing and implementation of these systems into the games and that is going to take, in my own personal experience, opinion, at least a few months. And also we believe that there will be minimal effect to the 2 games that we are operating right now mainly because first the games that we have right now we have very similar systems that is already implemented into the games for long time already.

On competing with The9's (ticker: NCTY) World of Warcraft

....our games and World of Warcraft, the games that we are operating now and the World of Warcraft is targeting at very, very different demographics.

(Quotes are from the CCBN StreetEvents transcript.)

Q3 Guidance

• Total gross revenue of $58 - $59.7 million.
• Online game services revenue to increase 12 - 15% quarter-over-quarter.
• Advertising services revenue to increase 25 - 30% quarter-over-quarter.
• Wireless services and other revenue to be flat to a decrease of 5% quarter-over-quarter.
• Net income of $32.6 - $34.2 million.

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