Linktone on the Brilliant acquisition, its new IM product, and share buyback plans (LTON 2Q05 conf call)

| About: Linktone Ltd. (LTON)
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Linktone (ticker: LTON) reported Q2 2005 earnings results yesterday. Key points from management's conference call:

On Q2

  • Expanded relationship with China Netcom (ticker: CN) and China Telecom (ticker: CHA).
  • Now offer text-based services for PHS through CN and CHA in 10 provinces.


  • Don't see dramatic growth for SMS going forward.

On Recent Developments

  • Developing platform for seamless delivery of product offerings to both online and wireless devices.
  • Will launch Korean licensed online casual game Mr Hammer in Q3.
  • Launched Instant Messaging (NYSE:IM) product - available to wireless users. Will start open beta in Q3.
  • Board approved share buyback of up to $15 million worth of shares --
    subject to shareholder approval at annual meeting in September. The
    company has not yet purchased shares.
  • Currently meeting with China Mobile (ticker: CHL) re: WAP policies.
  • Focusing on growth areas -- music, advanced gaming, graphics, IM, and communities.

On the Brilliant Acquisition

  • Completed acquisition of casual gaming company Brilliant.
  • Brilliant community consists of 13 million registered users.
  • Recently had high of 75,000 concurrent users.
  • Brilliant targets the same demographic as Linktone -- 16-30 year olds with disposable income interested in wireless and online entertainment.
  • Brilliant will begin to contribute revenue in late 2005 / early 2006.

On New IM "Aggregator" Product

  • Will be subscription-based -- currently free of charge.
  • IM product provides an interface for mobile phones that allows users to access all of the different IM products including QQ, MSN, and Yahoo on one platform.
  • Plans for SMS and WAP IM versions in the future.

Comment: One caller suggested that should shareholders approve the share buyback management should consider being aggressive buyers of the stock. With a $9 stock, $3 in cash on the balance sheet, quarterly earnings of $0.15 -- $0.60 on an annual basis -- the company is trading at a 10X P/E (15X?). The company has also shown consistent revenue growth.

The caller also suggested that a director recently bought shares -- though we can't seem to find evidence of that acquisition.

Management's response? A share buyback will be implemented should shareholders approve it at the annual meeting in September.