AsiaInfo Q4 Net Revenue Takes 18% Dip

By TechSecurityChina.com Editor
January 25, 2006

AsiaInfo (ASIA) has announced fourth quarter and full year results for the period ended December 31, 2005.

Net revenue for the fourth quarter was US$16.5 million, a decrease of 20% year-over-year and a 18% decrease sequentially.

The company says the shortfall in net revenue for the quarter was the result of significantly lower than expected shipment volume for the Lenovo-AsiaInfo business unit’s security products.

Steve Zhang, AsiaInfo’s President and Chief Executive Officer, said, “Clearly the disappointing performance of the Lenovo-AsiaInfo security business significantly impacted our results this quarter. We have initiated an inquiry into the issues that affected performance at Lenovo-AsiaInfo during the fourth quarter and we may take further actions as appropriate based upon the results of our inquiry. We believe that with its new management team, Lenovo-AsiaInfo has a strong future as the market for security products and services in China continues to grow rapidly.”

Gross revenues for the fourth quarter were US$19.8 million, representing a decrease of 31% year-over-year and a decrease of 15% sequentially.

Gross margins declined to 24% in the fourth quarter compared to 39% in the year-ago period and 47% in the previous quarter.

Revenue from software products and solutions for the fourth quarter was US$12.7 million, a decrease of 17% from the year-ago period and a decrease of 15% sequentially. Service revenue was US$3.7 million, a 24% decrease year-

over-year and a 25% sequential decrease. Third-party hardware revenue in the quarter fell to US$3.5 million as the company continued its focus on high margin software products and solutions.

During the fourth quarter, the Lenovo-AsiaInfo business unit’s contribution to the company’s net revenue was nominal due to the business unit’s revenue shortfall. Lenovo-AsiaInfo contributed 26% to the company’s net revenue in the previous quarter.

Due to the disappointing performance of the Lenovo-AsiaInfo business unit, AsiaInfo recorded a US$21.2 million non-cash charge for impairment of goodwill and acquired intangible assets for the fourth quarter. Reflecting this charge, operating loss was US$29.5 million, compared to an operating profit of US$0.6 million in the year-ago period and an operating loss of US$0.8 million in the previous quarter.

Net loss from continuing operations for the fourth quarter was US$28.1 million, or US$0.61 per basic share. Net income in the year-ago period was US$1.2 million, or US$0.03 per basic share, and US$1.5 million or US$0.03 per basic share in the previous quarter.

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