Ninetowns Reports 33.2% Quarterly Net Revenue Loss

By TechSecurityChina.com Editor
March 23, 2007

Chinese software service provider Ninetowns (NINE) reported a quarterly loss in its announced financial results for the fourth quarter and full year ended December 31, 2006.

Total net revenue for the fourth quarter of 2006 was US$4.5 million, a decrease of 33.2% compared to US$6.5 million in the same period last year. Net revenue from enterprise software sales for the fourth quarter was US$2.5 million, representing 55.6% of total net revenue, as compared to 88.4% for the fourth quarter 2005. Net revenue from software development services for the quarter was US$2.0 million, representing 44.4% of total net revenue, as compared to 11.1% for the prior year period.

Gross margin and operating margin for the fourth quarter 2006 were 72.0% and 33.8%, respectively, compared to 92.1% and 40.1%, respectively, for the fourth quarter 2005.

Net loss for the fourth quarter 2006 was US$0.8 million, compared to net income of US$3.4 million for the fourth quarter 2005. Diluted loss per ADS/share for the quarter were US$0.02, compared to diluted earnings per ADS/share of US$0.09 for the fourth quarter 2005. Diluted earnings per ADS/share computations for the fourth quarter 2006 were based on a weighted average of 35.5 million ADSs/shares outstanding, compared to 35.6 million in the same period last year.

Total net revenue for the full year 2006 was US$19.6 million, a decrease of 36.1% compared to US$29.7 million for the full year 2005. Net revenue from enterprise software sales for the full year 2006 was US$15.0 million, representing 76.2% of total net revenue, as compared to 84.7% for the full year 2005. Net revenue from software development services for the full year 2006 was US$4.6 million, representing 23.8% of total net revenue, as compared to 15.0% for the full year 2005.

Gross margin and operating margin for the full year 2006 were 88.9% and 18.0%, respectively, compared to 92.0% and 55.9%, respectively, for the full year 2005.

Net income for the full year 2006 was US$5.9 million, compared to net income of US$18.8 million for the full year 2005. Diluted earnings per ADS/share for the full year were US$0.17, compared to the diluted earnings per ADS/share of US$0.52 for the full year 2005. Diluted earnings per ADS/share computations for the full year 2006 were based on a weighted average of 35.6 million ADSs/shares outstanding, compared to 35.8 million in the year 2005.

During the fourth quarter 2006, the company sold approximately 2,400 iDeclare packages and approximately 10,000 iDeclare service contracts. For the full year of 2006, the company sold approximately 8,250 iDeclare packages, and approximately 29,000 iDeclare service contracts.











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