Shanda Games Limited(ADR) (GAME), Giant Interactive Group Inc (ADR) (GA): This Beaten-Down Company Is Getting Better

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Chinese online game developer Shanda Games Limited(ADR) (NASDAQ:GAME) has seen its fortunes turn around dramatically since it reported its first-quarter results in May. The company is up more than 30% since it sent out those signs of a resurgence in its business, and its recently reported second-quarter results indicate that further improvements might be on the way.

A look at the results reveals that Shanda Games Limited(ADR) (NASDAQ:GAME) is gradually getting better. The company’s revenue of $175.6 million was down just 4% from the year-ago quarter, a marked improvement over the 20% drops it had reported on the two previous occasions .

The results were better than analyst estimates, and the guidance of 3%-4% sequential growth for the current quarter should help Shanda Games Limited(ADR) (NASDAQ:GAME) report year-over-year revenue improvement.

Shanda Games

Going mobile
Shanda has been following a different strategy to resurrect itself than other Chinese online gaming companies. Its focus on mobile games seems to be reaping results as revenue from mobile gaming was $17 million in the quarter as compared to nothing in the year-ago period. While this is just 10% of overall revenue, Shanda Games Limited(ADR) (NASDAQ:GAME) expects mobile gaming revenue to increase 50% sequentially .

This growth rate is no doubt impressive, and Shanda’s excellent moves in mobile gaming are worth watching. Its mobile game Million Arthur has been doing well and ranked fifth among the top-grossing games on Google Play earlier this year. To build up on the success of this game, Shanda launched the game in China early last month and its reception was positive.

On the day of launch, Million Arthur became the second top-grossing app on Apple‘s app store in China on the back of Shanda’s aggressive marketing. The company is intent on keeping the momentum of this game intact by releasing more content going forward. Shanda Games Limited(ADR) (NASDAQ:GAME) has lined up 36 mobile games for release .

The company recently announced that it will launch a new mobile platform, known as G-Home, to enhance user experience and get more subscribers of its massively multiplayer online games, or MMO games, to use its mobile offerings. This cross-platform strategy looks like a smart move and should benefit the company by pulling in more mobile subscribers going forward .

MMO strategy
However, Shanda Games Limited(ADR) (NASDAQ:GAME) needs to turn in some good results in the MMO segment as well, since it makes up for the majority of its business. Moreover, as Chinese online gaming leader Giant Interactive Group Inc (ADR) (NYSE:GA) once stated, monetization prospects are better in MMO games as compared to mobile. As such, Giant Interactive Group Inc (ADR) (NYSE:GA) has consistently focused on building strong MMO franchises.

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