GAME

Shanda Games Limited (GAME)

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Shanda Games Ltd. (GAME)

Q1 2011 Earnings Call

May 31, 2011 9:00 pm ET

Executives

Ellen Chiu - IR Director

Alan Tan - Chairman and CEO

Richard Wei - CFO

Analysts

Jin Yoon - Nomura

Timothy Chan - Morgan Stanley

Eddie Leung - Merrill Lynch

Lisa Yuan - Goldman Sachs

Wendy Huang - Royal Bank of Scotland

Dick Wei - JPMorgan

Paul Wuh - Samsung Securities

Presentation

Operator

Welcome to Shanda Games Limited 2011 first quarter results conference call. This conference call will be recorded and available for reply in its entirety. A copy of Shanda Games' 2011 first quarter results announcement can be found and downloaded from its Investor Relations website, http://ir.shandagames.com. (Operator Instructions)

I would now like to turn the call over to Ellen Chiu, Shanda Games' Investor Relations Director.

Ellen Chiu

Thank you. Good morning and good evening everyone. On behalf of Shanda Games, I would like to welcome everyone to our 2011 first quarter results conference call. With me today are Mr. Alan Tan, our Chairman and Chief Executive Officer; and Mr. Richard Wei, our Chief Financial Officer.

Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations and are intended to qualify for the Safe Harbor from liability for such statements established in the U.S. Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical facts during the conference call are forward-looking statements which are subject to significant risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements. So please do take a minute to read the Safe Harbour Statement in Shanda Games' first quarter 2011 earnings release.

In addition, please note for discussion purpose, all numbers were translated into US dollars based on the exchange rate of RMB6.5564 per US dollar.

Now I would like to turn the call over to our Chairman and Chief Executive Officer, Ms. Tan.

Alan Tan

Thank you, Ellen, and welcome everyone. Playing games is increasingly becoming a common occurrence in the global internet market, whether be it through PC, tablet, mobile phone or other devices. Online gaming has clearly become a critical application for almost all social networks and all the platforms.

As an early pioneer, we have always been at the forefront of Chinese online gaming. With over 10 years of history in publishing and developing online games, we have evolved into an online gaming powerhouse with our own distinctive platform in markets from Asia to North America. It is our ability to leverage Shanda Games' unique operational experience and the structure that positions us especially well in China's ever evolving internet industry.

Now we at Shanda Games are preparing for the next shift. We have begun implementing a strategy that we are calling Triple-A. The Triple-A stands for the three critical elements: All-Star, All-Platform and All-Region. We are confident that this strategy will help us not only maintain our position as one of the most innovative and forward-thinking companies in the global online gaming industry, but also attract both near and long-term sustainable growth for the company.

Let me start with All-Star. Our All-Star strategy is the result of over 10 years of operational experience and expertise in online gaming. We have developed a mechanism that combines our multi-sourcing strategy, data mining and modularized and analyzed system and the whole operations platform.

Due to this mechanism, we seek to diversify the game portfolio, supported by the data mining and modularized and analyzed system to improve their quality and further leverage our operating platform to get a broad relation with gamers. The All-Star strategy will not only allow us to better organize our resources, secure best titles, but also to successfully roll out the multiple games consecutively.

This not only further solidifies our game portfolio, but also provides sustainable growth with games that focus on greater audience engagement. Our stable performance this quarter were a demonstration of our All-Star strategy, mainly driven by the continued popularity of a number of our important games, namely Dragon Nest, Mir II, Woool, Maple Story and Aion, along with our recent launch of Hades Realm 2.

Of significant notes, our recently started beta-testing of Legend of Immortals demonstrates the strength of our pipeline and our ability to release hit games well into the future.

The breadth and the depth of Mir II series, Woool series and our more recent Dragon Nest continues to be massive with enriched content and better interaction. The revenue from our robust game portfolio continues to diversify with Mir II, Dragon Nest and Woool contributing 37%, 18% and 16% of total revenue in the first quarter respectively.

To sustain our leadership, we'll continue to implement a four-pronged approach for sorting the game we believe are of the highest quality. This includes licensing state-of-art foreign-developed games, leveraging our outstanding R&D capabilities for in-house games production, investing and acquiring platforms and game development studios which also boost our R&D capability and our unique platform approach.

This four-pronged approach has allowed us to build an enviable game development pipeline for the coming years as well as sustained and continual adding to leverage online communities. Supported by our experienced talent pool and analyzing capabilities, we're continuing to optimize our pipeline for future releases.

We expect that in few years that only a handful of successful games launched in China will be able to generate the vast majority of the industry profits. And with our exciting pipeline, supported by our unique platform, we are confident in the popularity of our future games.

Read the rest of this transcript for free on seekingalpha.com