NetEase.com Inc, the most profitable online games operator in China, will continue to spend huge sums to develop games in-house, and try to avoid reliance on one or two products, company executives said as positive first quarter results were reported.

"We expect to see continuously rapid growth in our online games in the next one to two years," said NetEase Chief Operating Officer Michael Tong.

NetEase reported robust year-on-year revenue growth of 58 percent in the first quarter to US$39.6 million.

The company booked profits of US$18.6 million; a year-on-year increase of 48 percent.

Online games contributed to about 80 percent of total revenue, up 135.3 percent over the first quarter of 2004.

The profit margin for its online games business rose to 89 percent, from 88.3 percent in the fourth quarter.

Despite such strong growth and expectations of future growth in the online games sector, Tong said his company will speed up development of new games and build a leisure platform, to try to keep ahead of rivals.

NASDAQ-listed NetEase mainly collects revenue from just two titles.

One of the two games - Westward Journey Online II - after two and a half years, faces a decline as games are usually only popular for up to three years.

"It will maintain the growth momentum for a while, but it may reach its peak by the end of this year," said Tong.

The Beijing-based operator is to launch two new self-developed games - one about Chinese ancient mythology and the other about the Tang Dynasty.

The company spent US$4.04 million on research and development in the first quarter, compared to US$878,000 in the same period last year.

(China Daily April 28, 2005)