Shanda Interactive Entertainment Ltd, China's second largest online game operator, on Wednesday posted quarterly profit that plunged 95 percent as the popularity of its flagship game "The Legend of Mir II" dims.

Shanda reported first-quarter net income of 11.8 million yuan, which converts to $1.5 million, or 2 cents per American Depositary Share. In the year-ago quarter, it earned 220.1 million yuan.

Total revenue fell 31 percent to 341.4 million yuan, or $42.6 million. Contributions from online games dropped 30 percent to 309.6 million yuan, or $38.6 million, during the quarter.

Massively multiplayer online role-playing games, in which thousands of people compete via the Web, contributed revenue of 225.2 million yuan, or $28 million, during the quarter.

In Asia, video gaming is a social event that often takes place in Internet cafes. In the North American market, gamers tend to play alone or with a handful of friends on a console.

'MIR' DIMS
 
Shanda was China's top online game operator for much of its short life, but began to see a sharp decline in its fortunes toward the end of last year as its most popular title, "The Legend of Mir II," peaked and began to fade in the nation's competitive online game market.

The company recently gave up its top spot in the market to former number two, NetEase.com Inc. , whose fortunes have soared in recent quarters on the popularity of its two "Westward Journey" games.

Shanda reported a loss in the fourth quarter of last year -- its first quarterly loss since its March 2004 initial public offering -- following its move to a free model for basic play on "Mir II" and some other titles.

China's online game market has grown rapidly over the last few years and was worth an estimated $600 million last year. It is expected to grow to over $750 million this year as its audience swells, according to some analyst estimates.

But the nature of the market -- where a single hit or dud can make or break a company -- has also meant firms such as Shanda, which is trying to build itself into a diversified media company, can also fall as quickly as they rose.

Shanda's shares have plunged more than 60 percent in the last 52 weeks. They now trade at just above their IPO price of $11 after soaring as high as $45 at their highest point.

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