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Perfect World scents success

By Wang Xing (China Daily)
Updated: 2009-01-21 08:01

For many companies, the global financial crisis poses more challenges than opportunities.

But for others like NASDAQ-listed online game vendor Perfect World, the economic woes are turning out to be a boon. More and more people are turning to online games to seek temporary escape from the depressing reality of crashing stock markets, evaporating asset values and surging unemployment.

In its latest posting, the Chinese game developer said its net profit for the third quarter of 2008 jumped 78 percent from a year ago to $29 million, on sales of $56.2 million, up nearly 100 percent. Perfect World's high profit margin is typical to all online game developers, industry experts said.

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Stock analysts estimate that the company's sales for the whole of 2008 could reach $209.16 million, a 121.4 percent rise over 2007.

"The financial crisis will have little impact on online game companies as it provides cheap entertainment for the masses," said Zhu Qi, vice-president of Perfect World. "When times are difficult in the real world, people turn to the virtual world for relief."

According to the latest report from research firm IDC and the game committee under China's Publishers Association (GPA), sales of China's online game market grew 76.6 percent in 2008 to 18.38 billion yuan, with revenue from overseas market amounting to $707.4 million.

Perfect World, with $300 million in overseas sales, accounted for 40 percent of China's online game export market.

However, as the NASDAQ Composite shrank about 36 percent since last year, the share price of Perfect World fell nearly 29.9 percent to around $15.67 last week from $22.35 early last year.

The company has responded to the situation by announcing a plan to buy back 18.75 million shares for approximately $56.6 million. Its share price is expected to touch $27.87 over the next 12 months.

"Our largest overseas markets are mainly in the Asia-Pacific region where people have similar culture," Zhu said. "But this year we will focus on tapping markets like Europe and the United States."