Software maker Kingsoft Corp Ltd said its annual sales and profits would grow by 35 percent in the next few years. The company, however, added that projections were difficult to make because its market share is still less than five percent.

But the online game company is pinning its hopes on the just-launched title, "JX World", the third episode from the Beijing-based company's JX series.

"Over the next two to three years, I think it's maintainable. Maybe 35 percent CAGR (compounded annual growth rate), top line," Kevin Wang, Kingsoft's chief financial officer, said at the Reuters China Summit yesterday.

Wang said the company's bottomline was also expected to grow at 35 percent for the same period, but he said the fortunes of smaller companies were volatile and difficult to predict.

"If you don't have multiples like the major franchises, the visibility of growth and also revenue is very low," Wang said at the summit, held at the Reuters News office in Beijing.

"When I speak to analysts and investors, we are all very conservative. That's the nature of the business ... it's hit and miss," he said.

Kingsoft considers a new title to be a hit if it attracts 300,000 average daily users, a level that JX World has surpassed in its first few months.

"It's better than that," said Wang, who did not provide detailed user data for the new game. The company's previous two episodes in the JX series reached a maximum of 160,000 average daily users.

But the company's average revenue per user (ARPU), a key industry barometer, is only about 35 yuan compared with the industry average of around 60 yuan.

"Our ARPU is very low, lower than our peers," said Wang, who blamed overseas users - who make up a third of Kingsoft's user base but only 10 percent of revenue - for eroding its ARPU.

However, Kingsoft's cost structure overseas is also low, making developing that market worthwhile, he said.

The company aims to raise its domestic market share from four percent in the first half to about 4.5 percent in the second half. Wang said he still hopes to achieve a goal of up to 10 percent market share in the next two years.

But that would still lag far behind local rivals Netease and Shanda in a booming, multi-billion dollar sector.

China's online web game market had 3 million users in 2007, and will grow by 85 percent annually until 2011 when the market is expected to reach 34.8 million users, according to Analysys International, a Beijing-based research firm.

Reuters

(HK Edition 11/06/2008 page3)