Chinadotcom Corp. (Nasdaq: CHINA) reported better margins and declining losses for its first quarter Wednesday. The pan-Asian Internet company also said it was on the path to profitability, but didn't reveal a timeline.
The company, which went public as "China.com," and now refers to itself as Chinadotcom, saw shares gain 2 3/4 to 33 5/8, or 9 percent Wednesday.
Revenue for the quarter was $20 million, an 84 percent increase from revenue of $11 million in the quarter ended Dec. 31. Gross margin was $7 million, or 35 percent of total revenue, increasing from 33 percent gross margin during the previous quarter.
The company's cash on hand at the end of the first quarter was $561 million, an increase from $125 million in the previous quarter.
Due to non-operating gains during the quarter, Chinadotcom said it had a first quarter net profit of $109 million. These gains included a secondary offering, which raised $282 million. On March 10, the company listed its subsidiary hongkong.com on the Growth Enterprise Market in Hong Kong, which also contributed a gain of about $120 million.
Operating loss was $18.1 million as compared to $16 million in 1999's first quarter.
Consolidated earnings before interest, tax, depreciation and amortization improved from negative $12 million in the fourth quarter to negative $11 million in the first quarter, before considering the other non-operating gains.
The company said the results were ahead of internal and external projections. There was no First Call estimate for the company.
CEO Peter Yip emphasized in a conference call that the company is "well on our way to profitability."
When questioned about when investors can expect profitability, operating chief Peter Hamilton said they should "continue to look at improvement in operating margins, which are trending toward profitabilty." Yip added that profits should come some time next year.
The company said it saw the increase in registered users as a sign direct marketing-driven e-commerce revenue will rise. The company's portal network now has 4.5 million registered users, a 104 percent increase over the 2.2 million registered users at the end of the quarter ended Dec. 31.
Advertising revenue for the quarter was $9.3 million, representing a 105 percent increase from the previous quarter. Chinadotcom said a large portion of those revenues came from its services offered through 24/7 Media Asia, a venture of 24/7 Media (Nasdaq: TFSM), but was unable to provide a break-down for the figure.
Chinadotcom also continued to make partnerships, including a 50/50 joint venture with Softbank Investment Strategic, which is expected to give the company greater access to the Japanese market.
Yip emphasized during the conference call that investors should distinguish the company from Sina.com, which gained yesterday on news of a wireless deal.
"We have the only major portal operating in China with the Chinese government's support - the Chinese government is investor in our company," said Yip. "All foreign operators subject to are subject to foreign operator regulations."
Yip added it is still "hard to say if Sina will gain a license to publish content through wireless devices," as China awaits admission to the WTO. The company's current MOU agreement with Ericsson (Nasdaq: ERICY), Motorola (NYSE: MOT) and Siemens doesn't imply any exclusivity, he added.
Chindotcom said it has plans underway to offer WAP integration for its portal network.
Yip said the company is the "fastest growing portal network in the China region" and he expects business to expand "with the likelihood of China's admisison to the WTO." The company also stated it is already ahead of internal plans for margin improvements for the current year.
Chinadotcom also announced Wednesday it has appointed Andrew Miller to the position of President, Chinadotcom USA. Kenneth Fowler is senior vice president of finance.