Boring Games, Video Drain Drag Down Shanda

By newsdoug on September 1, 2011

Shanda Interactive (Nasdaq: SNDA) has just reported some of its most unimpressive results ever, with a core video game business that looks like a zombie and an online video unit that looks even scarier. The bottom line is that Shanda saw its second-quarter profit plunge 95 percent amid stiff competition and few compelling offerings in two of its core business, its online game unit operated by Shanda Games (Nasdaq: GAME) and its struggling video sharing business operated by Ku6 Media (Nasdaq: KUTV). (results announcement) Shanda said its game business, accounting for about two-thirds of its total revenue, grew just 5 percent in the second quarter from the first, and was up only a slightly better 19 percent year on year. Meantime, Ku6, which has been in a state of near chaos since Shanda Chairman Chen Tianqiao forced out its chief executive earlier this year (previous post), posted a massive net loss of $21.6 million, double the loss from the previous quarter. (company announcement) Strangely enough, Shanda shares rose a bit after the results came out, but gave back the gains in after-hours trade. Perhaps people are excited about the company’s upcoming plans to spin off its online literature unit, Cloudary, which is the lone positive spot in the company’s portfolio of otherwise unimpressive business units. (previous post) Or perhaps they suspect that Ku6 could soon become a takeover target, as evidenced by the recent talk of nearly all the major players, including Baidu (Nasdaq: BIDU), Tencent (HKEx: 700) and most recently Sina (Nasdaq: SINA) wanting to get into the video space. (previous post) Regardless, Shanda to me still looks like a long-term dud, and will probably stay that way as long as Chen remains at the head of the company — in other words for a long time!

Bottom line: Shanda Interactive’s latest results reveal a company in need of new leadership.

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