iResearch: Online Game-A New Opportunity for Kingsoft
Kingsoft listed on Hong Kong Stock Exchange with an issue price of 3.6 HK$ to fund7.6 billion HK$. The total income of Kingsoft was 3.16 billion RMB in 2006 and income from online game accounts for 68% and is expected to expand to 75% in 2007. According to iResearch, because of the decrease of income from software and the profit requirements of shareholders, Kingsoft will focus on online game business.
According to data from iResearch's 'Online Game Quarterly Report Q2, 2007', the market size for online game was 2.65 billion and the biggest 5 companies' income accounts for 72.6% of the market. Now there're about 150 companies in online game industry in China, with 5 million revenues a quarter on average. Although the situation is grim, opportunity still exists. Compare with more than 10 million netizens, there're only 100 million online game users, so online game market has great potential.
Since there're for Kingsoft in the field of application software and Kingsoft has successfully developed and launched JX online series, iResearch believe that developing online game business is the best choice for Kingsoft.
Kingsoft doesn't form a core competitiveness in online game yet
According to Kingsoft operation and products, iResearch believes that Kingsoft is strong in innovation and research and development capabilities while weak in operation capability. Kingsoft once said that they would learn from Nintendo to develop popular games and attract users do not play games. With this concept, Kingsoft launched CO online which was easy to operate and became a successful game for new players. But the game lacks of core competitiveness to attract players to stay. Unengaging tasks and boring conversations make the game a common one.
Although quality is a flaw for Kingsoft's development, but the biggest constraints is its operation capability. iResearch advised that strengthen operation team is the first problem to be solved after IPO.
IPO provides fund for expanding R&D team
Kingsoft said that fund will be used for software personnel recruitment and strategic acquisitions after IPO. Considered of experience and profit, online game will still be the core business after IPO, but the research love knot and lack of operation capability restricted Kingsoft. So iResearch believes that the fund from IPO will be used to game development and the possibility of buying games is rare.
To sum up, Kingsoft is transferring to game operation company from a software company. From business and income distribution structure, online game business is important to Kingsoft. To some extent, without online game business, Kingsoft would not IPO successfully.
Kingsoft will focus on online game business after IPO. In the fierce competing industry, Kingsoft is not in inferior position in technology. iResearch advises Kingsoft to strengthen its operation team building and marketing service to form 2-3 core products.
Source : Chinatechnews - Authorization duplication : iResearch
