It Gets Harder for NetEase - TheStreet

It Gets Harder for NetEase

The stock is hammered after its third-quarter earnings report.
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Love's labor went missing Wednesday as market super-darling

NetEase.com

(NTES) - Get Report

crashed following cautious comments about the Chinese text-messaging market.

The stock, whose 52-week range is $3.30 to $72, was recently changing hands on the Instinet premarket session for $53, down $12.85, or 20% from its Tuesday close.

The Chinese Internet company said it earned $10.1 million, or 30 cents an American depositary receipt, in its third quarter compared with a $1.1 million loss in the year-ago quarter. Revenue doubled year-over-year to $17.7 million. The company has a limited analyst following but the bottom-line number was roughly in line with estimates.

The problem for the stock was a slowdown in text-messaging revenue that the company blamed on stiffer competition and the termination of some cooperation agreements with third-party Web sites. It also said two mobile-phone operators decided to limit the types of services NetEase can offer in China.

"In response to these changes, NetEase began to offer a number of previously fee-based products for free in the meantime, with an aim of further enhancing their popularity and accumulating a larger user base which would put the company in a position to capitalize on its accumulated user base when alternative payment solutions become available," the company said in a statement.

NetEase is one of a handful of Chinese technology stocks including

Sina

(SINA) - Get Report

and

Sohu.com

(SOHU) - Get Report

whose gains have approached the quadruple digits this year. Sina is also lower in Wednesday's premarket despite reporting solid earnings Tuesday.