In Business Intelligence Systems, AsiaInfo holds approximately a 50% market share with complete installations at 15 China Mobile subsidiaries and the company’s headquarters. The company has also deployed BSS systems in seven China Unicom subsidiaries and have approximately 6% market share of China Netcom’s broadband billing system.
All numbers are in U.S. dollars unless otherwise noted.
Third quarter net revenues for the telecom business increased 42.4% year-over-year and 15.6% sequentially.
Third quarter telecom software product and solutions revenue increased 49.4% year-over-year and 17.1% sequentially. The increases were driven by strong demand for the industry-leading telecom software solutions, notably in the China Telecom account, as operators move to build out IT infrastructure for their new business as well as differentiate their service offering and improve marketing effectiveness in response to increasing competition.
Telecom service revenues increased 11.6% year-over-year and 14.4% sequentially as China’s telecom operators turned to AsiaInfo leading integration services.
Gross profit as a percentage of net revenue for the telecom business was 51.8% in the third quarter of 2008 compared to 53.4% in the year-ago period and 54.2% in the previous quarter.
Lenovo-AsiaInfo’s net revenues increased 55.2% year-over-year and 86.6% sequentially.
The year-over-year growth is attributable to the continuous improvement of the division. The significant sequential growth is largely due to seasonality as the second half of the year is traditionally strongest for the IT security business.
- Gross profit as a percentage of net revenue for Lenovo-AsiaInfo was 65.1% in the third quarter of 2008 compared to 60.7% in the year-ago period and 64.6% in the previous quarter.
- Gross profit as a percentage of net revenue for the Group was 54.2% as compared to 54.6% in the year-ago period and in the previous quarter.
Operating income, which increased 68.9% year-over-year and 48.8% sequentially to $5.3 million.
The year-over-year and sequential increases are mainly a result of the concerted efforts to improve operating efficiency and improving economies of scale. In addition, AsiaInfo is pleased with its operating margin of net revenue, which was 12.4% for the third quarter of 2008 compared to 10.6% in the year-ago period and 10.3% in the previous quarter.
Total operating expenses increased 37.5% year-over-year and 15.5% sequentially to $17.9 million, including non-cash stock-based compensation of $1.1 million, which was allocated to each expense line.
Sales and marketing expenses increased 38.2% year-over-year and 16.4% sequentially due to higher sales commission expenses accrued from successfully breaking into new accounts opened up by telecom restructuring.
AsiaInfo continues to benefit from these investments the recently announced contracts for billing, Business Intelligence, and OCS systems, as well as strong growth in the IT security business.
G&A expenses increased 29.5% year-over-year and decreased 7.3% sequentially.
The year over year increase was mainly due to allocated non-cash stock based compensation. The comparatively lower G&A expenses in the third quarter of 2007 was also due to a government incentive. The sequential decrease was mainly the result of lower bad debt provisions as a result of improving accounts receivable collection.
R&D expenses increased 39.4% year-over-year and 24.3% sequentially.
The year-over-year and sequential increases are largely due to increases in R&D headcount and in line with the strategy of continually investing in R&D capabilities in order to develop best-of-class telecom solutions and position AsiaInfo for future market opportunities.
Other income for the third quarter of 2008 was $2.3 million, a decrease of 49.6% year-over-year and 29.6% sequentially.
The year-over-year and sequential decreases were mainly due to decreased dividend income and gain on investments, which are based on the market performance. Other income for the nine months 2008 was $7.9 million, which is comparable to the year-ago period. Other income mainly represents the returns on the company’s investments.
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