This summary is based on the first quarter fiscal 2006 earnings call conducted by AsiaInfo Holdings, Inc. (ASIA: chart) on April 26, 2006.

Management:

Investor Relations: Eileen Chu
President and Chief Executive Officer: Steve Zhang
Chief Financial Officer: Ying Han

Key Investors Issues

- Total net income was $0.4 million compared to net income of $1.4 million in the year-ago period.
- Revenue was $19.7 million, 5% decrease year-over-year.
- Gross margins were 36% in the first quarter compared to 41% in the year-ago period.

First Quarter Highlights

The company exceeded its revenue guidance by more than $1 million and the EPS guidance by approximately 5 cents per share.

This reflects ongoing profitable growth in core telecom business, and lower than expected operating loss in security business.

- While first quarter gross revenues in telecom business were up, both year-over-year and sequentially, higher revenues from third party hardware pass-through resulted in lower gross margin during the period. This was largely due to two contracts signed in the fourth quarter of 2005 with hardware components from which revenue were realized upon delivery in the first quarter.
- Third party hardware pass-through has been generally increasing in the past year as the company focuses on high margin software business. However, from time to time the company offers hardware for some projects in response to customer requests.
- On a sequential basis, gross margin for the group increased from 23% to 36% as seen better-than-expected performance in Lenovo-AsiaInfo security business.

Total gross operating expenses were up year-over-year, and decreasing by 70% sequentially from the previous quarter, reflecting the large non-cash charge for impairment of goodwill and the acquired intangible assets due to the fourth quarter shuffle in revenue at Lenovo-AsiaInfo.

- Recurring revenues in telecom business continue to increase, allowing reducing the lines on direct salesforce. As a result, sales and marketing expenses decreased by 11% year-over-year and 25% sequentially.

- General and administrative expenses increased 48% year-over-year, reflecting the legal fees relating to the Lenovo-AsiaInfo inquiry and the $800,000 provision for bad debt for the group. This is compared to a profit and $400,000 write back in the provision for bad debt in the year ago period.

- The company posted an overall operating loss of $500,000 compared to an overall operating profit of $1.1 million in the year ago period. Telecom business posted a contribution profit, before corporate G&A expenses, of $3.7 million while Lenovo-AsiaInfo posted a contribution loss before corporate G&A expenses of $1.9 million.

- Operating cash flow was $7.2 million, up mainly as the result of enhanced collection efforts and the better use of financial instruments for vendor payments.
- Total cash and cash equivalents rose approximately $1 million to $93 million, reflecting the net operating cash flow of $7.2 million and the release of approximately $1 million of restricted cash, which was partially offset by share repurchase to the value of $7.4 million.

- There was only a 2% decrease in notes receivable, since last quarter, reflecting enhanced collection efforts. DSO decreased to 134 days compared to last quarter''s 157 days. Payment rates were up 9%, due to an increase in revenue for third party hardware pass-through. A large increase in notes payable and accounts payable were in line with the increase in hardware inventory.

Stock increased from $4 million to $11 million as a result of a 90-day share repurchase program, which was originally announced in January of 2006.

- The board of directors has offered an extension to this share repurchase program for an additional 90 days from April 25th to July 24th but make no change to the number of shares authorized to be repurchased under the plan.
- Share purchase under the extended repurchase program will not begin until after the insider trading window closes on May 25th, 2006. As of April 11th, 2006 the company has already repurchased 2.1 million common shares.

- As part of a pilot program to improve the data processing and analyzing capabilities of China Mobile''s city-level branches, AsiaInfo constructed municipal level of Data Mart applications of Jilin Mobile and Yunnan Mobile. The company deployed meta data management platforms for China Mobile''s provincial subsidiaries in Hebei and Jilin Mobile which greatly increased the quality of the carriers'' data management.

Second Quarter 2006 Outlook

- Revenues net of hardware are expected to be $18 million to $20 million and the company expects second quarter earnings per basic share to be 1 cent to 2 cents.
- The company anticipates the Lenovo-AsiaInfo security products and services will post an operating loss of approximately $1 million, compared to the $1.9 million operating loss in the first quarter.