This summary is based on the third quarter fiscal 2007 earnings call conducted by Shanda Interactive Entertainment Ltd. (SNDA: chart) on November 27, 2007.

Management:

President: Jun Tang
Chairman and CEO: Tianqiao Chen
CFO: Grace Wu
IR: Manager Maggie Yun Zhou

Key Investors Issues

- The earnings per ADS were 44 cents compared to 26 cents in Q3 2006.
- Quarterly revenue rose 16.3% over the sequential quarter to $87.4 million.
- Fiscal year to date net income was RMB1.1 billion, on revenue of RMB1.75 billion.

Third Quarter Fiscal 2006 Financial Highlights

The consolidated net revenues rose 16.3% quarter-over-quarter and the 50.3% year-over-year to a record $87.4 million.

This compares to the firm’s earlier guidance of 8% to 11% sequential growth. The organic growth of the existing business was the main contributor behind this remarkable performance, as revenues for the newly acquired business represented less than 5% of the consolidated revenue for Q3. Net revenues from online gaming business also reached at historic high of $84. 4 million, up 16 points or 6% quarter-over-quarter and 54.9% year-over-year. Not only did the firm see remarkable growth in its MMORPGs but also in all casual games.

Gross profit for the third quarter was RMB458 million or $61 million.

This compares to RMB380 million in the previous quarter and RMB246 million in Q3 2006. Gross margin was 69.8% in this quarter, compared to 67.2% for the preceding quarter and 56.2% for the third quarter 2006. This sequential improvement in gross margin was primarily due to the consolidation of Actoz, particularly savings on the company''s licensing fees relating to Mir II. They are partially offset by the increased amortization expenses associated with IP amortization of Aurora and Actoz.

Income from operations was RMB258 million compared to RMB244 million in Q2 and RMB 130 million in Q3 2006.

Operating expenses amounted to RMB200 million in Q3 of 2007 that compared to RMB135 million in Q2 of 2007 and RMB133 million in Q3 of 2006. Increasing operating expenses were primarily driven by increased spending in sales and marketing related to a series of heightened campaign during summer holidays and China Joy.

Payroll adjustment effective as of June, which impacted the third quarter and the increased R&D and G&A expenses from the consolidation of Actoz and Aurora. As a result, operating margin was 39.3% in Q3 compared to earlier guidance of no less then 35%. Operating margin was 43.3% in Q2 2007, and 25.8% in Q3 2006.

Excluding the impact of the firm’s newly consolidated entities, the gross margin and operating margin in Q3 2007 will be 65.9% and 40.4% respectively.

Share based compensation remained flat quarter-over-quarter of $2 million in the third quarter of 2007. The net non-operating income in third quarter will amount to RMB29 million which compared to RMB210 million in Q2 2007. The main difference is the one-time gain of RMB178 million from the sale of SINA shares, which occurred in Q2 2007 and the change in minority interest as a result of the Actoz consolidation. Non-operating income from government financial incentives in Q3 was RMB14.9 million. That compared to RMB14 million in the previous quarter and RMB29.1 million in the third quarter of 2006.

Net income for the third quarter of 2007 totaling RMB239 million remained relatively consistent to RMB238 million, excluding the one-time gain from the sale of SINA shares in Q2.

Compared to Q3 2006, the net income rose 66.4%. For the third quarter 2007, basic and diluted earnings per ADS were 44 cents. This compares to adjusted EPS of 44 cents and 42 cents in Q2 2007 and 26 cents and 26 cents in Q3 2006.

Effective tax rate was 16.4% in third quarter of 2007.

This compares with adjusted effective tax rate of 13.8%, excluding the onetime capital gain impact from SINA shares sale, which is non-taxable. This increase of tax rate also included the impact of consolidation of the actuals. Excluding actuals impact, the effective tax rate would have been 16% in Q3 2007.

As of September 30, cash and cash equivalents balance was approximately RMB3.7 billion and RMB4.6 billion.