This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Shanda Interactive Entertainment Ltd. (SNDA: chart) on February 25, 2008.

President, Director: Jun Tang
Chief Financial Officer: Grace Wu
Chairman of the Board, Chief Executive Officer: Tianqiao Chen
Manager, IR: Maggie Yun Zhou

Key Investors Issues

- Earnings per ADS were 54 cents versus 44 cents in Q3 2007 and 46 cents in Q4 2006.
- Quarterly revenue increased 8.8% over the sequential quarter to $97.8 million.
- At the end of Q4, the cash and cash equivalents totaled $271.9 million and $381.7 million.
- For fiscal 2007, the earnings per ADS were $2.62, on revenue of $337.8 million.

Fourth Quarter Fiscal 2007 Financial Highlights

The net revenues of RMB714.2 million ($97.8 million) represents an increase of 51.8% from RMB470.6 million in the fourth quarter of 2006 and 8.8% from RMB656.3 million in the third quarter of 2007.

Online game revenues, including MMORPGs and casual games, were RMB688.4 million ($94.3 million) in the fourth quarter of 2007, representing an increase of 53% from RMB450 million in the fourth quarter of 2006 and 8.6% from RMB633.7 million in the third quarter of 2007.

Revenues from MMORPGs in the fourth quarter of 2007 increased 59.4% year-over-year and 9.3% quarter-over-quarter to RMB602.6 million ($82.6 million), accounting for 84.4% of total revenues. The sequential growth in MMORPG revenues was primarily driven by the continuous growth of the company''s main titles in the fourth quarter of 2007. The number of APA for MMORPGs increased 12.7% sequentially to 3.47 million in the fourth quarter of 2007, mainly due to the release of expansion packs and in-game promotions to encourage conversion of free players to paying users, as well as the launch of new game title World Hegemony. ARPU for MMORPGs decreased 3.1% to RMB57.8 in the fourth quarter of 2007 from RMB59.7 in the third quarter of 2007, primarily due to dilution caused by the relatively lower APRU from new APAs in the fourth quarter of 2007.

Revenues from casual games in the fourth quarter of 2007 increased 19% year-over-year and 4.4% quarter-over-quarter to RMB85.8 million ($11.7 million) despite a traditionally slower period for the casual games business. The sequential increase in revenues from casual games was primarily driven by higher user consumption as the company introduced more premium items and services during the fourth quarter of 2007.

Other revenues in the fourth quarter of 2007 increased 25.5% year-over-year and 13.9% quarter-over-quarter to RMB25.8 million ($3.5 million).

Gross profit was $65.6 million in the fourth quarter, compared to $62.7 million in the preceding quarter, and $40.5 million for the same period in 2006.

Gross margins for the fourth quarter of 2007 were 67.1%, compared to 69.8% in the third quarter, and 2.9% a year ago.

Income from operations were $38.2 million, up 79.7% year over year and 8.1% quarter over quarter.

Operating margin was 39.1% in Q4 2007. This compared with 39.3% in Q3 and 33% in Q4 2006.

Expenses:

- Product development expenses increased 10.3% quarter over quarter to $7.5 million, mainly due to increased R&D-related compensation expense and R&D-related spending. - Sales and marketing expenses decreased 15.4% sequentially to $7 million due to lower advertising and marketing expenses in the quarter.
- General and administrative expenses increased 5.2% quarter over quarter to $12.9 million, primarily attributed to share-based compensation and higher staff-related expenses.
- Share-based compensation was RMB17 million, which was about $2.3 million in the fourth quarter of 2007.

Net non-operating income was $5.1 million compared with $4 million in the third quarter of 2007 and $13 million in the fourth quarter of 2006.

The year-over-year decline is mainly because of a one-time gain of $9.2 million recorded in Q4 2006 from the sale of SINA shares. Non-operating income from government financial incentives amounted to $1.9 million in Q4 2007 compared to $1.2 million in Q4 2006 and $2 million in Q3 2007.

Income tax expense for the fourth quarter of 2007 was $3.3 million compared to $6.6 million in Q3 and $1.4 million in Q4 2006.

This quarter over quarter decline was primarily due to the cessation of tax holidays for certain entities and the change in income tax rate pursuant to the new Chinese income tax law which went into effect as of January 1, 2008 in consideration of the future benefits expected to be realized. When the Chinese tax authorities finalized the regulations on the applicable requirements and procedures to apply for the preferential tax treatment, the expected future tax benefits from the deductible temporary differences as of December 31, 2007 might be adjusted based upon the future income tax rate applicable to certain PRC subsidiaries of the company.