Thursday, June 30, 2011

The Footsteps of Giant

By Eric Jackson
RealMoney Contributor

6/30/2011 11:30 AM EDT
Click here for more stories by Eric Jackson

I recently visited Giant Interactive's (GA - commentary - Trade Now) offices in Shanghai. The massively multiplayer online (MMO) game maker has been around from almost 10 years. It was started by colorful Chinese tycoon Yuzhu Shi.

It rode to great success with its original ZT game. It recently launched ZT2 and the company is cautiously optimistic about its prospects for the next several quarters. Below is a lightly-edited recap of some questions I put to the company:

Eric: What do you think of the recent Chinese frauds and your CEO speaking out in favor of Jack Ma (Shi tweeted on Sina (SINA - commentary -Trade Now) Weibo that Ma was a "patriotic hooligan" a few days after the Alipay newsbroke)?

GA: Definitely there has been some backlash against Chinese companies in recent weeks. Our CEO got involved with Jack Ma because he and Ma have been friends for a long time. He wanted to express his opinion and was surprised at the reaction it got from some Yahoo! (YHOO - commentary -Trade Now) investors and supporters. However, this issue doesn't affect our business.

Eric: Your shares went to a high of $9.45 a share recently, but they've come down since. Do you think the CEO and the recent frauds have anything to do with the pullback?

GA: Wall Street people now think many Chinese companies are overvalued and therefore some of the newer IPOs have been having a hard time. But our businesses are still good. The original ZT game is still very profitable. We launched ZT2 last November, it spread through word of mouth, and the number of users has grown healthily without much use of marketing. In the first quarter, ZT2 didn't contribute much to our revenue, but it will contribute more revenue this quarter, and we hope the trend will sustain at least for the next 8 quarters.


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