My estimate of the World of Warcraft average concurrent users (ACU) recorded during the second quarter is 310,000. The ACU, derived from my measurements of the WoW server utilization levels, is lower than the 330,000 number achieved during the first quarter. The main reason for this decline is the scheduled server downtime for the upgrade of the hardware required by The Burning Crusade WoW expansion.

Last year we started tracking the utilization levels of Netease's game servers to measure the average and peak concurrent user numbers of the company's games and forecast gaming revenues. Our previous reports generated significant interest from analysts, investors and media, both Internet and printed (China Daily February 28, 2007).

For the second quarter, our analysis of the server utilization data predicts a 15% decline in the average concurrent users (ACU) of Fantasy Westward Journey compared to the ACU achieved during the first quarter. Netease's total gaming revenues and net revenues are forecasted to decrease by 10% and 8% respectively, compared to the previous quarter.

To estimate the company's online game revenues I am continuously tracking the utilization levels of the Netease's game servers. Based on my interpretation of the server usage data, I expect online game revenues to increase by about 8-10% quarter over quarter, driven by the strong performance of Fantasy Westward Journey.

The9 will likely post very good earnings this year. However, the first quarter starts with a whimper. I expect the company to report a significant quarter over quarter decrease in earnings, largely as a result of four factors: lower World of Warcraft revenues, higher product development costs, higher tax expenses, and the likely absence of financial subsidies that were reported during the fourth quarter.

My Q1 estimates (not including extraordinary items) are: $34.5 million net revenues and EPS of $0.28-$0.32, down from revenues of $36.2 million and EPS of $0.54 ($0.43 excluding extraordinary items) in the fourth quarter. For comparison, current consensus analyst estimates call for revenues of $36 million and EPS of $0.32.