BEIJING, Nov. 30 /PRNewswire-Asia-FirstCall/ -- Linktone Ltd. (Nasdaq: LTON), one of the leading providers of wireless interactive entertainment services to consumers in China, today announced its unaudited financial results for the third quarter ended September 30, 2009.

    Results for the Third Quarter
    -- Wireless value-added services ("WVAS") and other revenues of $13.8
       million, compared with $18.3 million in the second quarter of 2009 and
       $16.6 million in the third quarter of 2008.
    -- GAAP net income of $0.7 million, compared with net income of $0.9
       million in the second quarter of 2009 and a net loss of $2.3 million in
       the third quarter of 2008.
    -- GAAP net income from continuing operations of $0.6 million, compared
       with net income from continuing operations of $0.7 million in the
       second quarter of 2009 and net income from continuing operations of
       $1.5 million in the third quarter of 2008.
    -- GAAP net income per fully diluted American Depositary Share ("ADS") of
       $0.02, compared with net income of $0.02 for the second quarter of 2009
       and a net loss of $0.06 for the third quarter of 2008.
    -- Non-GAAP net income* of $0.4 million, compared with non-GAAP net income
       of $0.9 million in the second quarter of 2009 and a non-GAAP net loss
       of $1.6 million in the third quarter of 2008.
    -- Non-GAAP net income per fully diluted ADS of $0.01, compared with
       non-GAAP net income per fully diluted ADS of $0.02 in the second
       quarter of 2009 and a non-GAAP net loss per fully diluted ADS of $0.04
       in the third quarter of 2008.

    *Non-GAAP measures exclude certain share-based compensation expense and
     impairment charges.  Please refer to the table at the end of this release
     titled "Non-GAAP Reconciliation" which provides a reconciliation between
     GAAP and non-GAAP financial measures.

Chief Executive Officer Hary Tanoesoedibjo said, "Linktone was able to continue its profitability despite lower than expected revenues due to our accomplishments in broadening our value-added services platform and maintaining stringent cost controls. During the third quarter, we recognized revenue and profit from our Indonesia VAS project, which represents the first phase of our Southeast Asia expansion strategy. In order to capitalize on extensive growth opportunities in the Southeast Asian market, we will continuously focus on building our core competitive strengths and cultivating strong partnerships in the region."

Deputy Chief Executive Officer and Chief Financial Officer, Colin Sung, stated, "We have always been highly selective in pursuing strategic alliances and expansion opportunities. We believe that our continued focus on international expansion, enhanced content offerings and utilization of distribution channels will position us well on all fronts as we strive toward our goal of achieving sustainable profitability. Operational efficiency and prudent cost management will also continue to be at the forefront of our agenda as we proceed into 2010."

Third Quarter Revenue Mix

Linktone's third quarter revenue mix includes data-related services (SMS, MMS, WAP, and Java), audio-related services (IVR and CRBT) and others (casual game and enterprise services).

Data-related services revenue was $7.8 million, representing 57% of total gross revenues, compared with $10.6 million or 58% of total gross revenues for the second quarter of 2009. The sequential decrease in Linktone's data-related services revenue was primarily attributable to decreased SMS services revenue resulting from fewer revenue sharing projects with mobile phone manufacturers, which was due to stricter policies, and the decrease also resulted from a lower level of revenue generation from Linktone's promotional activities conducted via media channels.

    Data-related services breakdowns are as follows:

    -- Short Messaging Services ("SMS") revenue represented 54% of gross
       revenues, compared with 55% for the second quarter of 2009.  SMS
       revenue was $7.4 million for the third quarter of 2009, compared with
       $10.1 million for the second quarter of 2009.

    -- Multimedia Messaging Services ("MMS") revenue was $0.1 million for the
       third quarter of 2009, representing 1% of gross revenues.  This was
       unchanged from the second quarter of 2009.

    -- Wireless Application Protocol ("WAP") and Java Gaming ("Java") revenue
       represented 2% of gross revenues compared with 2% for the second
       quarter of 2009.  WAP and Java revenue was $0.3 million for the third
       quarter of 2009, compared with $0.4 million for the second quarter of
       2009.

Audio-related services accounted for 36% of gross revenues, or $4.9 million, compared with 39%, or $7.1 million, for the second quarter of 2009. The sequential decrease was primarily due to a decrease in IVR revenue due to decreased returns from media advertising during the quarter.

    Audio-related service breakdowns are as follows:

    -- Interactive Voice Response Services ("IVR") revenue decreased to 24% of
       gross revenues, compared with 32% for the second quarter of 2009.  IVR
       revenue was $3.3 million for the third quarter of 2009, compared with
       $5.8 million for the second quarter of 2009.

    -- Color Ring-Back Tones ("CRBT") revenue increased to 12% of gross
       revenues, compared with 7% for the second quarter of 2009.  CRBT
       revenue was $1.6 million for the third quarter of 2009, compared with
       $1.3 million for the second quarter of 2009.

Other services accounted for 7% of gross revenues, or $1.1 million, compared with 3%, or $0.6 million, for the second quarter of 2009. Other services in the third quarter of 2009 included a fee of $0.7 million for technical advisory services relating to WVAS provided by Linktone to a related party in Indonesia for the period from March to September 2009.

Margins, Expenses and Balance Sheet

Linktone's key operating benchmarks and balance sheet items for the third quarter of 2009 include the following:

    -- Gross margin increased to 39% of net revenues, or gross revenues minus
       business tax, compared with 34% for the second quarter of 2009.  The
       sequential increase was primarily due to relatively higher profit
       margin service fees from Linktone's Indonesia VAS project.  Gross
       margin was 53% for the third quarter of 2008.

    -- Operating loss was 1% of net revenues, compared with operating profit
       of 1% for the second quarter of 2009 and operating profit of 8% for the
       third quarter of 2008.  The sequential decrease was primarily
       attributable to decreased returns from Linktone's spending in
       traditional media channels to promote its services.

    -- Operating expenses decreased to $5.2 million, compared with $5.7
       million for the second quarter of 2009 and $7.1 million for the third
       quarter of 2008.

    -- Selling and marketing expenses were $3.1 million, compared with $2.3
       million for the second quarter of 2009 and $4.0 million for the
       third quarter of 2008.  The sequential increase was primarily due to an
       increase in spending in traditional media channels.

    -- Product development expenses were $0.9 million, compared with $1.0
       million for the second quarter of 2009 and $0.9 million for the third
       quarter of 2008.

    -- Other general and administrative expenses decreased to $1.6 million,
       compared with $2.4 million for the second quarter of 2009 and $2.2
       million for the third quarter of 2008.  The sequential decrease was
       primarily due to higher professional fees incurred in connection with
       annual reporting and filing for 2008 and severance costs paid to former
       officers in the second quarter of 2009 and a reversal of long aging
       provisions for certain liabilities.

    -- Reversal of provision for impairment was $0.4 million in the third
       quarter of 2009, representing cash collected from a loan receivable
       against which a full provision of the total loan balance was made in
       2007.

    -- Cash and cash equivalents, as well as short-term investments available
       for sale, totaled $97.2 million on September 30, 2009, compared with
       $99.7 million on June 30, 2009.  The decrease in cash and cash
       equivalents was primarily due to a further loan drawdown of $0.8
       million by a related party and negative operating cash flow of $1.7
       million.  The above-referenced loan had an outstanding principal
       balance of $1.9 million on September 30, 2009, which is secured and
       earns interest at a rate of 10% per annum.  Interest is payable on the
       loan on a quarterly basis.

    -- Days Sales Outstanding for Continuing Operations ("DSO"), the average
       length of time required for Linktone to receive payment for services
       delivered, was 112 days as of September 30, 2009, compared with 83 days
       as of June 30, 2009.

Fourth Quarter 2009 Outlook

For the fourth quarter ending December 31, 2009, Linktone anticipates gross revenues to be in the range of $14 million to $15 million.

Use of Non-GAAP Financial Measures

The reconciliation of GAAP measures with non-GAAP measures for net income or loss and net income or loss per fully diluted ADS included in this press release is set forth after the attached financial statements. Linktone believes that the supplemental presentation of adjusted net income or loss and net income or loss per fully diluted ADS, excluding the effect of share-based compensation expense and provisions for impairment and their reversals, provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis, independently of share-based compensation and items not indicative of Linktone's future ongoing operating results. Thus, the non-GAAP financial measures provide investors with another method for assessing Linktone's operating results in a manner that is focused on the performance of its ongoing operations. Linktone management also uses non-GAAP financial measures to plan and forecast results for future periods. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results located after the financial statements.

Discontinued Operations

As previously reported, Linktone terminated its partnership agreement with the Chinese Youth League Internet, Film and Television Centre with regard to Qinghai Satellite Television and its partnership agreement with Tianjin Satellite Television in 2008. In the attached financial statements, the results of these advertising arrangements are reported separately as discontinued operations for both current and prior periods for the purpose of focusing on continuing operations and providing a consistent basis for comparing financial performance over time.

Today's Conference Call

As previously announced, Linktone management plans to host a conference call to discuss its third quarter 2009 financial results at 8:00 p.m. Eastern Time on November 30, 2009 (5:00 p.m. Pacific Time on November 30, 2009 and 9:00 a.m. Beijing/Hong Kong Time on December 1, 2009). The dial-in number for the call is 877-941-2068 for U.S. callers and 480-629-9712 for international callers. The management team will be on the call to discuss the quarterly results and highlights and to answer questions from participants. A replay of the call will be available through December 14, 2009. To access the replay, U.S. callers should dial 800-406-7325 and enter passcode 4185223; international callers should dial 303-590-3030 and enter the same passcode.

Additionally, a live webcast of this call will be available on the Linktone web site at http://www.linktone.com/webcasts.jsp . An archived replay of the call will be available for 90 days.

About Linktone Ltd.

Linktone Ltd. is one of the leading providers of wireless interactive entertainment services to consumers in China. Linktone provides a diverse portfolio of services to wireless consumers and corporate customers, with a particular focus on media, entertainment and communications. These services are promoted through the Company's strong distribution network, integrated service platform and multiple marketing sales channels, as well as through the networks of the mobile operators in China. Through in-house development and alliances with international and local branded content partners, the Company develops, aggregates, and distributes innovative and engaging products to maximize the breadth, quality and diversity of its offerings.

Forward-Looking Statements

This press release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," and similar statements. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: Linktone's ability to expand into Asian markets outside of China, including the Indonesian market, and create synergies with MNC; changes in the policies of the PRC Ministry of Industry and Information and/or the telecom operators in China or in the manner in which the operators interpret and enforce such policies, including policies which reduce the prices the Company may charge customers and current and future restrictions on the ability of Linktone to enter into profit sharing arrangements with mobile phone manufacturers to embed its services; the risk that other changes in Chinese laws and regulations, including without limitation tax and media-related laws or laws relating to the usage of telecom value-added services, or in application thereof by relevant PRC governmental authorities, could adversely affect Linktone's financial condition and results of operations; the risk that Linktone will not be able to compete effectively in the telecom value-added services market in China or any new markets it enters, for whatever reason, including competition from other service providers or penalties or suspensions for violations of the policies of the telecom operators; the risk that Linktone will not be able to realize meaningful returns from strategic partnerships or may be required to record additional provisions for impairments in the value of the Company's investments in such partnerships; uncertainty as to the popularity of the Major League Baseball ("MLB") content being licensed by MLB Advanced Media, L.P. ("MLBAM") or the profitability of the license and partnership arrangements between Linktone and MLBAM or the partnership arrangements with China National Radio Mobile Media (Beijing) Co. Ltd.; the ability of Linktone to successfully launch and maintain the licensed MLB web sites and other services such as mobile video content in a cost-effective manner or at all; the risk that Linktone will not be able to develop and effectively market innovative services; the risk that Linktone will not be able to effectively control its operating expenses in future periods or make expenditures that effectively differentiate Linktone's services and brand; and the risks outlined in Linktone's filings with the Securities and Exchange Commission, including its registration statement on Form F-1 and annual report on Form 20-F. Linktone does not undertake any obligation to update this forward-looking information, except as required under applicable law.

    For more information, please contact:

    Investor Relations
     Serena Shi
     Linktone Ltd.
     Tel:   +86-10-6539-6802
     Email: Serena.shi@linktone.com

    The Piacente Group, Inc.
     Brandi Piacente
     Email: brandi@thepiacentegroup.com
     Kristen McNally
     Email: kristen@thepiacentegroup.com
     Tel:   +1-212-481-2050



                                  LINKTONE LTD.
                           CONSOLIDATED BALANCE SHEETS
                      (In U.S. dollars, except share data)

                                                  December 31,  September 30,
                                                      2008           2009
                                                   (audited)     (unaudited)
    Assets
    Current assets:
      Cash and cash equivalents                    81,593,823     78,860,555
      Short-term investments                       14,372,646     18,293,981
      Accounts receivable, net                     15,245,030     12,726,294
      Tax refund receivable                         1,240,718      1,419,078
      Loans receivable from related parties         7,984,450     10,067,850
      Deposits and other current assets             5,106,901      2,750,547
      Deferred tax assets                           1,479,554      1,444,063
    Total current assets                          127,023,122    125,562,368

    Property and equipment, net                     1,031,543        639,420
    Intangible assets, net                            171,238        122,346
    Goodwill                                       14,584,212     14,584,212
    Deferred tax assets                               116,235        215,579
    Other long-term assets                            476,368        392,303

    Total assets                                  143,402,718    141,516,228

    Liabilities and shareholders' equity
    Current liabilities:
      Taxes payable                                 4,097,447      3,374,592
      Accounts payable, accrued liabilities
       and other payables                          10,796,440      7,390,482
      Deferred revenue                                210,833        307,291
      Deferred tax liabilities                         87,947        179,317
    Total current liabilities                      15,192,667     11,251,682

    Total liabilities                              15,192,667     11,251,682

    Shareholders' equity
      Ordinary shares ($0.0001 par value;
       500,000,000 shares authorized,
       420,636,230 shares and 420,756,430
       issued and outstanding as of December
       31, 2008 and September 30, 2009)                42,063         42,075
      Additional paid-in capital                  137,560,175    137,776,590
      Statutory reserves                            2,466,165      2,466,165
      Accumulated other comprehensive income:
        Cumulative translation adjustments          7,363,186      7,212,587
      Accumulated losses                          (19,221,538)   (17,232,871)
    Total shareholders' equity                    128,210,051    130,264,546

    Total liabilities and shareholders' equity    143,402,718    141,516,228



                                  LINKTONE LTD.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                      (In U.S. dollars, except share data)

                             Three months ended           Nine months ended
                     September     June      September  September   September
                      30, 2008   30, 2009     30, 2009   30, 2008    30, 2009
                    (unaudited)(unaudited)  (unaudited)(unaudited) (unaudited)
    Gross revenues  16,586,641  18,254,195  13,828,853  47,624,083  46,858,738
    Sales tax         (632,288)   (688,923)   (492,831) (1,751,145) (1,681,035)
    Net revenues    15,954,353  17,565,272  13,336,022  45,872,938  45,177,703
    Cost of
     services       (7,481,147)(11,613,627) (8,185,538)(23,910,814)(29,451,273)
    Gross profit     8,473,206   5,951,645   5,150,484  21,962,124  15,726,430
    Operating
     expenses:
      Product
       development    (917,231)   (989,118)   (931,718) (2,389,121) (2,530,779)
      Selling
       and
       marketing    (4,029,935) (2,286,112) (3,150,756) (9,132,388) (7,370,970)
      Other
       general and
       admini-
       strative     (2,202,707) (2,440,520) (1,553,203) (7,327,540) (6,016,645)
    Reversal of
     provision for
     impairment             --          --     395,257          --          --
    Total
     operating
     expenses       (7,149,873) (5,715,750) (5,240,420)(18,849,049)(15,918,394)
    Income/(Loss)
     from
     operations      1,323,333     235,895     (89,936)  3,113,075    (191,964)
    Interest income
     (including
     interest
     income of
     $79,775 and
     $132,687 from
     related party
     loans for the
     three months
     ended June 30,
     2009 and Sept-
     ember 30, 2009
     respectively)     520,920     645,635     691,334   1,095,556   1,168,458
    Other income        84,570     156,104      19,253     319,371     352,938
    Income before
     tax             1,928,823   1,037,634     620,651   4,528,002   1,329,432
    Income tax
     expense          (472,439)   (315,319)    (26,797) (1,296,224)   (329,014)
    Net income
     from
     continuing
     operations      1,456,384     722,315     593,854   3,231,778   1,000,418
    Net income/
     (loss) from
     discontinued
     operations     (3,779,477)    186,412     140,467 (20,345,470)    988,249
    Net income/
     (loss)         (2,323,093)    908,727     734,321 (17,113,692)  1,988,667
    Other
     comprehensive
     income/(loss):     39,112      20,926     (79,248)  2,483,761    (150,599)
    Comprehensive
     income/(loss)  (2,283,981)    929,653     655,073 (14,629,931)  1,838,068

    Basic income/
     (loss) per
     ordinary share:
      Continuing
       operations         0.00        0.00        0.00        0.01        0.01
      Discontinued
       operations        (0.01)       0.00        0.00       (0.06)       0.00
      Total net
       income/(loss)     (0.01)       0.00        0.00       (0.05)       0.01
    Diluted income/
     (loss) per
     ordinary share:
      Continuing
       operations         0.00        0.00        0.00        0.01        0.01
      Discontinued
       operations        (0.01)       0.00        0.00       (0.06)       0.00
      Total net
       income/(loss)     (0.01)       0.00        0.00       (0.05)       0.01

    Basic income/
     (loss) per ADS:
      Continuing
       operations         0.03        0.02        0.02        0.09        0.03
      Discontinued
       operations        (0.09)       0.00        0.00       (0.57)       0.02
      Total net
       income/(loss)     (0.06)       0.02        0.02       (0.48)       0.05
    Diluted income/
     (loss) per ADS:
      Continuing
       operations         0.03        0.02        0.02        0.09        0.03
      Discontinued
       operations        (0.09)       0.00        0.00       (0.57)       0.02
      Total net
       income/(loss)     (0.06)       0.02        0.02       (0.48)       0.05

    Weighted average
     ordinary shares:
       Basic       420,636,230 420,636,230 420,756,430 358,722,891 420,651,200
       Diluted     420,636,230 421,179,097 421,619,227 358,722,891 421,221,535

    Weighted
     average ADSs:
       Basic        42,063,623  42,063,623  42,075,643  35,872,289  42,065,120
       Diluted      42,063,623  42,117,910  42,161,923  35,872,289  42,122,154



                                  LINKTONE LTD.
                             NON-GAAP RECONCILIATION
                      (In U.S. dollars, except share data)

                             Three months ended            Nine months ended
                     September      June     September   September   September
                      30, 2008    30, 2009    30, 2009    30, 2008    30, 2009
                    (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

    Net income/
     (loss)         (2,323,093)    908,727     734,321 (17,113,692)  1,988,667
    Stock based
     compensation
     expense           161,941     (18,657)     51,673     552,635     223,244
    Provision/
     (Reversal of
     provision) for
     impairment        602,512          --    (395,257)  6,617,458    (395,257)
    Non-GAAP net
     income/(loss)  (1,558,640)    890,070     390,737  (9,943,599)  1,816,654

    Non-GAAP
     diluted
     income/(loss)
     per share           (0.00)       0.00        0.00       (0.03)       0.00
    Non-GAAP
     diluted
     income/(loss)
     per ADS             (0.04)       0.02        0.01       (0.28)       0.04
    Number of
     shares used
     in diluted
     per-share
     calculation   420,636,230 421,179,097 421,619,227 358,722,891 421,221,535
    Number of
     ADSs used
     in diluted
     per-share
     calculation    42,063,623  42,117,910  42,161,923  35,872,289  42,122,154

SOURCE Linktone Ltd.

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