NetEase.com Reports Fourth Quarter and Fiscal Year 2007 Unaudited Financial Results

BEIJING, Feb. 20 /Xinhua-PRNewswire-FirstCall/ -- NetEase.com, Inc. (NASDAQ:NTES), one of China's leading Internet and online game services providers, today announced its unaudited financial results for the quarter and fiscal year ended December 31, 2007.

William Ding, Chief Executive Officer and Director of NetEase stated, "As fiscal 2007 drew to a close, peak concurrent users for Fantasy Westward Journey hit an all-time high allowing us to conclude the year on a decidedly positive note. We believe that the ongoing diversification in our product offerings, including an intensified focus on item-based games and exploration of strategic licensing opportunities, will allow us to attract a larger array of game players and further solidify our leading position in the Chinese MMORPG market in 2008 and beyond."

Mr. Ding continued, "We are pleased with our improved content and successful integration of our email and blog services, allowing us to retain and grow traffic on the NetEase websites, while providing a solid platform to enhance our advertising revenues. As the world turns its attention to Beijing during the 2008 Olympic Games, we remain focused on capturing domestic market share and building capacity to capitalize on our enhanced marketing initiatives related to our advertising service business."

Fourth Quarter 2007 Financial Results

Total revenues for the fourth quarter of 2007 were RMB622.1 million (US$85.3 million), compared to RMB571.1 million (US$78.3 million) and RMB540.3 million (US$74.1 million) for the preceding quarter and the fourth quarter of 2006, respectively.

Revenues from online games were RMB507.0 million (US$69.5 million) for the fourth quarter of 2007, compared to RMB468.7 million (US$64.2 million) and RMB451.6 million (US$61.9 million) for the preceding quarter and the fourth quarter of 2006, respectively.

Revenues from advertising services were RMB98.1 million (US$13.4 million) for the fourth quarter of 2007, compared to RMB85.5 million (US$11.7 million) and RMB72.1 million (US$9.9 million) for the preceding quarter and the fourth quarter of 2006, respectively.

Revenues from wireless value-added services and others were RMB17.0 million (US$2.3 million) for the fourth quarter of 2007, compared to RMB16.9 million (US$2.3 million) and RMB16.6 million (US$2.3 million) for the preceding quarter and the fourth quarter of 2006, respectively.

Gross profit for the fourth quarter of 2007 was RMB488.0 million (US$66.9 million), compared to RMB441.9 million (US$60.6 million) and RMB456.7 million (US$62.6 million) for the preceding quarter and the fourth quarter of 2006, respectively. The quarter-over-quarter increase in gross profit was primarily driven by higher game and advertising revenues reported for the fourth quarter of 2007. The increase in online games revenues resulted in part from the full-quarter contribution of Westward Journey Online III which was commercially launched in mid-September. Higher revenues were also reported for Fantasy Westward Journey and Westward Journey Online II as a result of the October National Holiday week and the December Christmas season, which are usually peak usage periods for online game players in China. The year-over- year increase in gross profit was primarily attributable to the continued growth in revenues from Fantasy Westward Journey during the fourth quarter of 2007, which experienced a new record high number of peak concurrent users of approximately 1.5 million during that quarter. Higher advertising revenues were reported for the fourth quarter of 2007 in comparison to the preceding quarter and the same period of 2006 primarily due to the Company's continuing improvements to its online content and successful integration of its email and blog services, which resulted in increased traffic and created premium ad spaces on screens when users log on for such services.

Gross margin for the online game business for the fourth quarter of 2007 was 90.7%, compared to 89.4% and 90.3% for the preceding quarter and the fourth quarter of 2006, respectively. The quarter-over-quarter increase was primarily due to higher game revenues reported for the fourth quarter of 2007, while related costs were stable. The year-over-year gross margin ratios remained relatively stable.

Gross margin for the advertising business for the fourth quarter of 2007 was 52.0%, compared to 54.0% and 50.5% for the preceding quarter and the fourth quarter of 2006, respectively. The quarter-over-quarter decrease was primarily driven by higher staff-related and content costs during the fourth quarter of 2007. The year-over-year increase was primarily attributable to higher revenues reported for the fourth quarter of 2007, which outpaced the growth in related costs during the period.

Gross loss margin for the wireless value-added services and others business for the fourth quarter of 2007 was 19.5%, compared to 33.3% and 18.9% for the preceding quarter and the fourth quarter of 2006, respectively. The quarter-over-quarter decrease was primarily due to the continued rationalization of operational costs associated with the Company's wireless value-added services business in the fourth quarter of 2007. The year-over- year increase in gross loss margin was mainly due to higher miscellaneous cost of revenues related to that business incurred during the fourth quarter of 2007.

Total operating expenses for the fourth quarter of 2007 were RMB152.8 million (US$21.0 million), compared to RMB179.0 million (US$24.5 million) and RMB123.9 million (US$17.0 million) for the preceding quarter and the fourth quarter of 2006, respectively. The quarter-over-quarter decrease was primarily driven by increased spending on the advertising and marketing promotion of Westward Journey Online III and Fantasy Westward Journey during the third quarter of 2007, which was reduced in the fourth quarter. The year- over-year increase was mainly due to higher marketing spending to promote Westward Journey Online III and Fantasy Westward Journey and higher staff- related cost as a result of an increase in research and development headcount during the fourth quarter of 2007.

Net profit for the fourth quarter of 2007 totaled RMB389.8 million (US$53.4 million), compared to RMB260.2 million (US$35.7 million) and RMB320.2 million (US$43.9 million) for the preceding quarter and the fourth quarter of 2006, respectively. In December 2007, the Company received a reinvestment incentive tax refund of RMB29.9 million (US$4.1 million), which helped reduce the Company's income tax expense for the fourth quarter of 2007. In addition, new corporate income tax laws went into effect as of January 1, 2008, which unify the tax rate generally applicable to domestic and foreign-invested enterprises in China. As the Chinese tax authorities have not yet announced detailed regulations on the applicable requirements and procedures to apply for preferential tax treatment as a high and new technology enterprise and the continued application of a preferential tax rate for the advanced technology enterprise, such as those that have been enjoyed by certain PRC subsidiaries of the Company through 2007, the Company is required under applicable accounting standards to report its deferred tax assets as of December 31, 2007 at the new statutory income tax rate of 25%. The reporting of deferred tax assets at the new statutory income tax rate resulted in a tax benefit of approximately RMB42.0 million (US$5.8 million) for the fourth quarter of 2007. It is expected that the Company will report a higher tax charge in the future quarter if and when confirmation is received from the Chinese tax authorities that such preferential tax treatments will be allowed to continue for the relevant terms, as a result of a reduction to the deferred tax assets to reflect the lower preferred tax rates.

NetEase reported basic and diluted earnings per American depositary share (ADS) of US$0.44 and US$0.41 for the fourth quarter of 2007, respectively. The Company reported basic and diluted earnings per ADS of US$0.29 and US$0.27 and US$0.35 and US$0.32 for the preceding quarter and the fourth quarter of 2006, respectively.

Fiscal Year 2007 Financial Results

Total revenues for fiscal year 2007 were RMB2.31 billion (US$316.1 million), compared to RMB2.22 billion (US$304.0 million) for the preceding year. Revenues from online games were RMB1.93 billion (US$264.9 million) for fiscal 2007, compared to RMB1.86 billion (US$254.4 million) for preceding fiscal year. Revenues from advertising services were RMB305.1 million (US$41.8 million) for fiscal 2007, compared to RMB285.8 million (US$39.2 million) for the preceding fiscal year. Revenues from wireless value-added services and others were RMB68.0 million (US$9.3 million) for fiscal 2007, compared to RMB75.4 million (US$10.3 million) for the preceding fiscal year. Gross profit for fiscal 2007 was RMB1.80 billion (US$246.5 million), compared to RMB1.78 billion (US$244.4 million) for the preceding fiscal year. The increased gross profits for fiscal year 2007 were primarily due to higher revenues reported for Fantasy Westward Journey in fiscal year 2007.

Total operating expenses for fiscal 2007 were RMB592.2 million (US$81.2 million), compared to RMB503.2 million (US$69.0 million) for the preceding fiscal year. Higher operating expenses for fiscal 2007 were primarily due to increased marketing costs to promote Westward Journey Online III and Fantasy Westward Journey, as well as higher staff-related costs due to an increase in headcount for the online games research and development team.

Net profit for fiscal 2007 totaled RMB1.26 billion (US$173.3 million), compared to RMB1.24 billion (US$170.4 million) for the preceding fiscal year. In 2007, the Company received reinvestment incentive tax refunds of RM54.4 million (US$7.5 million), which reduced the Company's income tax expense for fiscal 2007. In addition, as mentioned above, the reporting of deferred tax assets at the new statutory income tax rate resulted in a tax benefit of approximately RMB42.0 million (US$5.8 million) for the fourth quarter of 2007. NetEase reported basic and diluted earnings per ADS of US$1.40 and US$1.31 for fiscal 2007, respectively. The Company reported basic and diluted earnings per ADS of US$1.32 and US$1.22 for the preceding fiscal year, respectively.

Other Information

As of December 31, 2007, the Company's total cash and time deposit balance was RMB4.16 billion (US$570.1 million), compared to RMB3.94 billion (US$539.8 million) as of December 31, 2006. As previously announced, the Company had obtained a revolving loan facility, which was taken out to enable the Company at its discretion to fund any redemption requests made by the holders of its zero coupon convertible subordinated notes in accordance with the terms of those notes during a period from May 17, 2007 to July 31, 2008. In December 2007, the Company cancelled such facility with the bank prior to its expiration. As a result of the termination of the loan facility, the related restriction on the Company's cash balance was removed on December 31, 2007, and the outstanding convertible notes as of December 31, 2007 were classified as current liabilities.

Cash flow generated from operating activities was approximately RMB426.6 million (US$58.5 million) for the fourth quarter of 2007, compared to RMB339.2 million (US$46.5 million) and RMB531.5 million (US$72.9 million) for the preceding quarter and the fourth quarter of 2006, respectively.

On July 2, 2007, the Company's Board authorized a share repurchase program of up to US$120 million of the Company's outstanding ADSs. As of December 31, 2007 the Company had spent in aggregate a total purchase consideration of approximately US$35.7 million (including transaction costs). The share repurchase program will end on July 1, 2008.

** The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the noon buying rate of US$1.00 = RMB7.2946 on December 31, 2007 in The City of New York for the cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 31, 2007, or at any other certain date. The percentages stated are calculated based on RMB.

Notes to Unaudited Financial Information

The unaudited financial information disclosed in this release is preliminary. The audit of the financial statements and related notes to be included in our annual report on Form 20-F for the year ended December 31, 2007 is still in progress. In addition, because an audit of our internal controls over financial reporting in connection with section 404 of the Sarbanes-Oxley Act of 2002 has not yet been completed, we make no representation as to the effectiveness of those internal controls as of the end of fiscal 2007.

Adjustments to the financial statements may be identified when the audit work is completed, which could result in significant differences between our audited financial statements and this preliminary unaudited financial information.

Conference Call

NetEase's management team will host a conference call at 8:00 pm Eastern Time on Wednesday, February 20, 2008, (Beijing/Hong Kong Time: 9:00 am, Thursday, February 21, 2008). Chief Executive Officer William Ding, Acting Chief Financial Officer Onward Choi, and Co-Chief Operating Officer Michael Tong will be on the call to discuss the quarterly results and answer questions.

Interested parties may participate in the conference call by dialing 800- 240-6709 (international: 303-262-2140), 10-15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 800-405-2236 (international 303-590-3000), and entering pass code 11108212#. The replay will be available through March 6, 2008 Easter Time.

This call is being webcast live and archived, and will be available for 12 months on NetEase's corporate web site at http://corp.netease.com/ , Investor Info: Earnings Call.

About NetEase

NetEase.com, Inc. is a leading China-based Internet technology company that pioneered the development of applications, services and other technologies for the Internet in China. NetEase's online communities and personalized premium services have established a large and stable user base for the NetEase websites which are operated by its affiliates. In particular, NetEase provides online game services to Internet users through the licensing or in-house development of massively multi-player online role-playing games, including Fantasy Westward Journey, Westward Journey Online II, Westward Journey Online III and Datang.

NetEase also offers online advertising on its websites which enables advertisers to reach its substantial user base. In addition, NetEase has paid listings on its search engine and web directory and classified ads services, as well as an online mall, which provides opportunities for e-commerce and traditional businesses to establish their own storefront on the Internet. NetEase also offers wireless value-added services such as news and information content, matchmaking services, music and photos from the Web which are sent over SMS, MMS, WAP, IVR and Color Ring-back Tone technologies.

Other community services which the NetEase websites offer include instant messaging, online personal ads, matchmaking, alumni clubs, personal home pages and community forums. NetEase is also the largest provider of free e-mail services in China. Furthermore, the NetEase websites provide various channels of content. NetEase aggregates news content on world events, sports, science and technology, and financial markets, as well as entertainment content such as cartoons, games, astrology and jokes, from over one hundred international and domestic content providers.

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: the risk that NetEase will not be successful in its product diversification efforts, including its focus on item-based games and exploration of strategic licensing opportunities; the risk that the online game market will not continue to grow or that NetEase will not be able to maintain its leading position in that market, which could occur if, for example, its new online games or expansion packs and other improvements to its existing games do not become as popular as management anticipates; the ability of NetEase to effectively market its games and other services and achieve a positive return on its marketing expenditures; the risk that changes in Chinese government regulation of the online game market may limit future growth of NetEase's revenue or cause revenue to decline; the risk that NetEase may not be able to continuously develop new and creative online services; the risk that NetEase will not be able to control its expenses in future periods; competition in NetEase's existing and potential markets; governmental uncertainties (including possible changes in the effective tax rates applicable to NetEase and its subsidiaries and affiliates), general competition and price pressures in the marketplace; the risk that security, reliability and confidentiality concerns may impede broad use of the Internet and e-commerce and other services; the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase's business and financial results; and other risks outlined in NetEase's filings with the Securities and Exchange Commission. NetEase does not undertake any obligation to update this forward- looking information, except as required under applicable law.

NETEASE.COM, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, December 31, December 31, 2006 2007 2007 RMB RMB USD (Note 1) Assets

Current assets: Cash 1,206,476,526 2,482,820,821 340,364,218 Time deposits 2,731,396,687 1,675,813,944 229,733,494 Accounts receivable, net 131,724,899 166,727,514 22,856,293 Prepayments and other current assets 33,913,350 45,143,728 6,188,650 Deferred tax assets 25,674,468 65,787,113 9,018,605 Total current assets 4,129,185,930 4,436,293,120 608,161,260

Non-current assets: Non-current rental deposits 3,353,209 3,033,171 415,810 Property, equipment and software, net 224,207,833 183,471,666 25,151,710 Prepayment for land use right -- 26,956,800 3,695,446 Investment in an associated company -- 1,948,958 267,178 Deferred tax assets 5,502,361 19,060,225 2,612,923 Other long-term assets 11,458,497 14,895,441 2,041,982 Total non-current assets 244,521,900 249,366,261 34,185,049 Total assets 4,373,707,830 4,685,659,381 642,346,309

Liabilities and Shareholders' Equity

Current liabilities: Zero-coupon convertible subordinated notes due July 15, 2023 -- 641,778,908 87,980,000 Accounts payable 105,555,248 89,143,868 12,220,529 Salary and welfare payables 54,924,038 68,653,742 9,411,584 Taxes payable 95,476,498 92,438,670 12,672,205 Deferred revenue 385,720,720 354,966,697 48,661,571 Deferred tax liabilities 3,391,754 -- -- Accrued liabilities 31,340,217 29,844,067 4,091,255 Total current liabilities 676,408,475 1,276,825,952 175,037,144

Long-term payable: Zero-coupon convertible subordinated notes due July 15, 2023 780,253,918 -- -- Other long-term payable 11,377,256 10,200,000 1,398,295 Total long-term payable 791,631,174 10,200,000 1,398,295

Total liabilities 1,468,039,649 1,287,025,952 176,435,439

Shareholders' equity 2,905,668,181 3,398,425,631 465,882,383

Minority interests -- 207,798 28,487 Total liabilities and shareholders' equity 4,373,707,830 4,685,659,381 642,346,309

The accompanying notes are an integral part of this press release.

NETEASE.COM, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter Ended December 31, September 30, 2006 2007 RMB RMB Revenues: Online game services 451,586,343 468,651,024 Advertising services 72,087,480 85,478,302 Wireless value-added services and others 16,632,276 16,946,709

Total revenues 540,306,099 571,076,035 Business taxes 13,823,672 (23,420,856)

Total net revenues 554,129,771 547,655,179

Total cost of revenues (97,406,648) (105,710,714)

Gross profit 456,723,123 441,944,465

Operating expenses: Selling and marketing expenses (36,825,961) (83,189,695) General and administrative expenses (49,976,139) (48,276,202) Research and development expenses (37,112,476) (47,515,112) Total operating expenses (123,914,576) (178,981,009)

Operating profit 332,808,547 262,963,456 Other income (expenses): Investment income 102,885 116,843 Interest income 22,661,439 29,194,435 Other, net 1,283,947 (12,164,815)

Profit before tax 356,856,818 280,109,919 Income tax (37,026,868) (19,946,757)

Profit after tax 319,829,950 260,163,162 Minority interests 400,046 -- Net profit 320,229,996 260,163,162

Earnings per share, basic 0.10 0.09 Earnings per ADS, basic 2.52 2.13 Earnings per share, diluted 0.09 0.08 Earnings per ADS, diluted 2.34 1.99 Weighted average number of ordinary shares outstanding, basic 3,180,435,508 3,053,681,518 Weighted average number of ADS outstanding, basic 127,217,420 122,147,261 Weighted average number of ordinary shares outstanding, diluted 3,425,090,889 3,261,550,487 Weighted average number of ADS outstanding, diluted 137,003,636 130,462,019

Quarter Ended December 31, December 31, 2007 2007 RMB USD(Note 1) Revenues: Online game services 506,968,240 69,499,114 Advertising services 98,055,630 13,442,222 Wireless value-added services and others 17,026,320 2,334,099

Total revenues 622,050,190 85,275,435 Business taxes (25,761,100) (3,531,530)

Total net revenues 596,289,090 81,743,905

Total cost of revenues (108,270,695) (14,842,581)

Gross profit 488,018,395 66,901,324

Operating expenses: Selling and marketing expenses (59,767,163) (8,193,343) General and administrative expenses (44,341,316) (6,078,649) Research and development expenses (48,724,456) (6,679,524) Total operating expenses (152,832,935) (20,951,516)

Operating profit 335,185,460 45,949,808 Other income (expenses): Investment income 114,007 15,629 Interest income 31,733,301 4,350,246 Other, net (30,144,109) (4,132,387)

Profit before tax 336,888,659 46,183,296 Income tax 52,868,775 7,247,659

Profit after tax 389,757,434 53,430,955 Minority interests 74,364 10,194 Net profit 389,831,798 53,441,149

Earnings per share, basic 0.13 0.02 Earnings per ADS, basic 3.21 0.44 Earnings per share, diluted 0.12 0.02 Earnings per ADS, diluted 3.01 0.41 Weighted average number of ordinary shares outstanding, basic 3,033,153,746 3,033,153,746 Weighted average number of ADS outstanding, basic 121,326,150 121,326,150 Weighted average number of ordinary shares outstanding, diluted 3,240,836,099 3,240,836,099 Weighted average number of ADS outstanding, diluted 129,633,444 129,633,444

Year Ended December 31, December 31, December 31, 2006 2007 2007 RMB RMB USD(Note 1) Revenues: Online game services 1,856,062,971 1,932,634,947 264,940,497 Advertising services 285,772,653 305,057,556 41,819,641 Wireless value-added services and others 75,406,121 68,018,461 9,324,495

Total revenues 2,217,241,745 2,305,710,964 316,084,633 Business taxes (52,882,275) (92,424,200) (12,670,222)

Total net revenues 2,164,359,470 2,213,286,764 303,414,411

Total cost of revenues (381,298,181) (415,453,046) (56,953,506)

Gross profit 1,783,061,289 1,797,833,718 246,460,905

Operating expenses: Selling and marketing expenses (170,142,691) (235,318,304) (32,259,247) General and administrative expenses (179,879,602) (176,178,740) (24,151,940) Research and development expenses (153,162,158) (180,734,713) (24,776,508) Total operating expenses (503,184,451) (592,231,757) (81,187,695)

Operating profit 1,279,876,838 1,205,601,961 165,273,210 Other income (expenses): Investment income 340,721 474,446 65,041 Interest income 94,364,852 112,599,994 15,436,075 Other, net 280,670 (51,975,334) (7,125,179)

Profit before tax 1,374,863,081 1,266,701,067 173,649,147 Income tax (132,485,543) (2,689,309) (368,671)

Profit after tax 1,242,377,538 1,264,011,758 173,280,476 Minority interests 400,046 74,364 10,194 Net profit 1,242,777,584 1,264,086,122 173,290,670

Earnings per share, basic 0.38 0.41 0.06 Earnings per ADS, basic 9.61 10.24 1.40 Earnings per share, diluted 0.36 0.38 0.05 Earnings per ADS, diluted 8.91 9.55 1.31 Weighted average number of ordinary shares outstanding, basic 3,231,832,008 3,086,451,412 3,086,451,412 Weighted average number Of ADS outstanding, basic 129,273,280 123,458,056 123,458,056 Weighted average number of ordinary shares outstanding, diluted 3,498,405,110 3,307,538,379 3,307,538,379 Weighted average number of ADS outstanding, diluted 139,936,204 132,301,535 132,301,535

The accompanying notes are an integral part of this press release.

NETEASE.COM, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Quarter Ended December 31, September 30, December 31, December 31, 2006 2007 2007 2007 RMB RMB RMB USD(Note 1) Cash flows from operating activities: Net profit 320,229,996 260,163,162 389,831,798 53,441,149 Adjustments to reconcile net profit to net cash provided by operating activities: Depreciation and amortization 26,202,590 24,019,586 26,752,268 3,667,407 Share-based compensation cost 23,055,508 26,072,433 22,060,172 3,024,178 (Reversal) provision for doubtful debts 4,316,554 1,067,169 (228,892) (31,378) Amortization of issuance cost of convertible notes -- -- -- -- Loss on disposal of property, equipment

and software 59,986 696,754 38,711 5,307 Write-off of property, equipment and software 2,024,936 -- -- -- Non-cash exchange (gains) losses (1,344,778) 11,262,944 30,229,825 4,144,137 Share of loss by minority interests (400,046) -- (74,364) (10,194) Net equity share of loss from an associated company -- 199,941 351,101 48,132 Others -- -- -- -- Changes in operating assets and liabilities: Accounts receivable (18,262,206) (16,898,211) (28,797,530) (3,947,787) Prepayments and other current assets 31,760,833 2,411,864 19,140,543 2,623,933 Deferred tax assets (5,934,365) 2,060,348 (45,969,165) (6,301,808) Deferred tax assets - non-current (5,502,361) (5,356,345) (11,939,153) (1,636,711) Accounts payable 39,050,562 (12,339,449) 4,839,436 663,427 Salary and welfare payables 13,764,854 (10,472,826) 25,160,475 3,449,192 Taxes payable 12,922,506 9,217,774 11,798,902 1,617,484 Deferred revenue 81,097,799 39,167,706 (14,094,607) (1,932,197) Deferred tax liabilities (1,082,291) -- -- -- Accrued liabilities 9,563,582 7,941,122 (2,499,785) (342,690) Net cash provided by operating activities 531,523,659 339,213,972 426,599,735 58,481,581

Cash flows from investing activities: Purchase of property, equipment and software (33,496,300) (16,472,855) (13,885,112) (1,903,478) Proceeds from sale of property, equipment and software -- 10,320 25,434 3,487 Prepayment for land use right -- -- -- -- Investment in an associated company -- (2,500,000) -- -- Net cash received upon closure of VIE -- (1,217,831) -- -- Transfer from restricted cash -- -- 761,580,600 104,403,339 Net change in time deposits with terms of three months (85,380,462) (216,493,992) (246,295,721) (33,764,116) Placement/ rollover of matured time deposits (655,105,518) (201,035,000) (270,000,000) (37,013,681) Uplift of matured time deposits 655,507,938 598,179,141 655,105,518 89,806,914 Net increase in other assets 583,578 (2,306) (89,786) (12,309) Net cash provided by (used in) investing activi- ties (117,890,764) 160,467,477 886,440,933 121,520,156

Cash flows from financing activities: Minority interests 400,046 -- 282,162 38,681 Proceeds from employees exercising stock options 207,554 20,819,202 1,618,804 221,918 Repurchase of company shares (336,251,381) (231,914,175) (36,478,319) (5,000,729) Payment of other long- term payable -- -- -- -- Net cash used in financing activities (335,643,781) (211,094,973) (34,577,353) (4,740,130)

Effect of exchange rate changes on cash held in foreign currencies (8,871,965) (3,525,100) (1,064,010) (145,863) Net increase (decrease) in cash 69,117,149 285,061,376 1,277,399,305 175,115,744 Cash, beginning of the quarter/year 1,137,359,377 920,360,140 1,205,421,516 165,248,474 Cash, end of the quarter/year 1,206,476,526 1,205,421,516 2,482,820,821 340,364,218

Supplemental disclosures of cash flow information: Cash paid for income tax, net of refund/(net tax refund) 16,946,423 19,457,537 (9,165,960) (1,256,540) Supplemental schedule of non-cash investing and financing activities: Treasury stock cancellation 282,862,720 237,971,707 121,821,189 16,700,188 Fixed asset purchases financed by accounts payable 20,051,899 11,313,407 6,112,886 838,002

Year Ended December 31, December 31, December 31, 2006 2007 2007 RMB RMB USD(Note 1) Cash flows from operating activities: Net profit 1,242,777,584 1,264,086,122 173,290,670 Adjustments to reconcile net profit to net cash provided by operating activities: Depreciation and amortization 78,370,029 99,110,799 13,586,872 Share-based compensation cost 101,286,676 95,428,175 13,082,029 (Reversal) provision for doubtful debts 7,487,619 (5,334,898) (731,349) Amortization of issuance cost of convertible notes 4,331,016 -- -- Loss on disposal of property, equipment

and software 586,254 830,169 113,806 Write-off of property, equipment and software 13,663,387 -- -- Non-cash exchange (gains) losses 584,612 50,891,073 6,976,541 Share of loss by minority interests (400,046) (74,364) (10,194) Net equity share of loss from an associated company -- 551,042 75,541 Others -- 278,324 38,155 Changes in operating assets and liabilities: Accounts receivable (69,580,977) (29,756,151) (4,079,203) Prepayments and other current assets (13,921,921) (16,535,100) (2,266,756) Deferred tax assets (5,744,969) (40,112,645) (5,498,951) Deferred tax assets - non-current (5,502,361) (13,557,864) (1,858,617) Accounts payable 45,117,500 945,594 129,629 Salary and welfare payables 9,411,771 13,216,566 1,811,829 Taxes payable 23,434,362 (2,750,313) (377,034) Deferred revenue 154,049,749 (30,754,023) (4,215,999) Deferred tax liabilities (549,100) (3,391,754) (464,968) Accrued liabilities 10,707,608 (3,168,330) (434,339) Net cash provided by operating activities 1,596,108,793 1,379,902,422 189,167,662

Cash flows from investing activities: Purchase of property, equipment and software (142,513,502) (71,515,551) (9,803,903) Proceeds from sale of property, equipment and software 148,076 55,675 7,632 Prepayment for land use right -- (26,956,800) (3,695,446) Investment in an associated company -- (2,500,000) (342,719) Net cash received upon closure of VIE -- (1,217,831) (166,950) Transfer from restricted cash -- -- -- Net change in time deposits with terms of three months (563,980,613) 74,476,020 10,209,747 Placement/rollover of matured time deposits (1,600,926,277) (636,577,729) (87,266,982) Uplift of matured time deposits 1,125,107,444 1,530,798,027 209,853,594 Net increase in other assets (36,077,586) (87,737) (12,028) Net cash provided by (used in) investing activities (1,218,242,458) 866,474,074 118,782,945

Cash flows from financing activities: Minority interests 400,046 282,162 38,681 Proceeds from employees exercising stock options 44,127,417 43,232,921 5,926,702 Repurchase of company shares (873,406,019) (1,003,747,328) (137,601,421) Payment of other long- term payable (177,256) (177,256) (24,300) Net cash used in financing activities (829,055,812) (960,409,501) (131,660,338)

Effect of exchange rate changes on cash held in foreign currencies (28,078,078) (9,622,700) (1,319,154) Net increase (decrease) in cash (479,267,555) 1,276,344,295 174,971,115 Cash, beginning of the quarter/year 1,685,744,081 1,206,476,526 165,393,103 Cash, end of the quarter/year 1,206,476,526 2,482,820,821 340,364,218

Supplemental disclosures of cash flow information: Cash paid for income tax, net of refund/(net tax refund) 125,238,532 71,797,010 9,842,488 Supplemental schedule of non-cash investing and financing activities: Treasury stock cancellation 684,603,920 1,192,549,427 163,483,868 Fixed asset purchases financed by accounts payable 20,051,899 6,112,886 838,002

The accompanying notes are an integral part of this press release.

NETEASE.COM, INC.

UNAUDITED SEGMENT INFORMATION

Quarter Ended December 31, September 30, December 31, December 31, 2006 2007 2007 2007 RMB RMB RMB USD (Note 1) Revenues: Online game services 451,586,343 468,651,024 506,968,240 69,499,114 Advertising services 72,087,480 85,478,302 98,055,630 13,442,222 Wireless value-added services and others 16,632,276 16,946,709 17,026,320 2,334,099 Total revenues 540,306,099 571,076,035 622,050,190 85,275,435

Business taxes: Online game services 20,578,370 (15,465,484) (16,729,952) (2,293,471) Advertising services (6,127,436) (7,265,655) (8,334,729) (1,142,589) Wireless value-added services and others (627,262) (689,717) (696,419) (95,470) Total business taxes 13,823,672 (23,420,856) (25,761,100) (3,531,530)

Net revenues: Online game services 472,164,713 453,185,540 490,238,288 67,205,643 Advertising services 65,960,044 78,212,647 89,720,901 12,299,633 Wireless value-added services and others 16,005,014 16,256,992 16,329,901 2,238,629 Total net revenues 554,129,771 547,655,179 596,289,090 81,743,905

Cost of revenues: Online game services (45,733,082) (48,094,598) (45,658,298) (6,259,191) Advertising services (32,636,526) (35,946,007) (43,104,579) (5,909,108) Wireless value-added services and others (19,037,040) (21,670,109) (19,507,818) (2,674,282) Total cost of revenues (97,406,648) (105,710,714) (108,270,695) (14,842,581)

Gross profit (loss) Online game services 426,431,631 405,090,942 444,579,990 60,946,452 Advertising services 33,323,518 42,266,640 46,616,322 6,390,525 Wireless value-added services and others (3,032,026) (5,413,117) (3,177,917) (435,653) Total gross profit 456,723,123 441,944,465 488,018,395 66,901,324

Gross profit (loss) margin Online game services 90.3% 89.4% 90.7% 90.7% Advertising services 50.5% 54.0% 52.0% 52.0% Wireless value-added services and others (18.9%) (33.3%) (19.5%) (19.5%)

Year Ended December 31, December 31, December 31, 2006 2007 2007 RMB RMB USD(Note 1) Revenues: Online game services 1,856,062,971 1,932,634,947 264,940,497 Advertising services 285,772,653 305,057,556 41,819,641 Wireless value-added services and others 75,406,121 68,018,461 9,324,495 Total revenues 2,217,241,745 2,305,710,964 316,084,633

Business taxes: Online game services (25,769,359) (63,776,953) (8,743,036) Advertising services (24,290,676) (25,929,892) (3,554,669) Wireless value-added services and others (2,822,240) (2,717,355) (372,517) Total business taxes (52,882,275) (92,424,200) (12,670,222)

Net revenues: Online game services 1,830,293,612 1,868,857,994 256,197,461 Advertising services 261,481,977 279,127,664 38,264,972 Wireless value-added services and others 72,583,881 65,301,106 8,951,978 Total net revenues 2,164,359,470 2,213,286,764 303,414,411

Cost of revenues: Online game services (178,676,915) (187,411,229) (25,691,776) Advertising services (125,183,293) (143,676,057) (19,696,221) Wireless value-added services and others (77,437,973) (84,365,760) (11,565,509) Total cost of revenues (381,298,181) (415,453,046) (56,953,506)

Gross profit (loss) Online game services 1,651,616,697 1,681,446,765 230,505,685 Advertising services 136,298,684 135,451,607 18,568,751 Wireless value-added services and others (4,854,092) (19,064,654) (2,613,531) Total gross profit 1,783,061,289 1,797,833,718 246,460,905

Gross profit (loss) margin Online game services 90.2% 90.0% 90.0% Advertising services 52.1% 48.5% 48.5% Wireless value-added services and others (6.7%) (29.2%) (29.2%)

The accompanying notes are an integral part of this press release.

NETEASE.COM, INC.

NOTES TO UNAUDITED FINANCIAL INFORMATION

Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB7.2946 on December 31, 2007 in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York.

Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of operations is set out as follows:

Quarter Ended

December 31, September 30, December 31, December 31, 2006 2007 2007 2007 RMB RMB RMB USD (Note 1) Share-based compensation cost included in: Cost of revenue 3,650,046 4,110,297 3,444,268 472,167 Operating expenses - Selling and marketing expenses 4,943,118 3,716,654 3,043,367 417,208 - General and administrative expenses 8,940,057 8,824,199 7,822,539 1,072,374 - Research and development expenses 5,522,287 9,421,283 7,749,998 1,062,429

Year Ended

December 31, December 31, December 31, 2006 2007 2007 RMB RMB USD (Note 1) Share-based compensation cost included in: Cost of revenue 16,614,309 14,890,378 2,041,288 Operating expenses - Selling and marketing expenses 21,147,343 14,357,336 1,968,214 - General and administrative expenses 37,360,433 33,887,323 4,645,535 - Research and development expenses 26,164,591 32,293,138 4,426,992

For more information, please contact:

Brandi Piacente Investor Relations Tel: +1-212-481-2050 Email:

Grace Zhao NetEase.com, Inc.

Tel: +86-10-8255-8208 Email:

DATASOURCE: NetEase.com, Inc.

CONTACT: Brandi Piacente, Investor Relations, +1-212-481-2050, or

, for NetEase; or Grace Zhao of NetEase.com, Inc., +86-

10-8255-8208, or

Web Site: http://corp.netease.com/