KongZhong sinks after co. says 1Q profit dropped

The Beijing-based company's American Depositary Shares fell 59 cents, or 11.4 percent, to $4.59. In the past year the stock has traded between $3.45 and $9.05.

Late Thursday, KongZhong said that for the quarter that ended March 31 it earned $88,000, breaking even on a per-share basis. The company earned $1.6 million, or 4 cents per share, in the year-ago quarter.

On an adjusted basis, KongZhong earned 3 cents per share in the first quarter.

Analysts polled by Thomson Financial expected a profit of 5 cents per share. The estimates typically exclude special items.

KongZhong's revenue rose 6.3 percent to $21.4 million, with wireless value-added services revenue rising to $21.1 million from $20 million.

The company's gross margin on wireless value-added services declined to 45 percent from 48 percent in the prior quarter, due mainly to increased revenue sharing with cell phone manufacturers.

KongZhong also reported operating expenses for these services rose 10 percent sequentially to $7.4 million, primarily because of increased compensation to company employees. The company's total operating expenses rose 8.5 percent year over year to $10.7 million.

KongZhong forecast second-quarter revenue of between $22 million and $23 million.

In a client note, Piper Jaffray analyst Michael J. Olson called the company's results "mixed," saying he thinks its profit was impacted by investment in the ongoing rollout of the company's wireless application protocol, or WAP, portal Kong.net.