Shanda Interactive Entertainment , China's No. 2 online game company, said on Sunday its fourth-quarter profit rose 13 percent, as revenue rose to a record in China's booming online game market.

China is one of the world's fastest growing online game markets, with about 80 million gamers in a market worth about $4 billion. Shanda competes in the market with the likes of NetEase , Changyou and Tencent <0700.HK>.

Despite the record revenue, Shanda's quarterly profit of 369.3 million yuan ($54.1 million), or 5.30 yuan per ADS, was still its weakest in three quarters, reflecting intense competition in China's online game market.

The quarterly profit compared with a profit of 326.5 million yuan a year ago, or 4.70 yuan per ADS.

Quarterly revenue rose to a record 1.51 billion yuan ($221.6 million) from 1.02 billion yuan a year earlier and compared with the average analyst forecast for $213 million.

Shanda closed the year 2009 with another quarter of solid progress, Shanda Interactive Chairman Chen Tianqiao said in a statement.

With the goal of becoming a leading global entertainment media enterprise, Shanda will continue to step up efforts to develop new technologies as well as explore innovative business models to transform the cultural landscape.

The company's core online game unit, Shanda Games , accounted for about 88 percent of its total revenue and 75 percent of its gross profit in the fourth quarter.

Last week, NetEase reported forecast-beating quarterly results, mostly due to strong performance from its non-gaming online advertising business as China's economy gains steam on spending from Beijing's 4 trillion yuan ($586 billion) economic stimulus plan.

Shanda spun off its online game unit last September in a $1 billion initial public offering in New York, in a move to transform itself into a more diversified media company.

But since then, Shanda Games' share price has fallen steadily, to as low as $7.95 in trading last week from an IPO price of $12.50.

Shanda Games said its board has authorized the repurchase of up to $150 million worth of its outstanding ADSs.

Shanda Interactive shares have fared somewhat better, rallying 63 percent last year on strong hopes for China's online game sector and amid a broader U.S. rally. But the rally has fizzled this year, with the shares down 14 percent, versus a more modest 1.5 percent drop for the broader Nasdaq <.IXIC>.

(Reporting by Doug Young; Editing by Anshuman Daga and Muralikumar Anantharaman)