Net Revenues Grew 7.7% Over Q2 2006 to US$ 55.2 Million -- Operating Income up 23.4% Over Q2 2006 to US $14.2 Million

SHANGHAI, China, Nov. 9 /Xinhua-PRNewswire/ -- Shanda Interactive Entertainment Limited , or Shanda, a leading interactive entertainment media company in China, today announced its unaudited financial results for the third quarter ended September 30, 2006.

Summary of the Third Quarter 2006: -- Total net revenues increased 7.7% quarter-over-quarter and decreased 12.6% year-over-year to RMB436.8 million (US$ 55.2 million). -- Online game revenues, including MMORPGs and casual games, increased 9.4% quarter-over-quarter and decreased 6.6% year-over-year to RMB409.1 million (US$ 51.7 million). -- Average monthly revenue per active paying account for MMORPGs increased 13.4% quarter-over-quarter to RMB51.6. -- Operating income increased 23.4% quarter-over-quarter and decreased 25.7% year-over-year to RMB112.7 million (US$14.2 million). -- Net income was RMB143.5 million (US$ 18.1 million), compared to net income of RMB133.6 million in the second quarter of 2006 and RMB261.1 million in the third quarter of 2005. Earnings per diluted ADS were RMB 1.98 (US$ 0.26), compared to earnings per diluted ADS of RMB 1.86 in the second quarter of 2006 and RMB 3.56 in the third quarter of 2005.

"Shanda posted solid third quarter results which were primarily driven by growth in our MMORPG and casual game business over second quarter 2006 levels," said Tianqiao Chen, Chairman & Chief Executive Officer of Shanda. "The continuous growth illustrates again that the new revenue model is sustainable and scalable. We believe this new model has now justified itself as an effective way to most efficiently discover and satisfy user demands, extend the life cycle of games and build a sustainable community experience for our interactive entertainment offerings. The successful transition has once again proven that Shanda's core competence lies in its operational ability to quickly address changing user demands. We are also excited about the MMORPGs and casual games in our pipeline. In the fourth quarter, we plan to commercially launch Dungeons & Dragons(R) Online in addition to the launch of three new casual games including Kong-Fu Masters."

Financial Results (Preliminary Unaudited)

Net Revenues. In the third quarter of 2006, Shanda reported net revenues of RMB436.8 million (US$ 55.2 million), representing a 7.7% increase compared to RMB405.7 million in the second quarter of 2006 and a 12.6% decrease from RMB499.7 million in the third quarter of 2005.

Online game revenues in the third quarter of 2006 increased 9.4% quarter- over-quarter and declined 6.6% year-over-year to RMB409.1 million (US$51.7 million). Total peak concurrent users for all Shanda games in commercial service in the third quarter of 2006 decreased 8.0% to 2.06 million from 2.24 million in the second quarter of 2006. The sequential decline of peak concurrent users was primarily due to the launch of a larger-scale campaign to combat robot-cheating programs in our MMORPGs in the third quarter to improve the integrity of the game experience as well as reduce server leasing and maintenance costs.

Revenues from MMORPGs in the third quarter of 2006 increased 9.1% quarter- over-quarter and were flat year-over-year at RMB332.3 million (US$42.0 million), accounting for 76.1% of total revenues. The sequential growth in MMORPGs revenues is primarily due to increased revenues from Mir II and Magical Land, as well as initial contributions from ArchLord.

The number of active paying accounts for MMORPGs was 2.14 million in the third quarter of 2006, compared to 2.23 million in the second quarter of 2006. The reduction in active paying accounts was primarily caused by the implementation of anti-robot-cheating techniques to improve game experience and reduce operating costs. Average monthly revenue per active paying account for MMORPGs increased to RMB51.6 in the third quarter of 2006 from RMB45.5 in the second quarter, due to increased consumption of in-game premium features. In the third quarter, Shanda continued to improve upon its virtual shopping malls and value-added services.

Revenues from casual games in the third quarter of 2006 increased 10.7% quarter-over-quarter and decreased 27.9% year-over-year to RMB76.8 million (US$9.7 million). The sequential increase in revenues from casual games was primarily due to the improved performance of Maple Story, BNB, and GetAmped, as well as seasonality related to the summer holiday during this quarter.

Shanda's other revenues in the third quarter of 2006 decreased 12.5% quarter-over-quarter and 55.1% year-over-year to RMB27.7 million (US$3.5 million). The sequential decrease was primarily due to a seasonal decline in EZ Products sales in the third quarter of 2006.

Gross Profit.

Gross margin was 56.2% in the third quarter of 2006, down from 56.5% in the second quarter of 2006 and 68.9% in the third quarter of 2005.

Income from Operations.

Operating income for the third quarter of 2006 was RMB112.7 million (US$14.2 million), representing a 23.4% increase compared to RMB91.3 million in the second quarter of 2006 and a 25.7% decrease compared to RMB151.7 million in the third quarter of 2005. Operating margin was 25.8% in the third quarter of 2006, compared to 22.5% in the second quarter of 2006 and 30.4% in the third quarter of 2005. The sequential improvement of operating margin resulted from higher revenues as well as lower operating expenses. The decrease in operating expenses was mainly due to the decline of EZ initiative research & development expenses and the reduction in sales & marketing expenses caused from further budget control, partially offset by increase in share-based compensation and provisions for doubtful debts. Share-based compensation was up from RMB6.1 million in the previous quarter to RMB10.9 million (US$1.4 million) in the third quarter of 2006, as new stock options were issued at the end of June 2006.

Other Income.

In the third quarter of 2006, Shanda reported other income of RMB47.8 million (US$6.0 million), representing a decrease of 3.1% from RMB49.4 million in the second quarter of 2006 and a decrease of 46.3% from RMB89.1 million in the third quarter of 2005. Other Income primarily consists of government financial incentives of RMB 29.1 million (US$ 3.7 million) received in the third quarter of 2006 and a foreign exchange gain of RMB 20.9 million (US$ 2.6 million).

Net Income.

In the third quarter of 2006, Shanda had net income of RMB143.5 million (US$18.1 million), compared to net income of RMB133.6 million in the second quarter of 2006 and RMB261.1 million in the third quarter of 2005. Earnings per diluted ADS were RMB 1.98(US$ 0.26), compared to earnings per diluted ADS of RMB 1.86 in the second quarter of 2006 and RMB 3.56 in the third quarter of 2005.

The conversion of Renminbi (RMB) into U.S. dollars in this release is based on the noon buying rate in The City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York as of September 30, 2006, which was RMB7.9087 to US$1.00. The percentages stated in this press release are calculated based on the RMB amounts.

Recent Business Highlights

On September 7, Shanda, its affiliated company Interjoy Technology Ltd. and the Chinese Academy of Sciences' Institute of Automation announced they will work closely together to establish a Digital Interactive Entertainment Laboratory, or the Lab, to develop the latest digital interactive entertainment technology. In addition to continuously providing healthy and customized intelligent interactive games for Shanda's home entertainment platform, the Lab will also focus on the application of digital interactive entertainment technologies and will train Masters and doctorate students as well as employees from Shanda's research and development department.

On October 26, 2006, Shanda announced that it entered into an agreement with JoyChina, a leading Chinese game developer headquartered in Beijing, for an exclusive license to operate a 3D advanced casual game entitled Kong-Fu Masters globally excluding Hong Kong and Taiwan. Kong-Fu Masters, which is expected to enter open-beta testing by end of 2006, is a martial arts fighting game featuring a cast of well-known characters from Chinese folklore and history including the Monkey King and Mulan, and brings users a new level of visual sophistication and dynamic gameplay.

On November 6, 2006, Shanda announced that it has entered into an agreement with Citigroup Global Markets Inc. for the sale by Shanda of an aggregate of 3,703,487 ordinary shares of SINA Corporation representing an aggregate net proceeds of approximately US$ 99,105,312. The sale of the SINA shares was completed on November 9, 2006. Following the sale, Shanda will continue to hold 6,118,278 SINA shares, representing approximately 11.4% of the issued and outstanding share capital of SINA based on information furnished by SINA in their public filings.

Other News

At Shanda's annual general meeting of shareholders held on October 25, 2006, the Company's shareholders elected nine directors to its Board. The elected directors include six prior directors and three new directors. Each director will hold office until the next annual general meeting of shareholders. The three new directors are Qunzhao Tan, Yong Zhang and Bruno Wu. Haibin Qu, Shujun Li and W. Mark Evans retired from their positions as directors.

Conference Call

Shanda's management team will host a conference call today at 8:00 p.m. Eastern Time, corresponding with November 10, 2006, at 9:00 a.m. Beijing/Hong Kong time, to present an overview of the company's financial performance and business operations. To participate in the live call, U.S. callers should dial 888-371-9318 and international callers should dial 973-935-2986. The pass code for the live call is 8041452. A live webcast of the presentation will be available at the company's corporate website at http://www.snda.com/ .

A replay of the conference call will be available until November 16, 2006, at midnight ET. The dial-in number for calls placed in the U.S. is 877-519- 4471 and 973-341-3080 for calls placed outside of the U.S. The pass code for the replay is 8041452.

Safe Harbor Statement

This announcement contains forward-looking statements that are based on current expectations, assumptions, estimates and projections about the companies and the industry. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to the statements regarding the commercial launch of Dungeons & Dragons(R) Online and the launch of Kong-Fu Masters and two additional casual games in the fourth quarter of 2006, results yielded by the cooperation between the three parties and statements regarding the date open-beta testing of Kong-Fu Masters is expected to begin. These forward-looking statements involve various risks and uncertainties. Although the companies believe that their expectations expressed in these forward-looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct. Important risks and uncertainties could cause actual results to be materially different from expectations include but not limited to the risk that there are delays in the localization and/or development of the MMORPGs and casual games Shanda intends to release in 2006, the risk that such MMORPGs and casual games are not well received by users in China, the risk that the cooperation fails to yield the intended results, the risk that the results fail to be commercialized or the commercialized results fail to meet the expectations of end users, the risk that open-beta testing of Kong-Fu Masters is delayed and the risks set forth in Shanda's filings with the U.S. Securities and Exchanges Commission, including Shanda's annual report on Form 20-F.

About Shanda Interactive Entertainment Limited

Shanda Interactive Entertainment Limited is a leading interactive entertainment media company in China. Shanda offers a portfolio of diversified entertainment content including some of the most popular massively multi-player and casual online games in China, along with online chess and board games, network PC games and a variety of cartoons, literature works and music. Shanda's interactive entertainment platform attracts a large and loyal user base, of which more and more is coming from homes. Each user can interact with thousands of others and enjoy the interactive entertainment content that Shanda provides. Interaction enriches your life. For more information about Shanda, please visit http://www.snda.com/ .

SHANDA INTERACTIVE ENTERTAINMENT LIMITED CONSOLIDATED BALANCE SHEET (in thousands) As of As of December 31, September 30, 2005 2006 RMB RMB US$ (audited) (unaudited) (unaudited) ASSETS Current assets: Cash and cash equivalents 949,622 1,072,765 135,644 Restricted cash 150,779 5,551 702 Short-term investment 126,360 150,132 18,983 Marketable securities 1,933,674 1,963,823 248,312 Accounts receivable 81,127 36,874 4,662 Inventories 28,481 6,409 810 Due from related parties -- 4,000 506 Deferred licensing fees and related costs 24,067 26,887 3,400 Prepayments and other current assets 41,085 29,727 3,759 Deferred tax assets 17,125 13,473 1,703 Total current assets 3,352,320 3,309,641 418,481 Investments in affiliated companies 328,582 321,970 40,711 Property, equipment and software 258,352 272,443 34,449 Intangible assets 212,315 202,928 25,659 Goodwill 245,092 493,564 62,408 Long-term deposits 2,863 2,270 287 Long-term prepayments 18,158 89,048 11,259 Other long-term assets 52,771 17,130 2,166 Total assets 4,470,453 4,708,994 595,420 LIABILITIES Current liabilities: Accounts payable 65,390 45,734 5,783 Licensing fees payable 18,158 18,788 2,376 Taxes payable 37,045 42,036 5,315 Deferred revenue 172,455 207,555 26,244 Licensing fees payable to a related party 13,830 46,669 5,901 Due to related parties 3,040 3,044 385 Acquisition related obligation 158,430 10,402 1,315 Other payables and accruals 141,552 134,656 17,026 Total current liabilities 609,900 508,884 64,345 Convertible debt 2,219,305 2,174,893 275,000 Total liabilities 2,829,205 2,683,777 339,345 Minority interests 3,389 2,961 375 Shareholders' equity Ordinary shares 11,751 11,827 1,495 Additional paid-in capital 1,397,092 1,445,114 182,725 Statutory reserves 87,619 94,138 11,903 Deferred share-based compensation (3,595) -- -- Accumulated other comprehensive gain 30,182 73,986 9,355 Retained earnings 114,810 397,191 50,222 Total shareholders' equity 1,637,859 2,022,256 255,700 Total liabilities and shareholders' equity 4,470,453 4,708,994 595,420 SHANDA INTERACTIVE ENTERTAINMENT LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for share and per share data) For the three months period ended, September 30, June 30, September 30, 2005 2006 2006 RMB RMB RMB US$ (unaudited) (unaudited) (unaudited) (unaudited) Net revenues MMORPG 331,467 304,646 332,292 42,016 Casual game 106,633 69,439 76,845 9,716 Others 61,565 31,567 27,632 3,494 Total net revenues 499,665 405,652 436,769 55,226 Cost of services Ongoing licensing fees for online games (70,303) (67,676) (82,242) (10,399) Amortization of upfront licensing fees (12,164) (11,791) (13,310) (1,683) Server leasing and maintenance fees (22,963) (25,515) (24,273) (3,069) Salary and benefits (12,122) (12,647) (13,441) (1,699) Depreciation of property, equipment and software (11,526) (12,870) (13,310) (1,683) Others (26,216) (45,949) (44,741) (5,657) Total cost of services (155,294) (176,448) (191,317) (24,190) Gross profit 344,371 229,204 245,452 31,036 Operating expenses Product development (46,122) (46,855) (35,965) (4,548) Sales and marketing (78,273) (39,168) (31,860) (4,028) General and administrative (68,249) (51,862) (64,953) (8,213) Total operating expenses (192,644) (137,885) (132,778) (16,789) Income from operations 151,727 91,319 112,674 14,247 Interest income 6,893 5,510 5,863 741 Amortization of convertible debt issuance cost (4,798) (4,383) (4,402) (557) Investment income 400 1,196 141 18 Other income, net 89,120 49,358 47,832 6,048 Income before income tax expenses, equity in loss of affiliates and minority interests 243,342 143,000 162,108 20,497 Income tax expenses 18,623 (2,077) (15,877) (2,007) Equity in loss of affiliates (1,425) (7,431) (2,909) (368) Minority interests 599 90 203 26 Net income 261,139 133,582 143,525 18,148 Earnings per share: Basic 1.83 0.94 1.00 0.13 Diluted 1.78 0.93 0.99 0.13 Earnings per ADS: Basic 3.66 1.88 2.00 0.26 Diluted 3.56 1.86 1.98 0.26 Weighted average ordinary shares outstanding: Basic 142,469,921 142,430,444 142,903,595 142,903,595 Diluted 147,094,084 144,231,071 144,732,342 144,732,342 Weighted average ADS outstanding: Basic 71,234,961 71,215,222 71,451,798 71,451,798 Diluted 73,547,042 72,115,536 72,366,171 72,366,171 CONTACT Shanda Interactive Entertainment Ltd. Frank Liang Associate Director of Investor Relations Shanda Interactive Entertainment Limited Phone: +86-21-5050-4740 (Shanghai) E-mail: IR@shanda.com.cn Crocker Coulson (investors): crocker.coulson@ccgir.com Elaine Burns (media): elaine.burns@ccgir.com CCG Elite Phone: +1-310-231-8600 (USA) SNDA/G

CONTACT: Frank Liang, Associate Director of Investor Relations for
Shanda Interactive Entertainment Limited, +86-21-5050-4740 or IR@shanda.com.cn;
or Investors - Crocker Coulson, crocker.coulson@ccgir.com; or Media - Elaine
Burns of CCG Elite, +1-310-231-8600 or elaine.burns@ccgir.com, both for SNDA

Web site: http://shandaentertainment.com/