NETEASE.COM Inc, China's largest online game operator, said first quarter profit rose 2.7 percent on solid game revenue growth that helped offset a decline in its advertising wireless businesses.

Net profit for the quarter was 301.5 million yuan (US$39 million), or 29 US cents per diluted American depositary share. Total revenue was 554.6 million yuan, an increase of 4.68 percent from the same period in 2006, the Beijing-based company said yesterday.

Sales from online games were 481.9 million yuan, compared to 450.6 million (US$56.2 million) a year ago, as online gamers were attracted to new content in its "Fantasy Westward Journey," an online role-playing game based on a well-known Chinese myth.

"'Fantasy Westward Journey' record PCU (peak concurrent user) during the quarter is a strong indicator of the popularity and long life cycle of this game," said William Ding, chief executive officer of NetEase.

He said the company will release an expansion pack in the year's second half to capitalize on the momentum, and has begun an internal beta testing of "Westward Journey III," the upgraded version.

China's online game sector posted a 62 percent increase last year, with total sales of nearly six billion yuan, according to the Internet Society of China, which estimates growth will slow down to 21 percent this year and 25 percent next year to reach nine billion yuan in 2008.

NetEase's first quarter revenue from online games rose 6.9 percent to 481.9 million yuan.

Sales of online advertising fell 8.7 percent to 56.2 million yuan. Revenue from the company's wireless service, mainly sales of ring tones and games to mobile phone users, fell 6.1 percent to 16.6 million yuan.

Chief financial officer Denny Lee also resigned for personal reasons and will remain as a director. Onward Choi, currently NetEase's financial controller, has been named acting chief financial officer.