NetEase Makes Investors Uneasy

Shares of NetEase.com plummeted 22% Tuesday after the Chinese Internet company reported earnings that were below analysts’ estimates.

NetEase’s quarterly profit more than doubled to 89 cents a share, but that was two cents below what analysts were looking for. Sales of $57.2 million beat estimates, but the company warned that fourth-quarter results will also be below forecasts, citing a slowdown in its core online games business.

On a conference call, the company cited growing competition for its tougher operating environment. Shares of rival Shanda Interactive lost 3.6% on the day.

It was the second disappointing earnings report from the Chinese Internet sector in recent weeks, following Baidu.com’s earnings miss late last month.

The broader market lost ground Tuesday on a warning from Toll Brothers that shook investors’ faith in the housing boom.

The Nasdaq lost 6 to 2172, the S&P 500 slipped 4 to 1218, and the Dow fell 44 to 10,539. Volume declined to 1.91 billion shares on the NYSE, but rose to 1.64 billion on the Nasdaq. Decliners led 19-12 on the NYSE, and 18-12 on the Nasdaq. Downside volume was 65% on the NYSE, and 51% on the Nasdaq. New highs-new lows were 67-104 on the NYSE, and 81-58 on the Nasdaq.

Cisco edged higher ahead of its earnings report due out after the close on Wednesday.

Agilysis jumped 7% on its results, while Cincinnati Bell lost 4% on its earnings.

Bitstream soared 31% after reporting a profit.