Shanda vs. NetEase: SNDA gaining ground quickly

For anyone who is doubting Shanda Interactive, I'm hoping that at least once a week the opportunity will arise for me to say, "I told you so."

Sure, only one session has passed since I proclaimed Shanda (SNDA), currently second to NetEase (NTES), as the eventual victor in the race to dominate China's potentially lucrative online gaming industry. In my Shanda-versus-NetEase piece from last Thursday, I argued that Shanda's approach is superior.

Shanda is pegged to spend $263 million on smaller gaming companies on top of the recent acquisition of Chengdu Aurora. Shanda's rule of thumb is to acquire these entities, then license out games that prove to be winners. It's a sensible plan of attack because there are enormous costs involved with employing game developers and testing the market. Acquiring hot games is cost efficient. It's the smarter way to go.

While NetEase has its hooks in several different industries and has no bigger news than a planned $120 million buyback of shares, there isn't much to say about their plans to fend off Shanda and grow its status in gaming.

Before Friday, each company had a market cap of $2.3 billion. Shanda gained 48 cents to $33.30 on Friday, while NetEase lost 24 cents to $18.60. It's just one session, but if the trend continues, you'll hear about it from me again. And again.

Disclaimer: Pupule Paul holds no positions in SNDA and NTES.