NETEASE, China's third-largest online game operator, reported less-than-estimated quarterly profit as its margins for online game operations shrank.

The company will also "spare no efforts" in strengthening its online search engine, Chief Executive Officer William Ding told a conference call yesterday.

"China has a large search engine market and we hope to become one of the top companies in the sector," Ding said.

Profit was up 8 percent from a year ago to US$66.3 million and revenues during the same quarter jumped 54 percent to US$175.1 million, the company said in a statement.

Income from online games increased 52 percent from a year ago but remained unchanged from the previous quarter at US$159 million and online marketing income stood at US$13.4 million, 1.2 times more than last year. Profit margins for its online game operations fell from 90 percent in the same period last year to around 72 percent as licensing fees and technical service spending increased due to its operation of Blizzard Entertainment's World of Warcraft.

The company plans to launch two additional packs for its self developed Westward Journey II and III in the third quarter of this year.