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Must-know NQ Mobile equity research

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Part 4
Must-know NQ Mobile equity research PART 4 OF 5

Why NQ Mobile is a leading provider to Chinese enterprises

Enterprises mobility

NationSky is a leading provider of managed mobility services to Chinese enterprises. As of December 31, 2012, NQ Mobile has more than 1,200 large and medium enterprise customers, covering a significant number of the Fortune 500 companies in China. Its enterprise customers are diversified across different industries, including financial services, insurance, healthcare, pharmaceutical, manufacturing, and energy. The company has also built strong industry alliances with global brands such as Apple, BlackBerry, China Mobile, and Global Enterprise Mobility Association (GEMA).

Why NQ Mobile is a leading provider to Chinese enterprises

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As of December 31, 2012, NationSky had over 80 sales, presales, and marketing professionals in major cities including Beijing, Shanghai, Shenzhen, Tianjin, Guangzhou, Chengdu, Qingdao, Jinan, Ningbo, and Nanjing. NationSky acquires its enterprise customers through direct inbound customer requests, direct outbound customer engagements, or partner referrals.

Why NQ Mobile is a leading provider to Chinese enterprises

The Market Realist Take

NQ Mobile announced that it had relationships to provide its flagship products—NQ Mobile Security, NQ Family Guardian, and NQ Mobile Vault for Android—to more than 3,500 retail locations across the US, beginning June 24, 2013. In addition to the previously announced relationships with Verizon Premium Wireless Retailers (such as the Cellular Connection, A-Wireless, and Go Wireless) and Metro PCS and Cricket retailers (such as Gratis Cellular and I-Communication), NQ Mobile’s flagship products started to roll out to 1,500 target stores across the US beginning on June 24, 2013. NQ Mobile’s flagship products are also currently available on the Google Play store.

On July 15, NQ Mobile agreed to purchase the remaining 45% stake in its subsidiary NationSky for $25.2 million. In July, NQ Mobile said that FL Mobile signed a new strategic cooperation agreement with Baidu under which Baidu DuoKu will be the exclusive publisher of the FL Mobile–developed game The Martial Arts Champion (Wu Lin Meng Zhu) on the Android platform in China. It also announced that FL Mobile has become the game content provider for China Mobile’s Game Center. FL Mobile also signed a strategic agreement with Tencent’s game studio Five Colored Stones, which gives it operating rights to a selection of mobile games developed by the studio on the iOS platform in mainland China.

It also announced subsidiary NationSky will provide enterprise MDM services to Guangzhou Overseas Chinese Hospital, a major hospital in Guangdong province, in cooperation with GE Healthcare China, one of the world’s top-tier medical technology and services providers. Plus, AnBang Insurance Group, one of the largest insurance companies in China, has chosen NQSky as its MDM service provider to manage its company-issued mobile devices. On August 2, 2013, it announced that China Mobile renewed a contract for NQ to provide mobile malware monitoring, alert, and other security analysis services.

NQ vies with companies like Qihoo360 (QHOO), Tencent (TCEHY), Baidu (BIDU), and Kingsoft (KSFTF) in the China mobile security space. Qihoo360 leads the Chinese Internet security market and faces competition from Tencent and search engine Baidu, which officially launched its anti-virus products in June. A report from Macquarie Research, which cited research from Sino MR, said that NQ has managed to grab 37.9% market share of mobile security users who installed mobile security software in 2Q13, and follows Qihoo, which had a 38.8% share. The report said that NQ has been trailing behind its competitors in user count mainly because of the freemium model it offers and has less organic traffic compared to its peers, which have high PC traffic.

In May 2013, there was speculation that Baidu and Tencent were in the running to acquire NQ. NQ had previously spoken about receiving interest from strategic and financial investors during its 1Q 2013 conference call but said “it remains focussed on delivering shareholder value by executing on its strategic plan and initiatives.”

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