Why NQ Mobile is a leading global mobile Internet provider

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Business description

NQ Mobile is a leading global provider of mobile Internet services. The company pioneered the consumer mobile security industry in 2005 and has since built a world-class cloud-based platform with proven competency to acquire, engage, and monetize customers globally. NQ Mobile currently offers a variety of products and services for the consumer and enterprise markets in consumer mobile security, mobile games and advertising, and enterprise mobility. As of December 31, 2012, the company maintains a large, global user base of approximately 283.4 million registered user accounts and 97.7 million monthly active user accounts in its consumer mobile security business, 67.4 million registered user accounts and 12.5 million monthly active user accounts in its mobile games and advertising business, and over 1,200 enterprise customers in China in its enterprise mobility business.

The company has a wide range of collaborations with key ecosystem participants.

NQ Mobile Business Overview

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The company’s vision is to become the most trusted mobile Internet platform for consumers and enterprises globally. The business was started by offering consumers mobile security services to address the fundamental and rapidly growing needs of smartphone users. Over the years, its proprietary, cloud-based security solution has been recognized as among the most effective for detecting and combating mobile threats. Building upon the success of its mobile security offerings, NQ Mobile expanded its service solutions to protect privacy and enhance productivity of mobile usage for consumers, and started to offer additional consumer mobile Internet services such as mobile games and interest-based online communities. NQ also extended mobile security, privacy, and productivity products to families and enterprise customers. In September 2012, NQ launched its family protection product, NQ Family Guardian, and in December 2012, it launched NQSky, its mobile device management (or MDM) product for enterprise customers. Today, its services cater to the ever-expanding needs of consumers and enterprises in their use of mobile devices, and the company is well positioned to capture market opportunities presented by the rapidly evolving mobile Internet industry.

The company offers products and services in the following main categories.

Consumer mobile security

NQ provides mobile security, privacy, and productivity services designed to protect users from mobile malware threats, data theft, and privacy intrusion, as well as increase productivity. Its products and services include features such as mobile malware scanning, Internet firewall, account and communication safety, anti-theft, performance optimization, hostile software rating and reporting, contacts and media file protection, cloud storage, parental control, and other services. NQ offers consumer mobile security services mostly through a Freemium subscription model. The company provides users with free services and the option to upgrade to premium services for a fee.

Mobile games and advertising

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Through its subsidiary Beijing Feiliu, NQ Mobile provides mobile Internet value-added services, which include a portfolio of mobile game offerings, applications of interest-based online communities, and advertising services. As of December 31, 2012, NQ Mobile publishes, distributes, and operates 12 free-to-play games on the Apple iOS smartphone platform and 19 games on the Android smartphone platform. The company provides an online mobile portal for users to access its mobile games, as well as other interest-based mobile community applications focused on games, gadgets/IT, automobiles, and healthcare. NQ Mobile generates revenues mainly through the sale of in-game virtual items to mobile game players, as well as advertisements in our interest-based online community applications.

Enterprise mobility

Through its subsidiary Beijing NationSky, NQ Mobile delivers a comprehensive suite of mobility solutions to assist enterprises in building an efficient, productive, and secure mobile environment. NQ provides mobility strategy consulting, architecture design, hardware and software procurement and deployment, mobile device and application management, training, maintenance, and other ongoing support services. The company generates revenues through mobility service delivery, software licensing, hardware procurement and deployment, technical support, maintenance, and other services provided to its enterprise customers.

The Market Realist Take

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On July 2, 2013, NQ Mobile announced certain funds managed by Atlantis have, in aggregate—purchased both directly from the company and in the open market—the equivalent of approximately 2,500,000 American depository shares (or ADSs). Founded in 1994, Atlantis is a Hong Kong–based independent asset management firm focused on Asian equities with about $3.2 billion assets under management.

The company also announced its board of directors has authorized expanding the current share repurchase plan from $20 million to $35 million. Under the share repurchase plan authorized by its Board of Directors, NQ Mobile may repurchase up to $35 million worth of its outstanding ADSs from November 26, 2012, through May 26, 2014.

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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