Technology

In Dallas, China's NQ Mobile Opens a Second Global Headquarters


In Dallas, China's NQ Mobile Opens a Second Global Headquarters

Illustration by Michael DeForge

(Corrects Omar Khan's age when he moved to the U.S.)

Set in a quiet neighborhood a few miles from downtown Dallas, NQ Mobile’s (NQ) office is indistinguishable from that of any American tech company. Situated amid low-rise buildings, stylish restaurants, and a bike trail, the smartphone-security specialist’s workplace features a game room, big-screen TVs tuned to ESPN, and porches with deck furniture for alfresco meetings. There’s little to suggest that NQ Mobile is a foreign enterprise—it’s Chinese—or that it’s home to one of oddest corporate structures in techdom.

The company has two global headquarters, in Dallas and Beijing, and two chief executive officers: co-founder Henry Lin in China and former Samsung Electronics (SMSN:LI) Chief Strategy Officer Omar Khan, a Massachusetts Institute of Technology graduate who moved to the U.S. from Pakistan at 10 months old. While most of the antivirus and anti-malware company’s 400 employees work in Beijing and about 60 percent of its revenue comes from China, the Dallas office has only three Mandarin speakers. “We didn’t want to be a subsidiary,” says international marketing chief Conrad Edwards, another Samsung veteran. Khan’s team manages software developers and user-experience engineers in Beijing, where the company pays salaries that are one-quarter of what it would pay in the U.S., Khan says.

By distancing itself from its Chinese roots, NQ thinks it will be better able to recruit U.S. tech talent. The company may also be able to assuage the concerns of U.S. corporate clients uneasy about buying privacy software from a country known for its cyber-espionage activities. Khan says he proposed the dual-CEO, dual-headquarters structure as a means of speeding up partnerships with carriers and retailers outside China. Lin says he agreed because doing that job from Beijing would be too challenging. “Maybe I could do it just by myself, but it would take a long time for me to build relationships, to find talented people one by one,” says Lin. “It’s a time issue, and the mobile Internet moves so quickly.”

Lin, 36, launched NQ in 2005 with $15,000 he and a high school classmate cobbled together. He scored investments from Sequoia Capital, Qualcomm (QCOM), and Fidelity en route to an $89 million initial public offering in 2011. To expand the company beyond China, he recruited Khan, who had just joined Citigroup (C) to run the bank’s worldwide mobile business.

Building business in the U.S. is a challenge for Chinese tech companies. Huawei Technology (002502:CH) and ZTE (000063:CH), the country’s two largest makers of telecommunications equipment, have opened U.S. research centers and are working with small carriers like MetroPCS to market low-cost smartphones, but their U.S. presence remains modest. Chinese TV manufacturer TCL (000100:CH) in January signed a deal for naming rights to the famous Grauman’s Chinese Theater in Hollywood but is still largely unknown in the U.S. Lenovo, the largest PC maker in the world, also had two headquarters after it acquired IBM’s (IBM) desktop and laptop business in 2005; it left the company’s chairman in China and installed its CEO in the suburbs of Raleigh, N.C. Lenovo scrapped that arrangement in 2009, when the CEO resigned after a 22 percent drop in regional revenue.

NQ has been moving its security software onto smartphones from Verizon (VZ) and Mexican telecom América Movíl (AMX), as well as marketing to consumers in retail stores that sell MetroPCS and Cricket phones. “Having partners like the people in Dallas, and just being able to meet them, has been helpful,” says Scott Moorehead, CEO of Verizon retailer The Cellular Connection, adding that he doesn’t know if he’d have cut a deal with a company based only in Asia. In June, NQ announced a deal with Target (TGT) to promote its security apps in 1,500 stores throughout the U.S. In China, NQ announced on July 9 a deal with GE Healthcare China (GE) to manage mobile services at one of its hospitals.

NQ also has a growing games business. Through its FL Mobile division, NQ publishes games from China and Korea, including fantasy role-playing titles, more-casual puzzle and card games, and the popular pet-raising simulator Gods and Dragons. The company on July 31 announced a deal to provide titles to leading wireless carrier China Mobile’s game center. Chinese smartphone and tablet users spent 5.4 billion yuan ($880 million) on games last year; they’re on track to spend double that this year, data compiled by Bloomberg Industries show.

The company’s global sales, which came in at $92 million last year, are projected to grow to $182 million in 2013 and $247 million next year, according to analysts surveyed by Bloomberg. Earnings were just $9.4 million last year but should boom to $70 million by 2014. The price of NQ’s shares, traded as an American depositary receipt on the New York Stock Exchange, jumped 93 percent during July, making NQ the best-performing stock on the Bloomberg index of 55 Chinese-owned companies listed in the U.S. The stock is up more than 180 percent since January.

It remains to be seen whether a Chinese company selling privacy and anti-hacking software can win over U.S. consumers. Topeka Capital Markets analyst Frederick Ziegel says one tack is to make NQ’s branding less Chinese: Before it was FL Mobile, the games business was called Feiliu. NQ is short for NetQin, referring to the dynasty that built the Great Wall.

With more than 400 million registered users and a growing list of deals with wireless service companies, smartphone makers, and retailers in both hemispheres, NQ is exploring ventures beyond security and games, including mobile e-commerce, mobile search, and other services. Other companies are snapping up promising mobile outfits in China, and NQ’s success is making it the subject of acquisition buzz. In Dallas, though, co-CEO Khan says NQ is sticking to its plan and that he and Lin will stay where they are. “We are not building the company to pretty it up for a sale,” he says

The bottom line: China’s NQ Mobile is trying to jump-start its U.S. development with a second global headquarters in Dallas.

With Kyle O'Donnell
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Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.

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Companies Mentioned

  • NQ
    (NQ Mobile Inc)
    • $4.32 USD
    • -0.36
    • -8.33%
  • SMSN:LI
    (Samsung Electronics Co Ltd)
    • $607.5 USD
    • 2.50
    • 0.41%
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