Bloomberg News

China’s NQ Mobile Stakes Claim to U.S. Talent Via Texas: Tech

August 09, 2013

NQ Mobile Co-CEO Omar Khan

Omar Khan, co-chief executive officer of NQ Mobile Inc. and former chief strategy officer of Samsung Electronics Co.'s Americas Telecommunications unit, said he proposed the dual-CEO, dual-headquarters structure as a means of speeding up partnerships with carriers and retailers outside China. Photographer: Andrew Harrer/Bloomberg

With an office set in a quiet neighborhood a few miles from downtown Dallas, there’s little to suggest that NQ Mobile Inc. (NQ:US) is a foreign enterprise -- it’s Chinese -- or that it’s home to one of oddest corporate structures among technology companies.

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 al fresco meetings, Bloomberg Businessweek reports in its Aug. 12 issue.

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 Co. Chief Strategy Officer Omar Khan, a Massachusetts Institute of Technology graduate who moved to the U.S. from Pakistan when he was 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,” said Conrad Edwards, NQ’s international marketing chief and another Samsung veteran.

Khan’s team manages software developers and user-experience engineers in Beijing, where the company pays salaries that are a quarter of what it would pay in the U.S., Khan said.

NQ’s shares, traded as an American depositary receipt on the New York Stock Exchange, almost doubled (NQ:US) in July, making NQ one of the best-performing stocks on the Bloomberg index of 55 Chinese-owned companies listed in the U.S. The stock is up 175 percent this year.

Attracting Talent

By distancing itself from its Chinese roots, NQ’s goal is to be better able to recruit U.S. technology 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 said he proposed the dual-CEO, dual-headquarters structure (NQ:US) as a means of speeding up partnerships with carriers and retailers outside China. Lin said 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,” said Lin. “It’s a time issue, and the mobile Internet moves so quickly.”

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

U.S. Connections

Building business in the U.S. is a challenge for Chinese technology companies. Huawei Technologies Co. and ZTE Corp., 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, though their U.S. presence remains modest.

Chinese TV manufacturer TCL Corp. in January signed an accord for naming rights to the famous Grauman’s Chinese Theater in Hollywood, yet is still largely unknown in the U.S.

Lenovo Group Ltd., the world’s largest personal-computer maker, also had two headquarters after it acquired International Business Machines Corp.’s desktop and laptop business in 2005. It left the company’s chairman in China and installed its CEO in the suburbs of Raleigh, North Carolina. Lenovo scrapped that arrangement in 2009, when the CEO resigned after a 22 percent drop in regional revenue.

Wireless Partners

NQ has been moving its security software onto smartphones from Verizon Wireless and Mexican telecommunications company America Movil SAB (AMX:US), as well as marketing to consumers in retail stores that sell phones for MetroPCS and Cricket.

“Having partners like the people in Dallas, and just being able to meet them, has been helpful,” said Scott Moorehead, CEO of Verizon retailer the Cellular Connection. He said he doesn’t know if he’d have cut a deal with a company based only in Asia.

In June, NQ announced an accord with Target Corp. to promote its security applications in 1,500 stores throughout the U.S. In China, NQ on July 9 unveiled a deal with GE Healthcare China to manage mobile services at one of its hospitals.

NQ also has a growing game business. Through its FL Mobile division, NQ publishes games from China and Korea, including fantasy role-playing titles, casual puzzle and card games, and the popular pet-raising simulator Gods and Dragons.

Mobile Games

The company last month unveiled an agreement to provide titles to China Mobile Ltd. (941)’s game center. Chinese smartphone and tablet users spent 5.4 billion yuan ($880 million) on games last year, and they’re on track to spend double that this year, data compiled by Bloomberg Industries show.

NQ’s global sales, which came in at $92 million last year, are projected (NQ:US) to grow to $182 million in 2013 and $247 million next year, the average analyst estimate compiled by Bloomberg.

It remains to be seen whether a Chinese company selling privacy and anti-hacking software can win over U.S. consumers. Frederick Ziegel, an analyst at Topeka Capital Markets, said one tack is to make NQ’s branding less Chinese -- before it was FL Mobile, the game 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, search on wireless devices 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 said 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 said.

To contact the reporter on this story: Bruce Einhorn in Hong Kong at beinhorn1@bloomberg.net

To contact the editor responsible for this story: Jeff Muskus at jmuskus@bloomberg.net


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Companies Mentioned

  • NQ
    (NQ Mobile Inc)
    • $4.09 USD
    • -0.94
    • -22.98%
  • AMX
    (America Movil SAB de CV)
    • $21.59 USD
    • -0.20
    • -0.93%
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