NetQin Mobile (NYSE:NQ) is scheduling a $75 million IPO with a market capitalization of $475 million at a price range mid-point of $10.50 for Thursday, May 5, 2011. The IPO Calendar includes 7 others for this week.
Summary and Conclusions
Based in Beijing, China, NQ provides security for mobile Internet services. Sales were up 21% to $80 million in 2010 from $66 million in 2009.
NQ sequentially increased revenue for the past five quarters while showing erratic gross margins and operating margins.
Adjusing the December quarter earnings by excluding the non-cash stock compensation expense of $12.2 million (see 'share-based compensation footnote (1) page 13 in the S-1) and applying a proforma tax rate of 20%, the P/E multiple is 87. 87 is high for a company with somewhat erratic sequential quarterly income statements. And competitors are increasingly targeting NQ’s market.
On other hand, if NQ can stabilize its gross margin and operating margin while increasing sequential quarterly revenue, the stock could do well.
NQ is a leading software-as-a-service (SaaS) provider of consumer-centric mobile Internet services focusing on security and productivity. According to a January 2011 Frost & Sullivan report, NQ is the dominant provider in the mobile security industry in China with a 67.7% market share as of December 31, 2010, as measured by the number of registered user accounts.
NQ provides a comprehensive suite of mobile Internet services that protect mobile users from security threats and enhance their productivity. As of December 31, 2010, the number of registered user accounts for NQ's services reached 72 million in over 100 countries, representing a sizeable share of the fast-growing market for mobile Internet services.
On the mobile security front, NQ competes directly with domestic PC/mobile security vendors such as Qihoo 360 and Kingsoft, overseas security software providers such as Symantec (NASDAQ:SYMC), McAfee, Trend Micro and Kaspersky, and other emerging companies offering mobile security products, such as Lookout.
Most of NQ’s competitors are traditional PC anti-virus providers who recently entered into the mobile security market. NQ has focused on providing mobile security services since the founding of the company.
On the mobile productivity front, NQ competes with services such as Apple MobileMe, although NQ is are not in direct competition with them because NQ is manufacturer-neutral and platform neutral, whereas products and services such as Apple MobileMe are largely limited by platform or mobile device manufacturer.
NQ has 378 employees as of December 31, 2010.
Use of Proceeds
$66 million from sale of 7.14 million ADSs. $25 million to pay for expansion of sales and marketing efforts; $15 million to pay for investments in technology, infrastructure and research and development activities; and the balance for other general corporate purposes, including working capital needs
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.