Chart: CNNMoney
Many China tech companies have enjoyed stellar debuts in their public offerings in the United States. NetQin is not one of them.
NetQin, a maker of mobile security software, priced its offering at $11.50 a share, the high end of its range on Thursday. But the stock fell nearly 20% Thursday and dropped another 8% on Friday.
But the company’s management team doesn’t appear too worried. I met with chief executive officer Henry Yu Lin and chief financial officer Suhai Ji at CNNMoney’s offices. Ji said the company was a bit surprised by the tepid response to the IPO, especially since it did price at the upper end of its offering range.
It does seem a bit odd. While NetQin may suffered from poor timing, going public on a day when the broader stock market plunged as commodities got dumped, it does appear to have what it takes to succeed for the long haul.
Qulacomm and HTC are strategic investors. VC firm Sequoia is a backer as well. Revenues are up big, but the company (like most tech IPos) is losing money.
It could be a simple case of China IPO fatigue. Renren, aka China’s Facebook, also debuted this week and didn’t live up to the hype. Another Chinese Web security firm, Qihoo 360, also recently went public.
But Ji pointed out that there are so many smartphone users that still aren’t protected from viruses and other bugs. The market opportunity is enormous and entrenched security companies like Symantec, Trend Micro and McAfee (now owned by Intel) still are more focused on the PC market as opposed to mobile.
“The more apps you have, the more potential threats there are,” he said.
Ji added that the company’s software is “platform agnostic.” NetQin, despite backing from Android beneficiaries Qualcomm and HTC, are not betting the ranch on Google.
Even though many people assume the mobile race is all about Google vs. Apple, said he expects the smartphone market to remain fairly fragmented.
Lin said there should still be room for Research in Motion (BlackBerry and QNX) and Nokia. He pointed out that while many in the U.S. are treating Nokia’s Symbian as if it’s dead because of Nokia’a alliance with Microsoft and Windows Phone 7, Symbian still has a significant chunk of the mobile market in Asia.
Of course, there are risks. And it’s somewhat refreshing to see that investors aren’t bidding up every China IPO just because it happens to be located in China.
Ji conceded that the company needs to do more to make its brand known with consumers and enterprise customers. Li said that expansion in the U.S. and Europe will be key.
Still, NetQin shouldn’t be written off just yet. I wrote not too long ago about a little company called BroadSoft. It too had a poor debut but shares have surged in the months since then thanks to strong earnings growth.
It just goes to show that it’s not the first day or two that counts most for a newly public company. Too many IPOs burn out after big first-day pops. There’s nothing wrong with being the proverbial tortoise. You can still win the race. — Paul