New Bloomberg Article (11/3)

[quantumvibes]

http://www.bloomberg.com/news/2013-11-03/muddy-waters-viewed-right-on-nq-mobile-payments-wrong-on-cash.html?cmpid=yhoo

My takeaway is that the tide of opinion is slowly moving in favor of NQ, but the company will still have work ahead of it to address more fully some accounting and product issues in order to rebuild market confidence.  That said, NQ should emerge from this episode as a stronger company IMO.

The following quote from the article probably sums up the current sentiment on the part of those not previously familiar with NQ:

“I am on the fence,” said Rocky Lee, Asia managing partner and head of Greater Chinacorporate practice at Cadwalader, Wickersham & Taft LLP in Beijing. “When I see a short seller report, I expect it to be indisputably convincing and this one, unlike some of Block’s other, better reports, does not do it for me.”

[admin]

Thanks.

[ “I am on the fence,” said Rocky Lee, Asia managing partner and head of Greater Chinacorporate practice at Cadwalader, Wickersham & Taft LLP in Beijing. “When I see a short seller report, I expect it to be indisputably convincing and this one, unlike some of Block’s other, better reports, does not do it for me.”]

Bit of an understatement that, I would say, but that's just me..

[Haggerston]

NQ is aggressive when it comes to growth so it wouldn't surprise me if their accounting is not the perfectly conservative...but that's a far cry from being fraudulent. Confirming great earnings on 12 Nov and stock buyback shortly after is a good start to rebuilding market confidence.

[quantumvibes]

There's not necessarily an implication that NQ's accounting is less than conservative, but rather a question as to whether its high DSO is characteristic of the collection cycles it faces or if there's a collection problem, or revenue fabrication as MW asserts. In NQ's defense AsiaInfo was cited as another company whose DSO's were typically high due to long collection patterns with the carriers it does business. The mgt has previously stated that they've been working with the carriers, etc. through many cycles without any collection issues, but still they recognize a need to reduce the DSO, and are focusing on doing so.

It's unlikely that PWC would have signed off on the financials if there were a material problem with collections. However, Deloitte is going to have a go at it also, and so there'll be a second independent opinion in due time. The fact that NQ is sitting on a pile of cash also speaks to their ability to collect on receivables.

[admin]

I don't have an accountancy background, but if PCW gives them a clean bill of health on their Q3 (rather than resigning, as MW suggested), would that not sufficiently settle all of this?

[Haggerston]

I don't have an accountant background either but when i used to do contracts and sales in advertising we would extend payment terms and would be loose on acct receivable to book the sales/revenue. But yes if PCW gives them a clean bill then it's a go.

[quantumvibes]

I don't have an accountancy background, but if PCW gives them a clean bill of health on their Q3 (rather than resigning, as MW suggested), would that not sufficiently settle all of this?

JMO: The quarterly statements are un-audited.  Still, I'd imagine PWC will have gone the extra mile at this point to comb through the numbers as carefully as possible and, if they did perceive a potential problem, would surely advise mgt to hold off on reporting until any issues could be resolved.

Given the high stakes involved, I'd take an on-time earnings announcement by mgt to be a tacit sign-off by PWC insofar as them not perceiving any audit issues that they feel should merit their intervention.

[bosreeno]

I don't particularly like this.

An analysis obtained by Bloomberg news of NQ’s Mobile Security & Antivirus application by ViaForensics, a mobile security app and testing company, found that the application has poor security leading to leaked sensitive data. The app does appear to generate fake virus alerts, according to ViaForensics’ analysis, which also found indications that it sends contacts and contents of text messages back to the company, “a serious privacy concern.”

[quantumvibes]

I don't have an accountancy background, but if PCW gives them a clean bill of health on their Q3 (rather than resigning, as MW suggested), would that not sufficiently settle all of this?

JMO: The quarterly statements are un-audited.  Still, I'd imagine PWC will have gone the extra mile at this point to comb through the numbers as carefully as possible and, if they did perceive a potential problem, would surely advise mgt to hold off on reporting until any issues could be resolved.

Given the high stakes involved, I'd take an on-time earnings announcement by mgt to be a tacit sign-off by PWC insofar as them not perceiving any audit issues that they feel should merit their intervention.

Sorry - I should've added that given the un-audited nature of the quarterly report and the fact that MW has alleged negligence on the part of PWC, the matter would still drag on as overhang until probably at least the independent audit/legal review is finalized/disclosed.

[thecrazykevy]

I don't particularly like this.

An analysis obtained by Bloomberg news of NQ’s Mobile Security & Antivirus application by ViaForensics, a mobile security app and testing company, found that the application has poor security leading to leaked sensitive data. The app does appear to generate fake virus alerts, according to ViaForensics’ analysis, which also found indications that it sends contacts and contents of text messages back to the company, “a serious privacy concern.”

They are probably takling about NQ Vault.  It can back up your contacts, texts, pictures, etc in their cloud so you can restore them to your phone if it ever gets wiped or if you buy a new phone.