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An interesting note from Canaccord


Our meetings with management focused largely on NQ Mobile’s recently announced partnership deals such as America Movil, A Wireless, The Cellular Connection, TDMobility, 3LM, Telefonica, Vodafone a long with NQ’s investments in Feiliu, Hesine and NationSky. While many of these new deals have not yet contributed material revenue, we believe these deals 1) increase NQ’s reach and global TAM, 2) enhance NQ Mobile’s consumer brand and channel credibility, and 3) could improve NQ’s corporate average ARPU, active - to -paid user conversion rates, and margins. Further, we believe NQ Mobile has a strong deal pipeline with significant growth opportunities in its core mobile security market. In fact, NQ Mobile management estimates the global mobile security market is only roughly 10% penetrated versus over 90% penetration in the global PC security market.


Our recent investor meetings with management focused largely on the potential of NQ Mobile’s recently signed deals, with investors’ primary focus on NQ’s recently announced strategic partnership with America Movil, the world’s third largest mobile operator. NQ Mobile announced that America Movil would offer NQ Mobile’s flagship products – NQ Mobile Security, NQ Vault and NQ Family Guardian – to its 262M subscriber base located in 18 countries.

We believe this deal significantly increases NQ’s reach and global TAM and anticipate roll-outs in Mexico starting in April of this year followed by Brazil and Argentina exiting the June quarter. Given NQ Mobile’s early success at selling mobile security products at Verizon independent dealers A Wireless and The Cellular Connection (TCC) in the U.S. market, we believe NQ could drive significant sales into America Movil’s large subscriber base.

In fact, we believe NQ’s attach rate at the Verizon independent retail channel is roughly 20% of new Android smartphone sales at these channels after only six months of channel development and could increase as in-store training increases and NQ rolls out the remaining 700 of 1,600 store locations with current partners that have not yet started selling NQ’s solutions.

Since these carrier channel sales for NQ are all paid user additions versus free pre-installation deals, we believe these new carrier deals have considerable potential to generate strong sales growth for NQ over the next couple years. Should NQ’s partnership with America Movil produce near-comparable Android attach rates, America Movil could represent a significant growth driver for NQ’s core business during 2013 and 2014.


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