Will China Connection Help or Hurt NQ Mobile’s Security Pitch in U.S.?

Photograph by Bloomberg

Omar Khan, a former executive at Samsung Mobile and Citigroup, was hired to help lead NQ’s international expansion.

NQ Mobile, China’s biggest mobile-phone security company, wants to expand in the U.S. But its success will hinge on a delicate question: Will American businesses and consumers be comfortable using security software designed in one of the world’s hacking hot spots?

There’s little doubt that some of the world’s most brazen cyber attacks originate in China, according to U.S. officials, security professionals and even NQ Mobile. In 2010, Google famously blamed Chinese hacking for an intrusion into its network. And earlier this year, a trio of high-ranking U.S. security officials wrote a blunt op-ed saying the Chinese government is “the world’s most active and persistent practitioners of cyber espionage today.”

NQ Mobile itself was accused of helping distribute malware, which the company said was false. That aside, NQ Mobile doesn’t see this view of China as a disadvantage. Rather, it’s a selling point, said Omar Khan, a former executive at Samsung Mobile and Citigroup who was hired this year to help lead NQ Mobile’s international expansion.

“We have the most on-the-ground experience in the market that has the highest infection rates from a malware perspective,” Khan, co-chief executive officer of NQ Mobile, said in an interview. “The analogy I use is, if you need a doctor for a rare infectious disease, you’re going to find a doctor with the most experience in that rare, infectious disease.”

Khan says he hasn’t encountered resistance in meeting with U.S. technology buyers.

Still, the company’s message is a tough sell, according to George Kurtz, former chief technology officer of security-software maker McAfee and now CEO of a startup called CrowdStrike that’s focused on international hacking threats.

“Obviously they’ve got a pretty stout install base in China, but it’s going to be a bit problematic to penetrate the U.S. market given all the targeted attacks that emanate from that area,” he said in an interview. “I think people are going to pause.”

A big challenge for the company will be overcoming a deeply held preference among U.S. consumers for U.S.-made security technology, said Jack Gold, president of J.Gold Associates, a market research firm in Northborough, Mass. There are exceptions — particularly Kaspersky Lab, a Moscow-based antivirus software vendor, which has become a reliable source for hacking research and protects millions of computers.

But the perception in North America of Chinese companies is that “you need to be very, very careful,” Gold said.

NQ Mobile, known until this year as NetQin Mobile, was founded in 2005 and has more than 50 million active users, mostly in China. The basic version of its software is free, which has allowed the company to build a large user base and capture some 60 percent of the Chinese market for mobile malware protection. It has more than 5 million paying customers.

Khan wouldn’t say how many customers NQ Mobile has in the U.S. But he says the U.S. is a significant market for NQ Mobile and will be a focus of  his efforts. 

Its push in the U.S. will put it up against companies such as Lookout, AVG Technologies, Symantec and McAfee, which is now part of Intel.  The worldwide market for mobile-phone security software for corporations is expected to grow to nearly $900 million this year, according to IDC. Most of the consumer software is given away free.

The image of NQ Mobile, which has headquarters in Beijing and Dallas, wasn’t helped by a report last year that accused the company of actually helping spread malware.

A consumer-rights program on Chinese state-run TV accused the company of working with Beijing Feiliu Jiutian Technology Co., a mobile-software company that NQ Mobile owns 33 percent of, to bundle malware with its products and charge users to remove it.

Khan says the allegations were “proven completely false,” pointing to test results that NQ Mobile says showed that malware wasn’t being downloaded.

The episode highlights the challenge NQ Mobile faces in expanding beyond China, said Gold, of J.Gold Associates.

“A lot of security is market-specific — it’s who you trust,” he said. “It takes a while and you have to build up credibility. It’s very hard to walk into the North American market and say, ‘we’ll  protect you.'”

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