NetQin Mobile on Friday denied reports that claimed it had deliberately installed viruses on customers' mobile phones along with its antivirus software and then charged customers to remove the malware.
NetQin's denial follows a written rebuttal in its initial public offering prospectus with the US Securities and Exchange Commission dated 15 March that referred to a China State TV report of "uploading virus to imported mobile phones to promote our mobile security products by Beijing Feiliu," a company in which NetQin holds a 33 percent interest.
NetQin, a Beijing-based mobile security software maker, hosted a booth at International CTIA Wireless in Orlando this week, and announced its NetQin Mobile Anti-virus 4.0 Beta for BlackBerry on Tuesday.
Reports circulated on the Internet the following day citing the earlier Chinese State TV report describing the alleged malware scheme. Various websites including Cellular-news.com reported that NetQin's customers would allegedly load the NetQin antivirus software, then get an alert informing them that they needed an update to fix the problem. They would subsequently be charged about 30 cents for the fix.
Cellular-news.com also said the Netqin software removed other antivirus software on the phones. Also, Cellular-news.com said China's three wireless network providers blocked sales of the NetQin software from their app stores.
NetQin issued a formal denial in a statement on Friday saying: "The allegations waged against us are entirely false," and encouraged any independent third party to evaluate and audit its products. "We are confident they will be found to be safe, secure and of high quality," the NetQin statement said.
In an email, a publicist hired by NetQin, Sean Angus from Spark PR, said the allegations were surprising and were "set up by a competitor and are completely false".
In a telephone interview, NetQin spokeswoman Elena Lau, said NetQin's antivirus software had never been sold by the three China-based carriers in their app stores. She said that NetQin had no comment on whether a competitor fabricated the false stories.
"This is a non-event," Lau added, and said she could not comment beyond the statement because NetQin is in a silent period, since it has filed its IPO prospectus to list its shares on the New York Stock Exchange.
SEC records show that NetQin filed for its IPO on 15 March to use the ticker symbol "NQ", and listed Piper Jaffray as the lead underwriter. Net revenues at NetQin were $4 million in 2008, $5.3 million in 2009 and $17.7 million in 2010, according to its IPO report.
NetQin offers mobile security products as well as mobile productivity and intelligent cloud services, primarily for smartphone users. About 35 percent of NetQin's revenues in 2010 came from subscribers outside of China. Frost & Sullivan has reported that NetQin had 67 percent of China's mobile security market at the end of 2010.
NetQin started in 2005 in Beijing and established a presence in the US in November 2010.
The 161-page IPO prospectus written by NetQin notes on page 17 that China Central Television (CCTV) ran a report on 15 March of complaints of fraudulent practices against NetQin. One practice named in the TV report was the uploading of viruses to imported mobile phones to promote NetQin's security products.
The uploading of viruses was reported to have been done by Beijing Feiliu, a company one-third owned by Netqin, but NetQin said in the prospectus it does not believe it has committed any wrongdoing and would publicly explain its practices.
However, NetQin further said in the prospectus that because CCTV "has wide coverage and perceived authority, such negative publicity has adversely and severely damaged our brand, public image and reputation, which may seriously harm our ability to attract and retain users and result in material adverse impact on our results of operations and prospect".
One security website, Nakedsecurity.sophos.com reported more details about the connections between Beijing Feiliu and NetQin, including claims that NetQin does remove the Feiliu app for a small fee.
One analyst, Jack Gold of J Gold Associates, said in an interview that NetQin had not specifically said in its statement this week or in the prospectus that it never uploaded malware, directly or indirectly, with its legitimate software.
"Maybe I am getting too skeptical in my old age, but NetQin didn't actually say that they didn't load a malware stub on the product and then make people pay to get it removed."
He said it would be interesting to hear Research in Motion's (RIM) reaction to the antivirus software for BlackBerry announced by NetQin this week. RIM did not respond to a request for comment.
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