Software maker Kingsoft mobilizes

Kingsoft CEO sees mobile Internet as the way forward

Kingsoft Co Ltd, one of China's oldest software developers, is determined to turn itself into an Internet company although the transition won't be "smooth", said Zhang Hongjiang, its CEO.

"None of the IT enterprises in the world will enjoy a steady development these days because trends in the sector are constantly changing," Zhang said, giving as an example the fact no one would have doubted that companies such as Facebook Inc would encounter advertising revenue difficulties six months ago.

The CEO's job is to avoid the reefs that may sink the 24-year-old company and find new routes to make profits.

According to Zhang, 52, mobile Internet will be the next big trend in the industry, and his company has to grab the opportunity before it is too late.

Starting last year, Kingsoft moved almost all its PC software products to mobile devices, paving the way for the transition.

"I want people to see a new Kingsoft, a platform provider that develops software for all devices - from PCs to smartphones," he said.

Zhang believes that Kingsoft has already adopted the business model of an Internet company. It provides free products to customers and relies on value-added services and advertising revenues to make a profit.

Entertainment is key

In the second quarter, Kingsoft's entertainment business helped the company to earn about 209 million yuan ($33.5 million) in revenue, an increase of 9 percent compared with the previous quarter.

According to the company's second quarter report, the entertainment software sector contributed 65 percent of total operating revenues. Its application software sector contributed the rest.

Earlier this year, a report from research firm Analysys International said that Chinese game developers gained roughly 5 billion yuan in revenue from browser games in 2011 - an amount that could easily double by 2013.

PC-based online games remain the biggest revenue contributor to Kingsoft. Zhang hopes that webpage games and smartphone games will become the top revenue contributor over the next three years.

"Kingsoft's flagship online gaming product Jianxiaqingyuan III was able to maintain its number of active users in July and August while the nation's overall figure remains unchanged," said a report released by China Merchants Securities (HK) Co Ltd.

The company's paid customer number and revenue increased by more than 20 percent year-on-year thanks to the strong performance of online games, said the report.

Teaming with Xiaomi

In October 2011, Zhang was appointed as the CEO of Kingsoft after a strong recommendation from Lei Jun, chairman of the board of directors. Lei was CEO at Xiaomi Corp, an ambitious smartphone maker that intends to become the Chinese version of Apple Inc.

"Lei is the chairman of the board at Kingsoft. He attends every Monday meeting held at the headquarters," Zhang said, editing a short message on a second-generation Xiaomi smartphone. "Lei cares about this company," he added.

Industry insiders said Kingsoft's software development experience will help to arm Xiaomi's applications arsenal, a move that could benefit both companies.

Looking overseas

In addition, Zhang is also looking outside for investment opportunities. Kingsoft's word processing and anti-virus software entered the Japanese market about seven years ago. Its online games, Web security and office products have also penetrated Southeast Asia markets.

According to Zhang, Kingsoft hopes to enter the United States market by the end of next year. Application software businesses, such as anti-virus products, may be among the first to enter the US market.

The company will not be the first Chinese anti-virus maker doing business in the US. NQ Mobile, a Chinese mobile security company, announced plans to enter the US and European markets.

NQ, which has ambitions to become the world's No 1 mobile security provider, hired Omar Khan, a former senior executive at Motorola and Samsung Mobile, as the company's co-CEO, managing the global expansion project.

Zhang believes NQ is not the biggest rival to worry about.

"We have a great number of strong competitors in the US but we are not hesitant about entering the market because of them," he said.