NetQin denies claims that it uploads malware with its antivirus software

Antivirus maker first rebutted allegations of fraud in its IPO statement on March 15

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 the initial public offering prospectus it filed with the U.S. Securities and Exchange Commission. In that document, dated March 15, NetQin referred to a China State TV report that charged the company with "uploading a virus to imported mobile phones to promote our mobile security products by Beijing Feiliu," a company in which NetQin holds a 33% interest.

NetQin, a Beijing-based mobile security software maker, hosted a booth at the International CTIA Wireless show in Orlando this week, and it announced its NetQin Mobile Anti-virus 4.0 Beta for BlackBerry on Tuesday.

The following day, reports circulated on the Internet describing the earlier Chinese State TV report on the alleged malware scheme. Various websites, including Cellular-news.com, reported that NetQin's customers would load the NetQin antivirus software and then get an alert informing them that they needed an update to fix a problem; they would be charged about 30 cents for the update.

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.

In a formal denial issued on Friday, NetQin said, "The allegations waged against us are entirely false" and it 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 e-mail, 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 stories.

"This is a non-event," Lau said, and added that she could not comment beyond the statement because NetQin is in a silent period, since it has filed an IPO prospectus to list its shares on the New York Stock Exchange.

SEC records show that NetQin filed for its IPO on March 15. It plans to use the ticker symbol "NQ" and listed Piper Jaffray as its lead underwriter. NetQin's net revenues were $4 million in 2008, $5.3 million in 2009 and $17.7 million in 2010, according to the IPO filing.

NetQin offers mobile security products as well as mobile productivity and intelligent cloud services, primarily for smartphone users. About 35% of NetQin's revenues in 2010 came from subscribers outside of China. Frost & Sullivan has reported that NetQin had 67% of China's mobile security market at the end of 2010.

NetQin was founded in 2005 in Beijing; it established a presence in the U.S. in November 2010.

NetQin's 161-page IPO prospectus notes on page 17 that China Central Television (CCTV) ran a report of complaints of fraudulent practices against NetQin. One practice the TV report claimed NetQin engaged in 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 that it does not believe it has committed any wrongdoing, and it said it 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 prospects."

One security Web site, Nakedsecurity.sophos.com reported, has 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."

Gold said it would be interesting to hear Research In Motion's reaction to the antivirus software for BlackBerry that NetQin announced this week. RIM did not respond to a request for comment.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen. or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

  
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