NQ Mobile CEO: Carson Block's Claims Are Absurd

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Nov. 1 (Bloomberg) -- NQ Mobile Co-CEO Omar Khan responds to Muddy Waters Founder Carson Block's claims that the company fabricated revenue and lied about its cash. Khan speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Nq mobile an opportunity to respond.

With me now is the co-ceo, omar khan.

He joins me in an exclusive interview from dallas.

A lot of allegations.

Let us take them one at a time.

The report came out a week ago, and they have not relented since.

You guys have hit back hard, but he is saying that 90% of her your revenue -- of your revenue is fake.

How do you respond?

Fax we are transparently addressing these false allegations.

Us take a step back for a second.

Let us take a look at his allegation that 90% of the revenues are false.

That would mean our products do not exist.

Our customers do not exist.

Our channels do not exist.

Our partners do not exist.

Let us take a step back and break down the business.

Second quarter, 20% of revenues came from our enterprise business.

Some of the largest companies in greater china are our customers.

We provide mobility management services.

We help partners like ge health care.

That business is absolutely real.

The revenues we generate from that channel is real.

The published games and operate games on behalf of some of the largest gaming developers in greater china, as an example.

Ken sent, "perfect world." we operate those applications and collect revenue through those channels.

Those are absolutely real.

If you take a look at, as an example, the security business -- we partner with operators, distributors, retailers.

Our products have been vetted.

The revenues we generate are absolutely real.

None of them will comment on the relationship with you, so how can we know for sure that you have a relationship, and that the relationship is meaningful?

Normally, large companies have a policy of not commenting.

You can validate the preloads.

You can buy the phones on the marketplace.

You can open them up and basically audit for yourself the applications preloaded on the devices.

It is extremely easy to validate.

Who are your top three customers?

Our customers -- let us take a step back.

Service providers, if you take a step back and try to understand what they are saying, service providers are intermediaries when it comes to billing.

If i am an application developer, and i have an application i want to develop and post onto the internet or onto the app store, in order for me generally to be able to add that to a carrier bill and be able to charge a customer a subscription, or charge that customer for a red sword, or a green sword, or a virtual good, i have to go through, many times, a service provider to add that item to the bill.

We go through those service providers.

They are actually not customers.

We actually identify that.

Who are your top three customers, not service providers?

Our customers are end users.

Our customers include partners like china mobile.

We do not disclose customer by customer.

Why don't you disclose it, especially when there are so many questions about whether your customers are really customers?

It is common policy not to comment on customers.

Our customers do not want us commenting on the revenue.

We are a channel-friendly custom -- company.

For us to disclose their revenue streams is not something that we would normally do.

We protect those relationships with our customers.

You have to admit that it sounds a little bit suspicious if you are not willing to tell us who your customers are.

How are we supposed to believe you actually have customers?

You guys are in a critical situation.

The stock has rebounded a little bit, but it is still down more than 40%. a lot of investors still do not believe you.

We actually do disclose our partnerships.

We disclose our customers.

We just do not go down by a revenue basis and go through that.

That is obviously confidential.

Our customers do not want us to closing that.

We are very close to our customers.

But you can go through, whether it is the ge-- it is zte, china mobile, cricket.

These are customers.

Validated relationships.

You can go into their stores, whether it is their digital or physical channels, and validate these products are available.

That is what is laughable about the situation.

All of this is so easy to validate.

If you look at these customers and the applications they provide or publish, it is extremely easy to validate.

How about this?

Put it this way.

Within china, where does nq have the most users?

What cities?

What provinces in china?

Where do you have the most users?

We have actually gone through the top five provinces.


I cannot remember off the top of my head.

We published earlier this week in a report.

We actually named the top five provinces where our customers are at.

We would be happy to provide that list to you.

I just did not bring it with me.

But we will be back to you.

It is publicly available.

The top five provinces where we have our customers.

That is something we have responded to.

We have no issue with opening that up.

It was actually already available in the marketplace.

We heard "muddy waters" saying that 90% of your revenue is fake.

You have formed an independent committee.

You are transferring money to standard chartered to prove you have at least $100 million in the bank.

The revenue is coming in chunks.

Another $13 million went in today.

Why is it coming in chunks?

Why isn't it coming all at once?

We hold our money in term deposits that earn interest.

We are doing it smiley.

We are not going to make irresponsible decisions from a capital allocation perspective.

We are transferring them as they make sense from a capital management perspective.

"muddy waters" says these are likely forgeries.

How do you respond to that?

Fax that has already been put to bed, right?

We have already moved the money, much of it.

It has actually been validated by independent parties.

It is laughable, obviously.

He have opened up a third-party independent audit.

We had multiple banks validate it, large investors.

We have provided complete transparency around the cash, and that has been put to bed.

He did not even mention it today, as an example.

You keep responding to the same allegations.

We have been nothing but transparent.

We are proud of the business we have built.

We announced a major new product last week that we are taking to market and building the pipeline for.

Or us, we need to get back to building the customer base we are building, the channel partnerships, and work with the partners and customers that will drive the future of our company.

Let us go back to this company that "muddy waters" says they found difficulty proving this company exists.

It went to 10 different addresses.

Five of those addresses did not exist.

Or was no evidence of this company at any of the other addresses.

They say you are playing the shell game, trying to recover from "massive lies" you have already told.

How do you respond to them?

It is again funny.

We were never asked by them for any addresses.

We held a conference call where we gave out the address where they are located.

I want to thank their ceo for cooperating with all of the people who have visited our office, including bloomberg.

She is an entrepreneur, a successful one.

We thank her for her support.

She has co-located two of her companies.

We have no problem with people visiting.

She has been nice enough to allow people to visit and do the diligence they have needed to do.

We have had several people, including bloomberg, visit her and sit with her and talk to her.

I know you are a product guy.

You came from samsung mobile.

If you sent that be a huge security risk for a mobile security company?

We again, we went through information by information in terms of what we collect.

Again, it was completely false allegations around that.

We take privately -- privacy extremely seriously.

Third-party privacy certification.

We take?

Privacy -- we take customer privacy extremely seriously.

Our products are very broad.

They include privacy protection, games, mdm software.

We have provided all the technical documentation on that in our responses that has been validated by third parties.

No issue there.

We have no problem with providing that validation.

We have already opened that up.

Omar, obviously these are incredibly bold claims and unfortunately chinese companies have a history of fraudulent activity.

"muddy waters" has exposed a number of these.

I lived in china for a time.

I'm familiar with some of these issues.

What can chinese companies do to make their businesses more believable?

Carson block just said that you will be gone any year.

That's absolutely absurd.

Why did i come to nq?

There's a tremendous amount of innovation in china.

Nq is a multinational, global company.

That is one of the things we are route off.

We work with one of the most reputable, if not the most equitable accounting firm in the world in pwc.

We follow our procedures and have been extremely transparent.

We hold ourselves to a higher bar.

We did nothing but completely open up and be very transparent, open up to investors, third- party validation.

I think that is what you have to do.

You not only have to follow the most strict of accounting standards -- we are very conservative in how we approach things.

We look at net revenue.

We hold deferred revenue on our balance sheet, because we sell products that have long-term subscriptions, as an example.

As you become a multinational, they do their homework on you.

We are one of the most diligent companies in the world.

Omar, you were brought in from samsung and citigroup to rebuild.

"muddy waters" has suggested that maybe you did not know some of the stuff that was going on there.

Can you tell us, when you were brought in and took a look at the books and saw how the company operated from the inside, was it 100% squeaky clean from the inside?

I'm extremely comfortable.

You know why i am comfortable?

I know the business.

I have worked with oem's, operators, i know the business inside and out.

I know how billing is done.

I know how we collect revenue.

The business model is extremely important for people to look at.

And understand.

Prickly speaking, i have been part of the expansion of the company, expanding -- frankly speaking, i have been part of the expansion of the company, expanding with our retail partners all over the world.

You can walk into locations in the u.s. and find our product on the shelves.

For me, i'm extremely proud of what we have done, and actually henry and i would like to say, we are building this company for the next 100 years.

We are innovating at a pace that is breakneck.

On that note, you mentioned your co-ceo.

He recently reported that revenues could hit $108 million in 2013, $500 million in 2015. can you confirm those numbers for us?

Yeah, we strive -- we shared our revenue stream.

That is one of the things that the companies can do, open themselves up.

Our 1-2-5 strategy was -- we already preannounced our revenue above a range of $50 million, $51 million.

We announced we would hit that runway over the next couple of years.

The business growth, if you look at the products we announced just in the last three months, and the partnership we have announced, whether it be music radar or nq care, those diseases have massive potential from a growth perspective.

All right, omar kahn, thanks for joining us today and telling as your side of the story.

I want to continue to update you on that shooting situation at

This text has been automatically generated. It may not be 100% accurate.


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