Xiaomi Founder Lei Jun Aims At U.S. IPO For Clean Master

Posted: Mar 26 2014, 5:54am CDT | by , in News | Mobile Phones

Xiaomi Founder Lei Jun Aims at U.S. IPO For Clean Master
Photo Credit: Forbes
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In the Google Play store, a free junk-file cleaning app called Clean Master is the latest sensation in the Android mobile phone universe. It’s the world’s most downloaded Android optimizer, ranked No. 1 in Google Play’s Tools category in the U.S. market, ahead of Google Translate and Adobe Air. It’s also the world’s No. 4 non-games application in Google Play, after Facebook, WhatsApp and Facebook Chat.

Clean Master is the American-born app of Lei Jun, founder of privately owned Xiaomi, the largest and most popular low-cost Chinese smartphone maker. In China in 2013, Xiaomi-branded smartphones sold a total of 18.7 million handsets; its December monthly sale rose to exceed that of Samsung phones and Apple’s iPhones. Late last year Lei succeeded in luring Hugo Barra, former Google vice president in charge of Android product development, to become its global vice president.

Since its launch in the United States a year ago, Clean Master has garnered more than 150 million downloads in more than a dozen languages, all without spending a dime on marketing. Lei is seeking an initial public offering in the United States to list Clean Master and the business unit it belongs to, KIS Holdings, which specializes in information security software.

It is not yet decided whether the company will list on Nasdaq or the New York Stock Exchange. An IPO application was lodged with the U.S. regulator in late January and could come to the market soon.

Lei controls KIS through Hong Kong-listed Kingsoft Corp., a Chinese technology company he co-founded 26 years ago with the promise that it would become China’s Microsoft. Instead the company has been engaged in a long struggle for survival. Kingsoft owns 54% of KIS. With Clean Master, Kingsoft stands a good chance of becoming one of the rare Chinese internet players to gain a critical foothold in the U.S. market.

Lei returned to Kingsoft as chairman three years ago, after a four-year hiatus from the company, and undertook a complete overhaul. He started with a bold gambit: making all its products freely available to users, thereby giving up about 200 million yuan in annual revenue. He then moved all its products, which had been designed for use in personal computers, to Android-based mobile phones (which account for nearly 70% of all the world’s smart phones), and is pushing forward in its development of mobile internet apps, including online gaming, a patented office software suite and cloud-based services.

“If the year 2012 was marked by the transformation of Kingsoft into an internet company, then the year 2013 would be the first year when we started to transform our core businesses into mobile businesses,” Lei said on March 19 in announcing Kingsoft’s annual financial results.

Only in 2013 did Kingsoft launch its mobile internet products, of which Clean Master is the flagship. Within a year, the company saw its monthly active users for its mobile business hit 150 million, accounting for nearly half of the 329 million monthly active users for all its products. The company is expected to double the number of its mobile business monthly active users to 300 million soon.

The comparable numbers for Clean Master are 83.9 million for monthly active users and 43.3 million for average daily active users. More than half of the these users are overseas, with the largest number in the United States. This makes Clean Master one of the few Chinese-made products to be debuted in the United States with a global footprint.

Hong-Jiang Zhang, CEO of Kingsoft and formerly chief technology officer for Microsoft’s research and development in Asia Pacific, says Kingsoft’s transformation has progressed at lightning speed. Only a year after it switched to the free-for-all model, it made more revenue than in the old days, he says. “Three years ago, we were still a traditional PC-based software vendor,” says Zhang.

“The year 2013 was the critical year in which we were established as an internet mobile player… In 2014 we will continue our push into mobile internet. Going mobile and going global are the two themes we’ll focus on in 2014. We’ve already gone global. When we talk about mobile, we are really talking about mobile apps. ”

The bulk of Kingsoft’s revenue is still from China and still going strong, with a 54% annual increase in 2013 to 668.7 million yuan, better than the 38% rate of growth a year earlier. Annual profit rose by 53% to 579 million yuan in 2013. All the company’s major business lines have set new records in terms of revenue and other operating metrics.

But the company has not yet seriously moved to monetize its mobile internet business, even as it is currently prepping for a U.S. listing. “We should put more effort into monetization for our mobile business, but the priority is really to grow our user base,” says Zhang, Kingsoft’s CEO. He is confident about profitability prospects, and cites a quote from Lei to make his point: “Even a pig can fly if it can find a place in the eye of a storm.” Lei’s piglet has found that place; his hope is that a U.S. IPO will allow it to fly more freely.

Source: Forbes

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