Kingsoft Corporation Ltd. (HK. 03888) was listed on Hong Kong Clearing and Exchanges Limited on Oct. 8th, 2007. At the end of September, Qiu Bojun, president, and Lei Jun, CEO, of Kingsoft, were not in the mood to celebrate the incoming National Holiday; they were busy traveling between the US, UK and Hong Kong, giving a global roadshow for its IPO. The prospectus showed that Kingsoft planned to issue 213 million shares to raise HKD619 million (US$79.4 million) to HKD768 million (US$98.5 million). So far, market reaction has been positive: in Hong Kong, Kingsoft was 2.5 times over-subscribed by institutions, and 12.2 times over-subscribed by retail investors.
After a 19-year ordeal, Kingsoft, one of China’s oldest ISVs (Independent Software Vendors) has finally achieved the most satisfying success so far. A few other Chinese representative software companies, most of which are not even as time-honored as Kingsoft, have long been listed on stock markets: UFsoft was established in 1988 (only one year earlier than Kingsoft); Neusoft in 1991; and Kingdee until 1993.
“Kingsoft is a typical example of how a software company has developed in China. During its 19-year history, we have undergone many changes, and it takes so long that the sprint has become a marathon.” sighed Lei Jun, who joined Kingsoft in 1992, “Finally we got out of the swamp.” But while congratulating Kingsoft for its successful IPO, many people in the trade still have a question: if the money collected from the stock market is not to draw a conclusion based on its past, but for Kingsoft to create a future, then where will Kingsoft go?
A Veteran Guerrilla of Multiple Transforms
Today’s Kingsoft is no longer it used to be. In fact, it’s more a company of online games than one of software. On September 20th, a flock of young Kingsoft employees with posters in their hands walked out of the corporate building situated in North Beijing. They were in a run up to launch the open test of an online game, CQ Online.
Today, income from Internet games accounts for over two thirds of Kingsoft’s revenue.
A dozen years ago, however, Kingsoft was well-known for its word processor WPS. In 1989, Qiu Bojun, still a programmer at Stone Group, attracted the attention of Zhang Xuanlong, a Hong Kong businessman and chairman of Founder Holdings Limited. Zhang then trusted him with the establishment of Kingsoft and the young fellow didn’t let the Hong Kong businessman down. Nearly single-handedly, Qiu Bojun developed the popular WPS before Microsoft had even launched its Chinese version of Word. WPS became so widespread that it was installed in almost every PC.
Unfortunately, the WPS that was used in nearly all the computers was pirated-WPS hasn’t brought Kingsoft wealth, though it did win reputation for the company. A few years later, Microsoft released its Chinese version of Office, and to make matters worse, pirated copies of the Chinese-version of Word were everywhere. It was a disaster to the ever-struggling Kingsoft. In 1996, Kingsoft almost collapsed, with only a dozen employees left. “We were a group of enthusiastic technology idealists who didn’t understand the market as well as we understood the technology,” recalled Lei Jun.
Later, thanks to guerrilla tactics like developing Kingsoft PowerWord, an English-Chinese and Chinese-English dictionary for computer use, Kingsoft survived. This survival was also a result of its antivirus software, another major attempt to bring Kingsoft into a bigger territory, although the company launched this software simply to make life easier during hard times.
“Antivirus software was really hot back then, and Jiangmin Antivirus Software was already hard currency in Zhongguancun (known as China’s Silicon Valley), Beijing.” As a newcomer, Kingsoft focused heavily on the Internet. When releasing its antivirus software, Kingsoft was already well prepared to provide after-sales services through the Internet. Before, all other antivirus producers had updated their software through actual shops, and users had to go to those shops to get a copy-it was not convenient at all. Instead, Kingsoft provided online updates. Any Kingsoft users could update by simply downloading from their specified websites.
Kingsoft Antivirus won the extensive support from distributors. When releasing its antivirus suite formally at the end of 2000, Kingsoft got orders for as much as RMB10 million (US$1.3 million), while its WPS and PowerWord, combined, hadn’t even grossed this much in a whole year.
It was the neglect of one of Kingsoft’s producer that took Kingsoft’s excitement and dropped them down to the bottom of hell. Some remnant of virus was found in the updates. Although it would no longer function, all dealers returned their stocks to Kingsoft almost overnight. This brought the company down from hero status back to zero status.
After that, Kingsoft Antivirus stayed dormant for over 2 years. Then in 2003, Kingsoft shot its way out from the dark by cutting the price of a package of “Antivirus + Firewall” from RMB168 (US$22.6) to strikingly RMB50 (US$6.7). The move enabled Kingsoft’s revenue to increase from less than RMB10 million (US$1.3 million) to RMB20 million (US$2.7 million), and then to RMB40 million (US$5.4 million). In addition, Kingsoft Antivirus was among China’s top home-grown antivirus software.
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