"WPS" wants IPO, but faces 5 infringement lawsuits

Lead: WPS, which was born in China's early IT era, was once the favorite of IT people, but it was quiet in the era of the rise of the Internet.

The ups and downs of 28 years, the WPS that has been nearing the age of "IPO".

On May 26, the CSRC disclosed the prospectus of Beijing Jinshan Office Software Co., Ltd. in advance. Compared with Jinshan Office, its office software product WPS Office is more familiar.

WPS, which was born in China's early IT era, was once the favorite of IT people, but it was quiet in the era of the rise of the Internet.

Subsequently, due to increased government procurement and pricing strategies, WPS Office regained a leading market share in China. According to the total number of WPS registered users of 166 million, in 2016, its WPS office software users accounted for the total size of users in the domestic office market. 27.81%. Its important customers include PetroChina, State Grid, five major state-owned banks, China Southern Airlines, and aerospace science and technology.

In a market with a gross margin of 90%, Kingsoft is facing a strong enemy, and Microsoft is one of them. It also admitted in the prospectus that overseas competitors are in an advantageous position in the international market.

The actual controller of Jinshan Office is Lei Jun, who has been accompanied by WPS for 24 years. If Jinshan Office sprints IPO success, it will become another listed company under Lei Jun, and the profit of “Rebs” will also rise.

As of the end of 2016, Lei Jun had a total of 27.06% of the voting rights of Jinshan Software listed in Hong Kong in 2007, while Jinshan Software held 67.50% of the shares of Jinshan Office through WPS Cayman and WPS Hong Kong. In addition to the foregoing, Lei Jun also indirectly holds shares in Jinshan Office through Shun Internet, Qiwen two-dimensional, Qiwen four-dimensional, Qiwen five-dimensional, and Qiwen seven-dimensional, and the specific proportion has not been disclosed.

Lei Jun worked in Jinshan Software since 1992 and is responsible for the development and expansion of business operations. Since 1998, he has served as CEO of Kingsoft Software and resigned in 2007. He was transferred to the non-executive director by the executive director in August 2008; July 2011 Lei Jun served as chairman of Jinshan Software. Lei Jun has served as Chairman and CEO of Xiaomi Company since 2010. Lei Jun served as an executive director when Jinshan Office Limited was established in 2011; currently, Lei Jun is a director of Jinshan Office Issuer.

WPS has faced bankruptcy, and Lei Jun is considering whether to transform and sell health products.

Jinshan Office intends to publicly issue no more than 41 million shares, and will use 565 million yuan to invest in four projects, the most important of which is the WPS office suite upgrade project.

WPS is the most important product of Jinshan Office, and it is also a product that has been robbed. Its age is much longer than that of Jinshan Office, which was established in 2011.

In the spring of 1988, a programmer named Qiu Bojun wrote WPS1.0, announcing the arrival of the Chinese character processing era. In the next few years, WPS jumped to the industry overlord at the time.

It has been reported in the past that from 1989 to 1994, it was the most brilliant period of WPS, accounting for more than 90% of the market. At that time, on the computer word processing system, almost all the software used by the Chinese were WPS.

In January 1992, Lei Jun went to Jinshan in Zhuhai for an internship and became the sixth employee of Jinshan. "I will never forget that day," and this sentence was later mentioned by Lei Jun again and again, becoming "Second Qijun" became his life goal. Later, he wrote in the recruitment of Jinshan: "Today is the future of Qiu Bojun."

In 1994, Microsoft entered China with Windows 95 and Word. The following year, Microsoft found Jinshan, hoping that the latter reached an agreement with them to make WPS and Word compatible.

Under this agreement, Microsoft's Office is popular. Microsoft has successfully transferred WPS users to Word through the document format, so as to attack the city and quickly open the market. The situation of WPS is getting worse.

At that time, China was in the software age, selling software became the main means of making money. But the piracy of shackles, coupled with Microsoft's pinch, in the mid-1990s, Jinshan has faced no shortage of rice, only one step away from the collapse. Lei Jun recalled in this public speech that this time, Jinshan has a large number of employees leaving, and the leadership including him even considers whether to transform into health products.

However, Lei Jun still insists on WPS. Complementing this strategy is “playing guerrilla warfare.” “Whatever Microsoft does, we will do it. This is our survival rule.”

In 1997, WPS 97 returned again and sales were flat. On the contrary, Kingsoft Internet Security, Jinshan Express Translation, Jinshan Ranger and other product line products sold in low price mode, which won the money for WPS in the long-term battle.

Since then, WPS has been upgraded many times, and it is difficult to recover the defeat. According to a 2006 report, WPS Office continued to be the domestic office software product with the highest share in the domestic market with a market share of 20.22%. Since then, it has gradually entered the overseas market. In its prospectus, the company said that according to the total number of WPS registered users of 166 million, in 2016 its WPS office software users accounted for 27.81% of the total domestic office market users.

In the last three years, only last year's operating profit was positive.

The reporter noted that in 2003, the "Government Procurement Law" was officially implemented, and WPS and Microsoft once again fought fiercely in the government procurement market. At present, WPS is widely used in many important fields such as government, finance, energy, and aviation. The advantages of government departments are particularly obvious. Currently, it covers more than 30 provinces, municipalities, and autonomous governments, and more than 300 city and county governments. As of December 2016, 110 Chinese companies in the “World Top 500” have served 68 Jinshan offices; 82 of the 102 domestic central enterprises are Jinshan office customers; in the financial industry, the country’s five major state-owned commercial banks are Among the company's customers, among the 12 national joint-stock commercial banks, the company has served 10 customers. Because the clients involved party and government organs, institutions and large and medium-sized enterprises, the Jinshan office prospectus emphasized the "customer advantage" in the competitive advantage.

Jinshan Office, born out of Jinshan Software. In 2007, Kingsoft was listed in Hong Kong. However, in the business, online games are its main source of income, accounting for 70% of total revenue. The office business segment is still in a subsidiary position.

In 2011, WPS split from Jinshan Software to operate independently, with a free WPS office suite to combat the charging of Microsoft Office strategy.

According to the prospectus, Jinshan Office, which is the main WPS office suite, has been extremely unstable. In 2014, the company achieved a net profit of 13.643 million yuan, but lost 145 million yuan in 2015. In 2016, it regained its profit, reaching 171 million yuan. From the perspective of operating profit, the company has been profitable in 2016 for only three years.

The actual controller of Jinshan Office was Lei Jun. As of the end of 2016, Lei Jun had a total of 27.06% of the voting rights of Jinshan Software listed in Hong Kong in 2007, while Jinshan Software held 67.50% of the shares of Jinshan Office through WPS Cayman and WPS Hong Kong.

Rely on the second spring of Internet advertising, "growth or encounter bottlenecks"

At the same time as the roller coaster performance, Jinshan office internal income model is also facing a reshuffle.

The profit model of Jinshan Office is mainly divided into three types: software license, service subscription and internet advertising. In the past three years, the proportion of software licenses has fallen from 68.01% in 2014 to 43.48% in 2016, while the proportion of Internet advertising promotion services has increased from 28.62% to 45.08%. From 2014 to 2016, the company's revenue was 283 million yuan, 394 million yuan, and 545 million yuan. In the past three years, the compound growth rate of revenue has reached 38.8%.

The Internet advertising promotion service adopts the "free + advertising"-based profit model, and its core lies in the advertising value generated by the huge user group of WPS Office software products for free.

In this profit model, if too much advertising is placed in the product, the user experience may be reduced, resulting in user loss, thereby reducing the value of the company's product advertising, which in turn has a negative impact on revenue. Therefore, Jinshan Office said that the company's revenue from Internet advertising promotion services may have a certain growth bottleneck.

At the end of 2016, the asset-liability ratio of Jinshan Office was 12.95%. Jinshan Office said that during the reporting period, the company had no bank loans, so there was no interest expense.

In the view of a financial person, through bank loans, the amount of loans will be limited, and through listing financing, a large amount of funds can be quickly collected, and in the face of consumer companies, it is easier to increase the popularity and facilitate the promotion of WPS.

In the view of the above-mentioned people, the practice of Jinshan Office is similar to the way that Lenovo adopts group operation, which is an inevitable measure for the development of multi-business of enterprises to a certain stage.

Faced with 5 infringement suits

As Jinshan Office gradually returned to the public, some disputes began to appear.

The prospectus shows that Jinshan Office currently involves five infringement lawsuits. The initiators of the lawsuits are Foxit Software, a new three-board listed company engaged in the research, development, application, sales and service of the core technology of PDF electronic documents.

It is not difficult to find through the litigation of the lawsuit that this has already reached the point of "seeing the court" for the former partners.

According to the Fushun Software Announcement, it signed the Software Cooperation Development Technology Agreement on November 9, 2011 with Zhuhai Jinshan Office, a subsidiary of Jinshan Office. The two parties confirmed the agreement cooperation project name as “OFFICE Document Format to PDF Document Format”.

In November 2015, Foxit Software found that the WPS office software released by Jinshan's official website and third-party download stations is the WPS office software of Zhuhai Jinshan Office Software Co., Ltd., using the "OFFICE document format" specified in the above agreement. The PDF document format "The result of the development of Foxit Software.

Foxit Software believes that, in view of the agreement between the two parties in the cooperative development agreement, the technology of "OFFICE document format to PDF document format" cannot be arbitrarily used for commercial purposes without the agreement of both parties.

To this end, Foxit Software initiated two lawsuits. One time, Jinshan Office Limited was brought to court. The reason was that the five versions of WPS office software released by Jinshan Office Limited used the PDF technology of Foxit Software for alleged infringement and filed five computer software copyright infringement complaints with the Beijing Intellectual Property Court.

The other party requested Jinshan Office to immediately stop using the infringement litigation software and pay the research and development costs of the infringement litigation software to Fushun Software for a total of RMB 4 million.

Another lawsuit occurred in July 2016. In the case of contract dispute, Foxit Software filed a lawsuit against Jinshan Office, Zhuhai Jinshan Office, to the court, requesting the court to order Zhuhai Jinshan Office to install the number of users based on WPS office software desktop products. Each installed user pays 2 yuan for the price of the software technology usage fee.

For the lawsuit, Jinshan Office said that the company's defense claimed that the Foxit software had been emailed, and the written permission of Jinshan Office Limited could use the PDF-related technology of Foxit Software on the WPS office software involved. Therefore, Jinshan Office Limited and Zhuhai Jinshan Office did not implement any infringement.

Whether or not it is determined that Jinshan Office Limited constitutes an infringement still needs to await the judgment or ruling of the court.

On June 2, the Beijing News reporter called Jinshan Office's prospectus to disclose the secretary's secret phone number, which was the company's customer service phone number, but the human service option was not answered. Subsequently, the reporter sent the interview outline to the company's disclosure mailbox. Reply.