Kingsoft chief's exit to further hit developer team
Online games maker Kingsoft Corp's development team, which has lost several members to rivals, might become even more fragile after its chief executive resigned over differences with the chairman, sources said.
While the Beijing-based software developer publicly attributed chief executive Lei Jun's departure to health issues, others pinned the reason on cracks at the top.
'Lei Jun and the company chairman, Kau Pak-kwan, have not been totally in agreement for years,' one source said. 'After the company got listed, Lei Jun was finally able to cash out and do something else.'
The resignation comes two months after Kingsoft went public in Hong Kong on October 9, raising about HK$768 million.
Mr Lei, Kingsoft's third-largest shareholder after Mr Kau and Government of Singapore Investment Corp, owned about 158.2 million shares or 14.9 per cent at the time of the listing.
Based on yesterday's closing price of HK$3.65, his stake is valued at about HK$577.43 million.
Mr Kau founded Kingsoft to develop Chinese-language software. With its word processing software widely popular, it was once considered the mainland's equivalent of Microsoft.
However, piracy hurt sales badly and the company had to find a new direction. That came in the form of online games, which accounted for 74 per cent of Kingsoft revenue in the third quarter of last year.
Mr Lei joined Kingsoft in 1992 and was its chief executive from 1998. He was also the chief technology officer, in charge of the online games division.
'Kingsoft is a solid game developer,' said Dick Wei, JP Morgan's mainland internet analyst. 'Although it has produced no blockbuster yet, it has the most diversified game portfolio in China.'
Kingsoft's 700-strong development team, scattered in six cities, has not been stable. In 2005, a group of software experts left for NetEase, the country's second-largest online game company by revenue. In October 2006, Wang Fung, second in command at the online games division, left to set up his own game company, Linekong.
'Mr Lei's resignation will make Kingsoft's game development team even more unstable,' an analyst said.
Chief financial officer Kelvin Wang Donghui disagreed.
'I think those analysts are very irresponsible in saying such things. They don't understand what Kingsoft has been through in the last two years,' Mr Wang said.
'Making the transition from a software package company to internet and entertainment services was not easy at all. Kingsoft almost went bankrupt.
'Now Kingsoft has finally listed in Hong Kong, fulfilling a long-term dream. I think it is the right time for [Mr Lei] to step down and take a rest.'
Mr Wang noted that Mr Lei 'has not left Kingsoft completely'. As a board member, 'he can lead the company from a higher perspective'.
He will remain an executive director and vice-chairman of the board.
Kingsoft's revenue increased from 112 million yuan in 2004 to 215.2 million yuan in 2005 and 316.4 million yuan in 2006, representing annual growth rate of 68.1 per cent.
Kingsoft moved into gaming after piracy eroded software sales
The contribution of games to Kingsoft's revenue in last year's third quarter: 74%