When Executive Casts interviewed Borqs Technologies, Inc. (NASDAQ:BRQS) CEO Pat Chan, we wanted to give him the opportunity to fully introduce himself to investors, a common and ongoing theme that the platform likes to showcase. Executive Casts serves to help investors learn about smaller publicly traded companies, and doubles as a learning tool integral to the process of getting to intimately know key company executives. Borqs is a global leader in software and products for Internet of Things providing customizable, differentiated and scalable Android-based smart connected devices and cloud service solutions.
Below Mr. Chan goes into detail about the progression of his career in the technology industry, where he eventually put himself up to the challenge to develop Android or terminal handset software. Please take a moment to listen to Pat as he talks about:
- His background and career, and the inception of Borqs
- Challenges when building Borqs as a company
- Being an early mover in Android based software
- Borqs’ business segments
- Important metrics to keep track of business progress
- His personal message to investors
Pat’s Background And Career, How He Came To Found Borqs
I was born in Hong Kong. What I was about 18 years old, when I was too young, I moved to Canada. I did my undergrad and graduate study in Canada. My undergrad…I got a double degree in Computer Science and Business. When I go to my graduate study, I decided to go into Mathematics, but research was actually in Computer Mathematics.
Lucky or not, I cannot find a job in Mathematics, then, I decided to join a company called Nortel Network in Ottawa doing the telecom switches.
After several years in Nortel, then I moved back to Vancouver. I love that City, it’s beautiful. I would join Motorola in Vancouver. I was one of the youngest Android managers in Motorola doing a lot of telecom products as well.
About 20 years ago, then I say, “Maybe, I’m old enough. I want to go back to my own area, the country.” Then, I decided to go back to China. And I joined the company called UTStarcom. UTStarcom is still a Nasdaq listed company. When I was there, I set up the wireless infrastructure business unit in that company. But the time when I left UTStarcom, I was a senior vice president running all the infrastructure business within UTStarcom. I was managing about one billion US dollar and then about 2,000 engineers. That was about 10 years ago.
Now, at that time I think I was old enough…let’s just do something different. Maybe it’s time for me to find my own company. Then, I found this company. And the reason why I want to do the mobile handset software is because when I was at the UTStarcom, my business unit developed telecom switches, telecom base stations, the prop and switches, a lot of the infrastructure-based product already. I’ve never done a mobile handset before while I was in UTStarcom. Therefore, when I found this company, I say, “Do something that’s different, challenges.” Then I decided to go into the Android or terminal handset software.
I actually have a team. In fact, when I found this company, I have some other founders with me as well. The are other people who were actually who are more familiar with the mobile handset industry that joined me together as part of the founding team.
Reflecting On Challenges When Building Borqs
Every company has challenges in its history. The company has been 10 years. We always experienced up and down in the business.
One of the challenges that we have is in the first three or four years. At the beginning when we found this company, our focus has been doing Android customization for the mobile operators. We have been very successful the first three years doing Android customization for the operator, but afterward a lot of the mobile operators, they see that the customization of Android for their own network is not good for the end user because a lot of the end users they prefer generic Android software rather than to operate the specific software. Therefore, the operator interest in the Android customization dropped.
We had to change our strategy of Android for the operator has a chain to [inaudible] something else. Luckily, we also find Intel and when we start doing the Android software for particular chipset vendors or multiple chipset vendors it’s actually one big change for us to change from Android to mobile operators, which is that our customer to enjoy full [inaudible] semiconductor company because the customers are actually quite different. Operators, which are the chipset vendors.
We’re also seeing the industry continually changing the last several years. The last five year we’ve been doing a lot of Android for phones and tablet, but with a new wearable, IoT comes in, we have to change our software, we have to enhance our platform to do more software for IoT business or IoT solutions. What we have learned in the last several years, in the last 10 years, we have to keep changing. Our business model, our technical capability has to continue to evolve to build our own IP. It’s something that we learned.
Borqs An Early Mover In Android Software Development
Let me talk again a little bit about our history. I found this company in 2007 and [inaudible] we are able to get all the Android source code of the software – late 2007 beginning of 2008.
Google opened source to Android at the end of 2008 and we got all the Android software in late 2007 beginning at 2008, which means that one year ahead of Google open source, we already have the full access of Android software and in the late 2007 beginning to 2008 then we start working with some of the largest operators in the world in doing the Android customizations. Which means that throughout the last 10 years, we’ve been able to build different portfolios or different side of the Android customization and Android software for different industries. This is our one of the key advantages compared to our competitors.
Overview Of Borqs’ Business Segments
The Company has a two business segments, sometimes we’ve got two business units. The first one is the Connected Solution Business Unit and the second one is the Connectivity Business Unit.
The first business unit (Connected Solution Business Unit), basically, we provide the key software IP and the hardware IP in terms of software platform, hardware platform to help our customers to build the IoT, Internet of Things, solutions. For instance, we provide the key software and hardware to build a connected Android watch or Android wear watch and all these things we do for phones, tablets, and the watches all related to the Internet of Things. In terms of software-hardware, belongs to the Connected Solution Business Unit.
The second business unit is the Connectivity Business Unit because a lot of time a lot of these IoT, Internet of Things, devices or solutions need to have a data plan and a voice plan. Anything related to the voice plan, data plan that we provide to our customers belongs to the connectivity business unit. So, for instance, you have a kids watch and a kids watch you have a SIM card inside and the SIM card has a voice plan, a data plan, and our company provides the, again, the voice plan/data plan for our customers to pile up that kind of connectivity into the network. That belongs to the revenue from that voice plan/data plan, belongs to the Connectivity Business Unit.
Important Metrics To Track Business Progress
The way I usually track the business is actually quite simple. We look at the revenue growth and the probability, the two simple metrics of it. We would like to have the company continue to grow more than 30%, 40% at top line. We also expect the company to be continually profitable. How you build margin has to continue to grow for the next several years. It’s two simple metrics that we have.
We have a target of the business model that as a whole company, we would like to have the gross margin for the business we bring in as a company, usually, between 20% to 25% blended margin for the whole company. Anything above that for sure we love it; anything below that we just drop it; anything within that range we’ll do it. This is our operating gross margin for the business we take in or we take 20 to 25% gross margin, not including the MVNO business.
The MVNO business is already more than about 30%. In terms of new bids, we’re hoping that the next several years the bids, the margin will be about 12 to 15% of the company.
What Message Does Pat Have For Investors? A Focus on Internet of Things.
Borqs, we are an Internet of Things solutions provider. As a company, we have two business unit: the Connectivity Business Unit and the Connected Solution Business Unit. As a company, we focus on the IoT, Internet of Things, based on Android. One thing we know is that the Android and the IoT business, especially IoT business is growing rapidly, that’s one thing.
The second thing is that there are a lot of the Internet of Things companies. They want to build products, but they don’t have the know-how to build products. As a company, we have a big portfolio of software IP and hardware IP. We can help these companies to build the Internet of Things products.
The next thing is our relationship with chipset partners. If our customer wants to have the latest and the greatest solutions, from Intel and Qualcomm, we are there to supply them with these solutions.
And last but not least, for the last several years, the company has been growing rapidly. Our top line, our probability, demonstrates that we are able to execute, last but not least, we also have a [inaudible] management team all over the world. We have people from Ex-Motorola, Ex-Intel, Ex-Nortel as part of the management team all over the world to execute our visions going forward.
Mr. Pat Chan
CEO, Founder and Chairman, Borqs Technologies
Pat Sek Yuen Chan, is the founder and Chairman of the board of directors of Borqs Technologies, and since 2007 he has served as its Chief Executive Officer and President. Mr. Chan has over 20 years of experience in the mobile network communications sector. Prior to founding Borqs, Mr. Chan served as Senior Vice President and General Manager of the infrastructure business unit of UTStarcom Inc., a telecommunications equipment company, from 2000 to 2007. Earlier, Mr. Chan was an engineering manager in Motorola responsible for the development of the GPRS switching. Mr. Chan is an established entrepreneur and has received many awards, including the “High-Caliber Talent from Overseas Award” from the PRC government, and “2012 Beijing Entrepreneur of the Year”from Silicon Dragon.Mr. Chan received his bachelor’s degree in computer science from the University of Toronto and his master’s degree in computer science from the University of British Columbia.