Summary

CMCM’s flagship Clean Master app was removed from Google Play’s top free app rankings, calling into question growth in its highly touted large overseas user base and future monetization potential.

Outside of China, daily downloads from Google Play of CMCM’s six apps have fallen by approximately 88% following Google’s removal of Clean Master from the rankings.

Management has not alerted investors to these negative developments that occurred since July 15, 2014, raising a significant corporate governance issue.

There is a risk that the Clean Master app may be kicked out of the Google Play store if violations of store policies are not mitigated and resolved.

Given the current undisclosed significant business risk, CMCM’s current valuation premium over QIHU is entirely unwarranted and we believe the stock is worth between $7.00 and $9.00.