This article was posted on ChosunBiz MoneyMove on April 24, 2025, at 1:07 p.m.
Cloud management service (MSP) corporation Megazone Cloud has recently dissolved its unprofitable subsidiaries one after another. Last year, it selected underwriters and formalized its initial public offering (IPO), but evaluations indicated that without improving its revenue structure, the listing itself would be difficult. The timing for entering the listing procedures, originally set for this first half of the year, has also been postponed.
According to the investment bank (IB) industry on the 24th, Megazone Cloud has recently dissolved subsidiaries such as Digital X One and Cloudgram. Megazone Cloud has pursued a small-scale merger by board resolution, absorbing its 100% subsidiaries Digital X One and Cloudgram.
Megazone Cloud also acquired all of LG CNS's equity (34.96%) in Cloudgram to incorporate it as a 100% subsidiary for the small-scale merger with Cloudgram. Cloudgram is a joint venture created in December 2019 in partnership with LG CNS for Megazone Cloud to conduct MSP sales in the financial sector.
There are analyses that Megazone Cloud has begun cost reduction and operational efficiency measures ahead of its IPO. Despite having experienced growth every year since its establishment in 2018, thanks to the growth of the cloud market, it has struggled to escape deficits, making it difficult to meet the Korean Exchange's scrutiny threshold.
In just four years since its establishment, Megazone Cloud surpassed consolidated revenue of 1 trillion won in 2022 and recorded 1.4265 trillion won in revenue in 2023, but operating profit was in the negative. The operating loss for 2023 reached 69 billion won, double the 34 billion won in 2022, and it is estimated to have incurred losses last year as well. Despite being a non-listed company, Megazone Cloud has submitted audit reports every early April since 2020, but it has not yet submitted this year.
Megazone Cloud aims to reduce a portion of its losses through the dissolution of subsidiaries and adjustment of overlapping businesses. Digital X One and Cloudgram were established in 2020, focusing on digital transformation consulting and cloud transition sales targeting large corporations and the financial sector, but they have continued to incur net losses each year.
In particular, Digital X One's scale of net loss was larger than its revenue. It recorded 1.2 billion won in revenue and a net loss of 2.3 billion won in 2023. The growth has been limited because Megazone Cloud, the parent company, undertook consulting before conducting the cloud transition work, construction, operation, and maintenance of the IT system.
A representative from Megazone Cloud noted, "It is true that we dissolved Digital X One and Cloudgram after merging them. We have achieved a significant portion of the effects we sought in terms of expanding sales capacity through the establishment of subsidiaries, and we believe we can pursue related businesses within Megazone Cloud."
Megazone Cloud has also postponed the timing of its listing efforts. Initially, it aimed for a valuation of at least 6 trillion won and planned to enter the listing process in the first half of this year, but it has been adjusted to after the second half. Even if the valuation target is matched by the price-to-sales ratio (PSR), it has come to the conclusion that it would be difficult to succeed while still being a deficit corporation.
The company is also pursuing business diversification to improve profitability. Due to the nature of the MSP, which supplies and manages infrastructure for cloud service providers (CSPs) like Amazon Web Services (AWS), the commission margin rate itself is low, around 5%. Competition has intensified due to the entry of system integration (SI) corporations into the MSP market.
Recently, the company has highlighted its service 'Gen AI360,' which provides everything from consulting to construction and operation for corporations wanting to introduce generative artificial intelligence (AI). It is also reported that plans are underway to expand into the quantum computing-based cloud service sector.
Meanwhile, the largest shareholder of Megazone Cloud is Megazone, which holds 53.16% equity. Other major shareholders include MBK Partners (10.57%) and IMM PE (8.46%). MBK Partners and IMM PE invested 250 billion won and 200 billion won, respectively, in September 2022, with a valuation of 2.4 trillion won.