Last year, the operating profit of Korea IBM (the Korean subsidiary of the U.S. IBM) halved. As if that wasn't enough, the sudden resignation of former CEO Lee Eun-joo has left the position vacant for over three months. While Korea IBM is struggling with poor performance and a leadership vacuum, it is also falling behind in the public cloud competition with U.S. big tech companies like Amazon Web Services (AWS), Microsoft (MS), and Google.
According to Korea IBM's 2024 audit report posted on the Financial Supervisory Service electronic disclosure system on the 10th, the company's operating profit last year was 23.4 billion won, down about 53% from the previous year (49.6 billion won). The net profit also plummeted. Korea IBM's net profit for 2023 was 50.7 billion won, but it recorded a net loss of 8 billion won last year. The company's revenue last year was 592.5 billion won, which is an increase of about 6% compared to the previous year (558.5 billion won). Despite the increase in revenue, Korea IBM declined to comment on the reason for the halved operating profit.
The industry estimates that Korea IBM's operating profit decreased last year due to the impact of high exchange rates, which raised the import costs of hardware (HW) such as storage and servers. This was because Korea IBM's foreign exchange translation losses and foreign exchange losses reached 16.7 billion won last year. In 2023, these losses were only 2.3 billion won but increased more than sevenfold in just one year. In 2008, Korea IBM also saw increased revenue but recorded a loss due to the same reason of high exchange rates. An industry official explained, "At that time, Korea IBM could not raise prices sufficiently due to concerns about client backlash and ultimately deepened its losses."
In this situation, former Korea IBM CEO Lee Eun-joo's sudden resignation in early January has left the CEO position vacant for over three months. This coincides with an even more soaring exchange rate compared to last year, compounding the adverse situation created by the lack of leadership. There are concerns that swift decision-making regarding domestic hardware price increases is likely to be hindered.
The absence of leadership is also holding Korea IBM back in the public cloud market. Competitors like AWS, MS, and Google have already obtained "Cloud Security Authentication (CSAP)" to enter the domestic public cloud market, but there has been no news from Korea IBM. There are views in and out of the industry that the prolonged vacancy of the CEO position may mean that they have not even applied for cloud security certification yet. Korea IBM's market share in the domestic private cloud market is merely around 1%, lagging behind AWS, MS, and Google. There are also claims that they may have given up on entering the public cloud market due to the low profits from it.
Some analysts suggest that the development of generative artificial intelligence (AI) like ChatGPT could impact Korea IBM's consulting business, one of its main revenue sources in the future. If domestic corporations, the clients of Korea IBM, increasingly turn to ChatGPT for problem-solving instead of relying on consulting services, demand for consulting may decline.
Ryu Jong-ki, an adjunct professor at the Sogang University College of Knowledge Convergence Media, noted, "The IBM headquarters must manage risks and increase new business investments in the Korean market, but they are disengaged. This is because Korea IBM's revenue is so minimal that it constitutes less than 1% of IBM’s total revenue." He pointed out, "There were times in the past when AI and cloud businesses were thriving, but now both have shriveled." He added, "They are barely holding on through hardware sales like servers in the domestic market."