October 25, 2024

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Kakao's Pangyo headquarters in Gyeonggi Province (Yonhap)

Kakao Corp., the operator of South Korea’s No. 1 messenger app KakaoTalk, said Thursday that it will swiftly implement a contingency plan in the second half of this year to carry out a drastic reform in its overall business operations.

"We have defined KakaoTalk and AI as the key drivers of our growth," Kakao CEO Chung Shin-a said during the company’s second-quarter earnings conference, indicating the possible sell-off of non-core businesses.

Her comments came when she answered a question regarding the potential sales of Kakao companies amid growing uncertainty surrounding its founder and top decision maker Kim Beom-su’s indictment on charges of alleged stock manipulation.

She declined further elaborating on specific plans. But speculation grew that some money-losing units such as Kakao Games and Kakao Entertainment, could be put up for sale to improve Kakao’s financial stability.

A leadership vacuum has continued at the tech giant since July 23 when Kim was arrested for violating the Capital Markets Act. Chung has instead served as the acting chief of the management reform committee under Kakao's corporate alignment council, which comprises representatives from 13 affiliates of the company.

Regarding the worsening situation, Chung expressed regret, saying, “It is unfortunate that we have to face this situation while focusing on management reform and AI innovation.”

“As the CEO, I will pursue shared growth with various stakeholders, build the foundation and achieve mid- to long-term growth focused on core businesses.”

Kakao also unveiled a plan to launch a new AI service in the second half through a separate app rather than within the KakaoTalk platform.

“Our strength is to create the best service that everyone can easily use,” the CEO said. “Starting with business-to-customer AI service, we will rapidly expand our business and establish ourselves as a new core growth engine.”

In its earnings report for the April-June period, Kakao said operating profit came to 134 billion won ($97.3 million), up 18.5 percent from a year ago, which was slightly higher than the consensus of 133.2 billion won by local analysts provided by market intelligence firm FnGuide.

The company's net profit soared 59.1 percent on-year to 87.1 billion won, while sales rose 4 percent to 2 trillion won over the cited period. The sales figure was, however, lower than the consensus of 2.05 trillion won. Its operating margin came to 6.7 percent.

By Jie Ye-eun (yeeun@heraldcorp.com)