{"id":2203006,"date":"2023-12-05T16:00:25","date_gmt":"2023-12-05T07:00:25","guid":{"rendered":"https:\/\/koreapro.org\/?p=2203006"},"modified":"2023-12-06T18:43:07","modified_gmt":"2023-12-06T09:43:07","slug":"south-koreas-tech-giant-struggles-amid-legal-and-market-turmoil","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/12\/south-koreas-tech-giant-struggles-amid-legal-and-market-turmoil\/","title":{"rendered":"South Korea\u2019s tech giant struggles amid legal and market turmoil"},"content":{"rendered":"
Kakao Corporation, South Korea\u2019s leading tech company known for its popular messaging app KakaoTalk, is facing a severe crisis. Its top executives, including founder <\/span>Kim Beom-su<\/span><\/a> and Chief Investment Officer <\/span>Bae Jae-hyun<\/span><\/a>, are embroiled in legal battles over allegations of stock manipulation during the high-profile takeover of SM Entertainment \u2014 a South Korean multinational entertainment agency.<\/span><\/p>\n This legal issue could have significant consequences for Kakao, as a conviction would mean <\/span>losing management control of KakaoBank<\/span><\/a>, its internet-only banking venture, as per Korean law. This situation is particularly critical as it threatens to derail the company\u2019s global expansion plans, especially with SM Entertainment, a key player in the K-pop industry.<\/span><\/p>\n The impact of these legal troubles is already visible in the company\u2019s financial performance. Kakao\u2019s stock, once a darling among small investors for reaching an all-time high of <\/span>$130 per share in 2021<\/span><\/a>, has seen a <\/span>dramatic fall<\/span><\/a> to between $23 and $30 this year.<\/span><\/p>\n This decline in stock value reflects the immediate concerns over the current legal situation and raises questions about the future stability and growth strategy of one of South Korea\u2019s most prominent tech giants.<\/span><\/p>\n EXPANSION AND OPERATIONAL RISKS<\/b><\/p>\n Kakao\u2019s aggressive expansion through mergers and acquisitions marks a significant aspect of its current crisis. The company, which <\/span>outranks even Samsung<\/span><\/a> in its growth, has expanded its reach beyond its core technology and messaging services.<\/span><\/p>\n From 65 affiliates in 2018, Kakao\u2019s network has ballooned to <\/span>144<\/span><\/a> as of August, including ventures in disparate sectors like beauty salons, indoor golf driving ranges, and the taxi-hailing industry. Kakao has even succeeded in <\/span>taking over Daum<\/span><\/a>, one of South Korea\u2019s major internet portal services and has also <\/span>tapped into<\/span><\/a> the music and entertainment industries.<\/span><\/p>\n This rapid diversification, however, has not been without controversy. Kakao\u2019s expansion into small-market industries has raised concerns about its potential impact on small businesses.\u00a0<\/span><\/p>\n Despite promises by founder Kim Beom-su in a 2021 parliamentary audit to scale back from these markets, the company\u2019s number of affiliates has <\/span>continued to increase<\/span><\/a>.<\/span><\/p>\n Kakao\u2019s seeming focus on growth at the expense of investing in the quality and resilience of its core services is compounding these issues. This was illustrated in Oct. 2022 when a <\/span>fire<\/span><\/a> at a Kakao data center in Pangyo city caused a widespread service outage.<\/span><\/p>\n This incident, which disrupted various sectors across the country for <\/span>nearly five days<\/span><\/a>, contrasted sharply with the quick recovery of Naver, which also used the same data center but had additional facilities for a more rapid response.<\/span><\/p>\n The data center fire and the ensuing service disruption revealed significant gaps in Kakao\u2019s investment in infrastructure and emergency preparedness. The incident damaged user and investor trust and raised serious questions about Kakao\u2019s management and prioritization strategies.<\/span><\/p>\n