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Kakao hints at drastic revamp in non-core businesses in second half

Amid prolonged leadership vacuum, tech giant to focus on KakaoTalk, AI as key growth drivers

Aug. 8, 2024 - 15:36 By Jie Ye-eun
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 would swiftly implement a contingency plan in the second half of this year to drastically reform 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 gauge consumer reaction to its new AI service through a separate app rather than using Kakao Talk, considering the huge impact on over 48 million users who may not be familiar with the new feature.

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, largely driven by upbeat sales of its flagship KakaoTalk and Kakao Mobility platform businesses.

The figure was slightly higher than local analysts' consensus of 133.2 billion won 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.

After fluctuating several times during the trading session, Kakao shares gained 0.39 percent from the previous trading day to close at 38,450 won on Thursday.