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| IBM Korea CEO Chang Hwa-jin speaks during a press conference at the firm's headquarters in Seoul, Monday. He took office in January to succeed Jeffrey Rhoda. Courtesy of IBM Korea |
By Lee Min-hyung
IBM is expected to suffer further sales and profitability setbacks in Korea. In a desperate effort to rebound, however, its new chief executive vows to expand investment.
IBM Korea, the Seoul subsidiary of the U.S.-based tech titan, said Monday the company is making aggressive investments in its artificial intelligence (AI) supercomputer Watson and cloud computing to create its next-generation revenue sources.
"It is true our global sales are declining," IBM Korea's new CEO Chang Hwa-jin said at a press conference, Monday. "That is because we are on track to shift our business portfolio, reducing our reliance on traditional cash cows and making strategic investments in Watson and cloud businesses."
"IBM Korea is, however, generating outcomes in the business-to-business (B2B) cloud services," he said, declining to reveal a specific profit breakdown.
The remarks come as the IBM head office is trying to accelerate its painful transition from the traditional hardware business into the two key emerging tech areas.
Reflecting on its short-term murky outlook, the company's stock value shows no signs of recovery.
Last week, IBM reported a five-year-long sales decline to $18.2 billion (20.65 trillion won) in the first quarter of 2017 amid weakening growth in its mainframe, server and other systems business. Its new growth areas failed to offset the sluggish hardware sales.
Upon the global release of its earnings last Tuesday, Warren Buffett made headlines for dropping out as IBM's largest shareholder. At that time, IBM shares dropped 4.92 percent to close at $161.69, Wednesday. The global investing icon is reported to have lost $678 million in one day due to the disappointing IBM profits.
IBM Korea is not in good shape, either. Last year, it reported 814.1 billion won in sales. The company has failed to rebound here since its sales plunged to 819.7 billion won in 2015, down 22 percent from a year before.
The IBM Korea chief said the local subsidiary would also follow in the footsteps of the U.S. headquarters in terms of profit structures.
"About 42 percent of IBM global sales in the first quarter came from new technologies ― including cognitive and cloud computing," he said. "The two tech areas take up a small proportion of sales in Korea, compared with the U.S., but more than half of IBM Korea sales will come from the two sectors in the next five decades."
He said IBM Korea is seeking to tackle the ever-toughening rivalry in the emerging tech areas by offering client-oriented services.
"One of our core competencies, different from such firms as Google, is that we can offer a differentiated and customized cloud solution upon request from each client," he said. "Not a single company hopes to unveil their datasets to third-party info-tech service operators. IBM specializes in this B2B-oriented business model."
