Poor Local Performance
Major foreign IT enterprises such as IBM Korea and Dell Korea posted a sharp decline in sales last year. A slack in the enterprise hardware business is attributed to their worsening performance.
According to Data Analysis, Retrieval and Transfer System on May 12, major foreign IT companies like IBM Korea and Dell reported an over 20 percent year-on-year decrease in net profits in 2013.
IBM Korea, which posted the highest sales figures among foreign IT enterprises, recorded 1.2253 trillion won (US$1.1978 billion) in sales and 142 billion won (US$139 million) in operating profits last year. The number for sales is a year-on-year decrease of 11 percent, and the figure for operating profits was a 10.2 percent year-on-year reduction. The company reported 115.4 billion won (US$112.8 million) in net profits in 2013, down 24 percent from the previous year.
Dell Korea, on the other hand, turned over 345.4 billion won (US$337.6 million) and posted an operating profit of 4 billion won (US$3.9 million) last year. There was not much difference between 2012 and 2013. However, its profit margin plunged with 1.2 billion won (US$1.1 million) in net profits last year, which is one-third from 2012.
Sales of IBM Korea’s high-end and low-end hardware businesses comprise 25 percent of the total (324.3 billion won, US$317.2 million). Lackluster sales are largely due to the stagnant Unix server market and low profit margins on its x86 server business. Those reasons are believed to have contributed to the fact that IBM sold its x86 server unit to Chinese PC maker Lenovo early this year.
Dell’s PC business has also been struggling because of a slump in the market. Last year, Lenovo snatched first place from Dell in the market. In response, Dell is focusing on the enterprise hardware business rather than than the PC business. Nevertheless, the hardware business led by its server unit is only concentrated on low-priced products in Korea. Thus, even though 3,000 units were sold in 2013, sales reportedly remain the same.
As a result, both firms have been working to reduce costs by undertaking a major restructuring of the business and improving the distribution channel structure starting early this year. IBM Korea is going to slash 200 jobs in the first half of this year. Dell Korea has already scaled back its work force: 20 to 30 people are said to have recently left the company.