Ambiguous Identity of NHN... Need for Selection and Focus

New Businesses in Payment, Advertising, and Technology Grew, but Core Cash-Generating Game Business Slumped
All Four New Titles Released in 4Q Last Year Failed to Succeed... Doubts Rise Over Development Capability
"Must Choose and Focus on Areas to Demonstrate Competitiveness Compared to Rivals"

[Asia Economy Reporter Minwoo Lee] NHN recorded an operating profit in the fourth quarter of last year that fell significantly short of expectations. Although new businesses such as payment, advertising, and content are steadily growing, the mobile game sector, which is the main cash generator, showed sluggish performance. There are calls for a strategy of selection and concentration to realign the direction focusing on core businesses.

On the 14th, concerns about NHN's recent performance emerged in the securities industry. NH Investment & Securities even issued a 'Hold' investment rating. While the transformation from a game-centered company to a comprehensive IT company is positive, it is judged that NHN is still on the borderline with ambiguous growth potential and profitability.

In the fourth quarter of last year, NHN posted consolidated sales of 462.3 billion KRW and an operating profit of 20.3 billion KRW. These figures represent increases of 15.6% and 16.1%, respectively, compared to the same period the previous year. Although this appears to be a steady growth trend, the operating profit fell more than 32% short of the market forecast of 29.9 billion KRW. While many business units such as payment and advertising, content, and technology grew, the sluggish sales in the high operating margin game business pulled down overall growth. Net profit recorded a net loss of 32.6 billion KRW compared to the previous quarter due to impairment losses of 62.8 billion KRW in the operating profit area.

Sales in the payment and advertising segment reached 191 billion KRW, up 36.2% year-on-year. The growth in sales of NHN's subsidiary NHN Korea Cyber Payment stood out due to the increased proportion of online payments caused by COVID-19. Sales in the technology business, including cloud services, rose 20.9% from the fourth quarter of the previous year to 52 billion KRW. The data center (IDC) and cloud business showed solid performance. These areas are expected to be promising fields driving NHN's sales growth this year as well.

The game business continued to struggle, recording 98.5 billion KRW, down 1.5% year-on-year. The failure of new game releases dealt a heavy blow. All four new titles released in the fourth quarter?'AIMS,' 'Yongbi Bulpae M,' 'Critical Ops,' and 'Hangame Prediction'?failed to gain popularity. Samsung Securities analyst Donghwan Oh said, "Due to the continuous poor performance of new releases, market skepticism about NHN's new game development capabilities is increasing. Although 4 to 5 new titles are scheduled for release this year, except for 'Idolmaster Pop Links,' the lineup has not been disclosed, making it difficult to raise expectations for new releases."

Regarding existing games, PC online game sales increased 13% quarter-on-quarter due to the mobile linkage service of 'Hangame Poker Classic,' but mobile game sales declined 8.7% during the same period due to natural decreases in titles such as 'Compass' and 'Line Disney Tsum Tsum.'

NHN, which has rapidly diversified and continued growth from games to payment, advertising, technology, commerce, and content, is now at a point where selection and concentration are necessary. Meritz Securities analyst Donghee Kim explained, "Just as NHN realigned its game business direction from casual to mid-core, a strategy of selection and concentration on core businesses is needed. While noting that Payco's offline competitiveness could be re-emphasized after the end of COVID-19 and benefits are expected from the activation of the MyData business, NHN must find differentiated growth points compared to competitors."

This content was produced with the assistance of AI translation services.