Blessings Sometimes Visit Firms in Disguise
By Kim Tae-gyu
Staff Reporter
Many companies fail to achieve what they originally want to accomplish. More often than not, they are also forced to do what they do not want to do, typically ending up undermining their competitiveness. But in some cases, such events prove to be blessings in disguise even if it takes a while to see them that way.
LG Group, POSCO and SK Broadband all experienced such dramatic reversals of fortune ― disappointments serving them in the long run.
In the aftermath of the currency crisis in 1999, LG Group was pressed to sell off its chip-making unit, LG Semiconductor, to Hyundai Electronics, now Hynix Semiconductor.
The Kim Dae-jung administration and the Federation of Korean Industries (FKI) led the initiative, and LG Group Chairman Koo Bon-moo was forced to let go of his beloved business.
Enraged, Koo has not attended any function hosted by the FKI, the country's major business lobby group, since. As a leader of one of the country's major conglomerates, Koo is supposed to be a key member of the group.
However, 63-year-old Koo may have to thank Kim Dae-jung and the FKI for the involuntary disposal because Hynix is struggling to stay alive due to snowballing losses.
``Nobody knows for certain what would have happened if LG had kept the semiconductor affiliate under its arm since 1999,'' said Kim Gee-soo, an analyst at Goodmorning Shinhan Securities.
``But chances are that the group would have suffered a big headache, as the global semiconductor business is stuck in a terrible slump. In this sense, the disposal of LG Semiconductor helped LG,'' he said.
Indeed, the world's second-largest memory chipmaker, Hynix, has netted a three trillion won-plus deficit for the first three quarters of this year.
Even the foremost memory player, Samsung Electronics, is expected to lose money over the final quarter of 2008 and the first quarter of 2009.
POSCO-Daewoo Shipbuilding
Earlier in October, managers of POSCO faced the discouraging news that the world's No. 4 steel maker was disqualified in a competition to snap up Daewoo Shipbuilding & Marine Engineering, the third-largest shipyard in the world, after its partner GS Group pulled out of the consortium with POSCO saying Daewoo was overvalued.
As a result, Hanwha Group signed a memorandum of understanding (MOU) with creditor lenders to take over a controlling stake in Daewoo for 6.3 trillion won.
Amid the global financial crisis, however, banks and some European investors, formerly cooperative with Hanwha, are refusing to channel money into the deal.
Adding to the woe, Daewoo Shipbuilding's value has plunged over the past several months, as its stock price suffered a free fall due to diminishing orders.
In this climate, Korea Ratings also downgraded Hanwha Group and its two subsidiaries to a ``negative outlook'' recently.
To make the deal float, Hanwha asked, to no avail, that payments be made in installments or delayed.
Experts think Hanwha may give up the contract.
``Hanwha has two options. One is to buy a highly overvalued company or forget about 300 billion won in deposits to wash its hands of the affair,'' Woori Securities researcher Chang Lee said.
``POSCO could have been in Hanwha's shoes but it isn't because it was disqualified. POSCO may want to thank GS Group,'' Lee said.
He added POSCO will be able to use the saved cash, which the company put aside to buy Daewoo Shipbuilding, as a war chest to grapple with the financial distress.
Hanaro Telecom
In late April of 2005, Hanaro Telecom, now SK Broadband, the country's runner-up fixed-line operator, surprised the government by jettisoning its license for the futuristic WiBro service.
Homegrown, WiBro enables people on the road to enjoy a high-quality Internet connection for laptop computers and handheld gadgets.
Hanaro initially planned to funnel more than 700 billion won in installing WiBro networks across the country while regarding the Internet-on-the-move offerings as its next-generation growth engine.
Criticism erupted both inside and outside the company. In particular, many Hanaro employees contended that the Seoul-based outfit had thrown away its future cash cow.
Three-and-a-half years later, however, experts have a totally different view, as WiBro services have hit a snag despite massive investment from two other licensees of KT and SK Telecom.
``KT and SK Telecom joined to invest almost one trillion won in WiBro but they are getting almost nothing back as less than half a million subscribers have singed up for it,'' Daishin Securities economist Yi Dong-sub said.
``Hanaro saved 700 billion won. In addition, when SK Telecom acquired it, the lack of a WiBro license helped accelerate the move,'' he said.
The country's foremost mobile operator, SK Telecom, took over Hanaro Telecom last December and changed its name to SK Broadband.
If Hanaro had a WiBro license and spent money on its network, SK Telecom would be reluctant to buy it, according to Yi.