National pride in the making
Hancom CEO Lee Hong-goo sets sights on Adobe after Microsoft
By Kim Tae-gyu
One of the first things Steve Jobs did in 1997 when he returned to Apple, which he founded but was expelled from in 1985, was to ditch a host of nonviable projects including personal digital assistant Newton.
As a result, the Cupertino-based high-tech company turned profitable as soon as he took the leadership, pulling off a major turnaround from a record $1.2 billion loss in 1996.
That’s exactly what Hancom CEO Lee Hong-goo did after he took charge of the Pangyo-headquartered software company, south of Seoul, in late 2010 ― he jettisoned the incompetent distribution division.
``Back then, some worried because the distribution division accounted for a substantial part of our revenues. But I forged ahead with the restructuring idea,’’ Lee said during a recent interview with the Business Focus.
``The distribution division was not likely to offer any momentum for our future growth while imposing financial risks. It is not right to keep operating a business that provides no added values to our core competency.’’
Meanwhile, Lee aggressively expanded its bread-and-butter segment of software, including the Hancom Office suite, and briskly tapped into the global markets.
The strategy paid off. With the distribution division, the company could not break through the ceiling of 50 billion won in annual sales during four years between 2007 and 2011 amid the global economic downturn.
In fact, it chalked up a turnover of 47.28 billion won in 2010, which is less than its 2007 performance of 47.76 billion won.
Its operating profit was also stuck in a range between 10 billion won and 15 billion won and the figure went down for the four years from 13.04 billion won in 2007 to 10.89 billion won in 2010.
Under Lee’s stewardship, however, the corporation racked up record performances of 57.32 billion won in sales and 20.3 billion won in operating income last year, up 21.2 percent and 86.5 percent from a year before.
Hancom sold products worth 32.8 billion won during the first six months of this year for a bottom line of 12.6 billion won for the best-ever half-year results in both metrics.
Out of the first-half turnover of the company, the sales of Hancom Office software carved out the vast majority with 24.44 billion won while those of ThinkFree specific for mobile and online amounted to 7.18 billion won.
The company is striving to renew its record in just a year through attaining 64.3 billion won in sales in 2012.
``Our conventional cash cows ― ThinkFree Office and the Hancom Office ― which are our core competencies, gave double bangs to our top lines last year and this year,’’ he said.
``We will keep gunning for a quantum leap through our cornerstone assets as well as by wading into the global markets so as to take on our competitors heads on.’’
ThinkFree Office is an office program, which enables its customers to create documents, spreadsheets and presentation. Organized as three programs of Write, Calc and Show, its online and mobile-based services have gained great popularity of late.
The Hancom Office is composed of Hanword, Hanshow and Hancell, which are equivalent to Microsoft Word, PowerPoint and Excel.
New venture
Hancom has been an archrival of Microsoft in the Korean market as the two have formed a duopoly in the office industry and what Lee is trying to do is expand the competition in the global scene.
Microsoft considers Hancom to have a competitive edge but there is one more international juggernaut, who have to worry about the Korean firm ― Adobe.
Hancom is thinking of launching an image editor software similar to Photoshop of Adobe in the not-so-distant future. To that end, it recently acquired a local firm Ezphoto.
``The image-editing software market is almost 20 trillion won across the world and its size is around 100 billion in Korea. Even if we can take just 1 percent of the pie, the amount would be significant,’’ he said.
``We might embed the new software into our office suit or sell it as a separate product.’’
A company that has grown up
Hancom Office was on the brink of disappearing when the corporation signed a memorandum of understanding (MOU) with Microsoft to stop developing the Korean-language software of the Hancom Office in the aftermath of the 1997 Asian financial crisis. In exchange, the U.S. software giant promised a $20 million investment.
However, the decision was eventually dropped as a nationwide fund-raising campaign was carried out to revive the software, once regarded as an icon of national pride.
Boosted by such strong backing, Hancom continued to develop Korean-language software thereafter that explains a vast majority of its yearly sales.
Against this backdrop, Lee said that it is a high time for Hancom to stand more firmly on its own two feet and return the support it received to people.
``Hancom has turned 22 as it was established in 1990. Thus far, Korean consumers took care of the company in its infant and adolescent stages,’’ the 55-year-old said.
``Now, we have grown to be an adult and we should not depend on outside helps. We must progress on our own, keeping in mind the support from our customers. Hancom does not have the luxury of making mistakes.’’
His ultimate goal is to ensure that Hancom evolves into a role model for Korean software companies, which are relatively weak in global competitiveness compared to manufacturing industries.
Korean manufacturers are leading the world in such sectors as memory chips, automobiles, petrochemical products, flat-panel displays and shipbuilding but Asia’s No. 4 economy has lagged far behind globally in software.
Toward that end, Lee vowed to accomplish the two seemingly conflicting goals of recording profits both in the short term and long term.
``When managers pay too big attention to the bottom line of today, they tend to undermine their long-term competitiveness. Conversely, when they care more about profitability of tomorrow, they tend to suffer weak profits in the short run,’’ he said.
``I will take a balanced approach in order to succeed both in the short term and over the long haul. For today’s profits, we are vehemently expanding our business while for tomorrow’s, we increased the number of developers by 20 percent this year alone.’’
On the strength of such efforts, Lee is jockeying to catapult Hancom to become one of the top three players with a set of software segments.
``By 2015, we are determined to double our annual sales to 100 billion won before reaching 200 billion won by 2017 on the back of our competitive edge of customization,’’ he said.
Compared to its rivals, Lee said that Hancom cooperates with its customers at a very deep level from the very beginning of development of new products and services.
As a result, he noted that its clients can generate serious results with highly customized offerings of Hancom.
``Many of our customers including international ones respect our sincere efforts in offering tailor-made services or products for their needs,’’ he said.
``That is also a good tool of marketing through word of mouth. Satisfied with the cooperation with us, they recommend other companies use our products and services.’’